Reports & Responses

Become a Golden Supporter

December 2000

Report on the UK Government White Paper on International Development

Eliminating World Poverty: Making Globalisation Work for the Poor,

Contents

Introduction

1. Global Economic Integration: Ideals and Realities
1.1. Market Forces and `Openness'
1.2. Openness and Development
1.3. Development and Market Theory
1.4. Growth and Development

2. International Finance and Trade
2.1. International Finance
2.1.1. Prospects for Regulation
2.2. International Trade
2.2.1. Trade and Investment
2.3. ‘The Spread of Democracy’
2.3.1. The IMF, World Bank and WTO
2.3.2. Subverting Democracy

3. Conclusion
3.1. Unmodified Global Economic Integration
3.1.1. North and South
3.2. What is Required
3.2.1. Sustainable Development

Introduction
The purpose of this report is to critically assess the global poverty elimination strategy of the UK Government as set forth in the White Paper. While it is worth noting that there are a number of laudable initiatives proposed in the Paper regarding the improvement of labour standards, curtailing environmental degradation and accelerating debt relief, the aim of this report is to evaluate the fundamental aspects of the government's strategy, rather than conduct a point by point review.

Therefore, the focus of the report concentrates primarily - but not exclusively - on Chapters 1, 2, 4 and 5, where the predominant aspects of this strategy are to be found. An additional reason for this approach is determined by the rationale that those 'laudable' initiatives can only be taken seriously if the overarching strategy is complimentary to them.

The declared intention to reduce poverty "in the context of globalisation" announced early on in the White Paper, confines us to a discussion of whether globalisation in its current form can be made to work for the poor. The title of the White Paper correctly implies that to date the process has been working against them, in recognition of the need to actually `make' globalisation work for the poor - a reality that has been brought to public attention through the tireless campaigns conducted by an international coalition of NGOs, grassroots organisations, labour, church and human rights groups.

To this extent, the White Paper could be viewed as a government response to these campaigns, for it represents a shift in prevailing attitudes that dominated the parameters of discourse on the issue until recently. It is no longer assumed that the individual word `globalisation' implies something that is universally positive and beneficial. Such impressions, crafted by a sympathetic mainstream media, are no longer convincing. The rhetoric regarding economic processes and sustainable development has begun to mirror the views held by the majority of NGOs on these issues. For example, in the White Paper the government declares that "it is clear that development strategies must be adapted to local circumstances and must be nationally owned and nationally led by developing and transition countries."

A genuine commitment to such positive observations would be welcome and worthy of support, yet when placed "in the context of globalisation" the question of compatibility arises. Herein lies the necessity, in addition to the duty, to scrutinize the government's poverty elimination strategy and expose any flaws in it. To do so requires a review of the various theoretical and empirical components of a global economic integration process that the government clearly supports.

To enter a generalized debate on globalisation is not the intention here, neither is it necessary, as the arguments for and against are well understood by interested parties and individuals. Rather, the intention is to evaluate the various beliefs and ideals on which the process is being driven, such as free trade and free market theory and to then go on to examine the key components intrinsic to the process, such as the deregulation of the international financial system and the growth of transnational corporations. The UK Government's attitude to these processes is critical in concluding whether its professed commitment to poverty elimination and sustainable development is genuine and worthy of support.

1. Global Economic Integration: Ideals and Realities
UK Government targets for the reduction of world poverty are set forth in Chapter 1, they include "a reduction by one half in the proportion of people living in extreme poverty by 2015" and "the implementation of national strategies for sustainable development in all countries by 2005," in addition to reductions in mortality rates and increases in primary education. This is to be done by "making globalisation work more effectively for the world's poor" through "the equitable management of globalisation". The UN Secretary General is cited as showing the way in observing that "inclusive globalisation must be built on the great enabling force of the market, but market forces alone will not achieve it." So we have a clear commitment to market forces as a primary poverty alleviation mechanism, although market forces have long been identified as root causes of poverty and inequality by their very nature. The mechanism that evolves from the systemized practise of buying and selling, and of the competition entailed within this activity, is a socially destructive force. Participants in this system seek gain that can only be attained at someone elses expense and this ensures certain inequitable outcomes.

The government however, takes issue with the notion that "globalisation is synonymous with unleashing market forces, minimizing the role of the state and letting equality rip" and instead prefers to view global economic integration as a harmonious process of "growing interdependence and interconnectedness of the modern world." Implicit in this counter-definition is the notion that this is a positive process "driven by technological advance"and "reflected in the diffusion of global norms and values" and perhaps crucially, "the spread of democracy." Environmental degradation is another factor that cannot be made synonymous with globalisation either, for "this process was at work before global integration speeded up." As for inequality, "this has more recently started to fall." The effects that globalisation is having on culture are also regarded as positive, having "produced elements of a `global culture'" to the extent that this has even "encouraged a re-assertion of local cultural identity." Implicit in this assessment is the notion that this process is welcome in the so-called developing world, although it is being driven by the developed world in an alleged display of benevolence. The popular view from the developed world is that this is a continuation of North-South policies.

For sake of clarity, the North constitutes the `developed world,' located in the north-western hemisphere of the globe where Western Europe and North America lie, but it also includes Japan, Australia and New Zealand. These are sometimes referred to as the industrialized countries or the `west.' The South constitutes the `developing world' and the `Least Developed Countries' (LDCs), often referred to as the `Third World.' The South is obviously composed of all the countries and continents that do not lie in the North, those being Africa, Asia and Central and South America, with recent addition of the former-Soviet Union. Perhaps needless to say, the South is composed of the vast majority of the world's landmass and population, as well as the majority of its natural wealth.

1.1. Market Forces and `Openness'
The failure to recognize the fundamental dynamics of globalisation undermines any attempt to reduce world poverty before it has even begun, for the term `globalisation' is used to describe a particular form of global economic integration administered by international institutions. For example, one such institution is the World Trade Organisation (WTO), which according to Chapter 5, section 227 of the White Paper, "still bears the heavy imprint of the much smaller group of mainly northern countries that have dominated negotiations since the founding of the General Agreement of Tariffs and Trade (GATT)." The White Paper reflects this agenda by affirming the government's commitment to `openness', which is simply a euphemism for further liberalization and deregulation. The claim that "the best evidence to date suggests that there is no systematic relationship between openness and inequality," reveals an ideological commitment on behalf of the government to the liberalization doctrine that seeks to replace the role of the state in economic affairs with that of the market.

In fact the mass of evidence suggests the exact opposite, revealing that free market reforms and liberalization (or `openness') lead to the kind of economic crises suffered by South East Asia in 1997, which in turn exacerbate poverty and inequality. Such a conclusion is drawn by the United Nations Conference on Trade and Development (UNCTAD) 1997 Trade and Development Report, which identifies `openness' and liberalization as the primary factor responsible for the dramatic increase in poverty and inequality. That this "best evidence" is denied in the White Paper raises serious questions about the government's commitment to poverty reduction. Instead, we find that "everywhere it is clear that openness is a necessary - though not sufficient - condition for national prosperity." This mirrors the UN Secretary General's acknowledgement that markets alone are not a sufficient guarantor for development, while emphasizing a commitment to them as a primary factor nonetheless.

In stark contradiction however, it is later conceded that "globalisation also brings some systemic risks" in the form of "financial volatility" which was "vividly illustrated in the Asian Crisis of 1997," revealing that "the Asian experience indicates clearly that openness to short-term flows can be damaging." So openness may not cause inequality or deter growth according to the government, but it can be "damaging" and to relieve the damage caused by this openness "strong and effective regulatory systems are needed at the national and international level."

Despite the recognition that liberalization has lead to severe problems in the international financial system, and that regulations are necessary in order to stabilize the situation, this in no way undermines the government's commitment to globalisation and openness. On the contrary, it is asserted in classic trickle-down economic theory that "if well managed, the benefits of globalisation for poor countries and people can substantially outweigh the costs, especially in the longer term."

This may sound convincing if one believes that the globalisation of international trade and finance is a recent development. However, economic history reveals that global trade has existed since antiquity. What has developed recently within the perspective of this time-frame, is an international trading system dominated by countries located in the North. Established over two hundred years ago, inequality between this region and the rest of the world has steadfastly risen. Therefore, the "longer term benefits" of the globalisation of trade have eluded poor countries and their people (bar a small elite minority) for more than two centuries. Nevertheless, it is claimed in the concluding sections of Chapter 1 that "open trade has a vital role to play in helping countries to reduce poverty."

1.2. Openness and Development
These assertions on the benefits of `openness' and `market forces' are well understood to be false, for every wealthy industrialized country radically violated these principles in order to develop economically. These same `developed' countries continue to do so in order to maintain their disproportionate accumulation of wealth and relative economic power. Infant industry protection was an American innovation pioneered in the late eighteenth century by Alexander Hamilton (Secretary of the Treasury under first US President George Washington) in his Report on Manufactures. This applied to the textile industry during Hamilton's time, and to the preservation of the steel industry under the Reagan administration of the 1980s. It currently applies to the increasingly influential biotechnology and pharmaceutical industries with the help of WTO trade rules, specifically Trade-Related Aspects of Intellectual Property Rights (TRIPs), all in blatant rejection of market discipline. These modern forms of protectionism followed earlier examples set by developed European states.

The British example is instructive. The introduction of the `calico acts' (1700 and 1721) during the early stages of industrialization prohibited cheaper imports from India in a bid to protect manufacturers of wool, linen and crucially the `infant' cotton industry. These measures destroyed an advanced cottage industry in India and were largely responsible for the gradual economic decline and underdevelopment that followed. Britain only converted to free market principles once it was safe to do so after 150 years of protectionism, for this development strategy had helped secure such an advantageous position for British industry, that operating on a `level playing field' represented no threat to Britain's economic dominance over international trade. At least up until the period following the First World War, where competition with Japan inspired a new wave of protectionism (and provided a major impetus to the conditions that evolved into conflict in the Pacific during the Second World War).

During the post-war period the only region outside of the `developed world' to industrialize and advance economically was East Asia, incorporating the reliable method of infant industry protection in order to develop successfully. The rest of the `South' was subject to free market principles under the trade rules of GATT, a situation East Asia was able to avoid for a variety of reasons. The results for the South have been catastrophic, particularly over the past three decades where `openness' has been virulently pursued by the IMF and the World Bank. Yet the rejection of the `openness' doctrine on the part of the developed world is only one component of the sustenance of their industrial health: there are also state subsidies to take into account.

One of the reasons the United States has adopted the free trade mantra with such vigor is because the two sectors of industry in which it is internationally competitive - high technology and agriculture - are both subsidized by the state. This essentially shields these industries from the dangers of competition. The case of technology is the most intriguing, as the respected economist John Kenneth Galbraith has observed that in the US "the stability of production depends on a large volume of military expenditures." Crucially for the private sector "it is also a cover by which the cost of research and development for civilian purposes which is too expensive or too risky to be afforded by private firms can, on occasion, be conducted at public cost" (1984, p. 270-1). Although this understates the case, for the vast majority of research and development conducted in the US during its 1950s phase of liberal trade promotion was undertaken through military spending.

The term `corporate welfare' evolved from the realization that the way developed countries economies function, and one of the reasons they look so successful, is because they have been particularly adept at socializing costs and privatising benefits. As Galbraith has written elsewhere with regard to the state protection of industry during the 1980s: "the Reagan administration has repeatedly set aside its free market rhetoric to come to the rescue of failing banks and needful exporters and, at unprecedented costs, to protect farmers from the free market." He concluded that "socialism in our time is not the achievement of socialists; modern socialism is the failed children of capitalism." (1987, p. 295)

These are crucial aspects of post-Second World War economic history, where the ideology of free trade has been used as a weapon by the developed world to undermine the development of the South. This truism gains some limited recognition in Chapter 5, section 230 of the White Paper, with the admission that "developed countries have long preached the virtues of openness: but practise lags behind the rhetoric" for "developed countries maintain significant tariff and non-tariff barriers against the exports of developing countries." From this, one may deduce that this is why they are `developed' - and the rest are not.

1.3. Development and Market Theory
However, although we find earlier on at the beginning of Chapter 2 that "while the market fundamentalism of the 1980s and early 1990s has been throughly discredited, it is now almost universally accepted that efficient markets are indispensable for effective development." It is a grim irony then that efficient market hypothesis lays the very foundations for "thoroughly discredited" market fundamentalism, as it provides the rationale market systems require in accordance with the theory that prices accurately reflect all available information and in so doing adjust and allocate `efficiently'. This theory is only "universally accepted" among those with a vested interest in the theory prevailing as the received wisdom or convention, those being mainstream economists, governments of wealthy states and industry based in those states.

Complimentary to this is the theory of perfect competition, where no monopolies, oligopolies or cartels can exist, when there is perfect knowledge of markets and products, prices subsequently reflect true costs. But neither are born out by fact. The burst of the `dot com' bubble and consequent devaluation of the Nasdaq by over fifty% serves as the most recent example undermining efficient market theory, and the trend toward oligopoly with the unprecedented wave of mergers and acquisitions hardly compliments the ideal of perfect competition. The latter point is particularly relevant to free market theory, because it constitutes a major assault on markets on the part of growing corporations, who just so happen to be leading proponents of free market and free trade ideals through their intense lobbying of governments, international institutions and funding of think tanks and university research. Paradoxically, however, the very existence of these corporations in themselves constitutes a major violation of these favored ideals. For the dominance over international trade and increasingly over the global economy of these hierarchically structured centrally planned institutions has more affinity with Soviet-style command economies than anything that warrants the term `free,' not to mention 'democratic'.

To delve slightly deeper into the theoretical aspects of these professed ideals it is worth noting that their founder, Adam Smith, did not have this in mind when he made his case for free markets in his renowned Wealth of Nations. What Adam Smith advocated was a free market system of independent small traders and craftsmen, and explicitly condemned the machinations of joint-stock companies, whose interests he contended were in direct contravention of those of society at large.

One other reason why efficient markets are not "indispensable for effective development" is the erroneous ideal that free trade theory is based on, i.e. Ricardo's theory of comparative advantage, based on the premiss that capital is immobile and will be invested domestically. Perhaps needless to say, this is an ideal that does not hold true in today's world, where capital is highly mobile and moves at the push of a button to wherever it expects to gain the highest returns.

1.4. Growth and Development
Along with openness, the government views economic growth as the best way for developing countries to reduce poverty. This view is expressed in the observation that "the initially poor countries that have been most successful in catching up in recent decades - the newly industrializing east Asian countries and China - seized the opportunity offered by more open world markets to build strong export sectors and to attract inward investment." The first point to make here is that world markets have not been all that open, as mentioned above and acknowledged in Chapter 5, section 230 of the White Paper. Second, and also acknowledged in the same chapter (sections 221-222), is that the example set by East Asia is not one that can be readily followed. The reason for this however, is explained in terms of free trade theory in that East Asia "has a comparative advantage in manufactured exports because it is densely populated," so "with little land per person, there is less scope for primary exports than for labour-intensive production of industrial exports." This explanation may contain a grain of truth, but there is more to East Asian development than Ricardo-inspired rationalizations on economic policy.

The industrialization of East Asia, particularly that of South Korea and Taiwan, is a special case in itself, part accident and part legacy left by Japanese colonial management, a legacy that differed substantially to that left by European imperial powers over their former colonies in that Japan took the unique step of developing its imperial domains. The recent industrial rise of the region owes its origins in no small part to the stimulating economic effects of an `accident' of history in the form of the Korean and Vietnam wars, and the substantial capital injection into the region that came as a consequence. In radical violation of IMF principles, this capital injection was used in vast public expenditure projects in infrastructure development suited to build an industrial base and education to provide that industrial base with skilled and competent workers.

All this is averse to an IMF and World Bank preference for infrastructure development with an orientation to attract foreign investment. East Asia pursued an export-led growth strategy not by "opening up" but through emulation of its developed predecessors, in following a state planned development strategy coupled with infant industry protection. It is acknowledged in the White Paper that "in the 1950s and 60s, protectionist policies in developing countries - promoting industrialization by restricting imports of manufactures - were often associated with quite rapid growth," with no reference to which developing countries these were. The only developing countries to be "associated with quite rapid growth" throughout the entire post-Second World War period have been those of East Asia. Yet where credit is allocated to this region numerous times throughout the White Paper as representing a fine example of development, it happens to be missing in this one conspicuous case.

If East Asia developed in contravention of the `openness' doctrine, it certainly collapsed because of it. The kind of the praise the region receives in the White Paper, as evidenced by the claim that "it is in these countries - mainly east Asian-" which follow an export-led growth strategy "that poverty has fallen most rapidly," misleadingly omits one crucial fact. Since the 1997 financial crisis, this region has suffered a huge rise in poverty, widely acknowledged within the mainstream to have been exacerbated by IMF `rescue packages.' Despite earlier claims that "inequality has more recently started to fall," in this`developed' region it has recently increased at a rapid rate. The currency and stock market devaluations of the former `tiger economies' were widely covered in the mainstream media, the human costs of the crisis less so. The following is a brief tally of just some of the consequences:

• A year after the crisis hit Thailand the unemployment rate had risen over 5% to 7.3%, with 1 million people pushed below the poverty line according to the World Bank;
• In Indonesia the unemployment rate rose over 8% to 13.2%, with job losses of 20 million in the first year following the crisis;
• For Malaysia the World Bank estimated an increase of 50,000 officially poor for every 1% decline in GDP, which would mean an additional 320,000 people condemned to poverty;
• In South Korea almost a year on from the crisis, 2 million people would find themselves newly unemployed.

There are many more unfolding tragedies not detailed here, such as growing infant mortality rates, declining numbers of children in full time education in addition to increasing numbers off children engaged in prostitution.

These human costs have been accompanied by severe economic costs, from which East Asia will not recover within "the context of globalisation" in its current form. For IMF doctrine requires that all troubled enterprises be shut down or put on sale, regardless of their longer term prospects. This has meant that the `rescue packages' have obliterated the base of East Asia's economic success, its domestic industrial base will only consist of companies able to survive the crisis, these will be few, for they will be denied access to capital. The huge job losses in the region lay testimony to the wave of bankruptcies that hit the region following the crisis, and those companies that survived the initial onslaught are likely to be bought by foreign investors at bargain basement prices.

The capital flight from the region, enabled by a deregulated international financial system, has brought about the fall of the one region in the world that has `developed' in the past fifty years. The lesson in all of this for developing countries seems to be fairly obvious but it is one which the UK Government, along with the IMF, WTO and World Bank are unwilling to recognize by instead opting to advocate more `openness'.

2. International Finance and Trade
Having set forth the case that contrary to the claims made in Chapters 1 and 2 of the White Paper, the international finance and trade system is being constructed on dogmatic beliefs that have no basis in fact, it is necessary to look at the structure of the system being constructed. Chapters 4 and 5 of the White Paper are key in the respect that they establish the government's position with regard to the institutions that are instrumental in crafting the framework in which this system operates. The actors in question are the International Monetary Fund (IMF), the World Trade Organisation (WTO) and the World Bank.

2.1. International Finance
Chapter 4 begins by informing us that "a central feature of globalisation has been the substantial increase in movement of capital around the world." This is due to the deregulation of the international financial system which began with the break down of the Bretton Woods system of fixed exchange rates and capital controls in 1973. Since then there has been a consistent drive to remove all barriers to the flow of capital, pursued in the main by the IMF with the support of governments of developed countries. Enhanced by the `telecommunications revolution' this process has led to huge amounts of money shifting around the globe in search of optimal returns, often to be found in short-term investments and outright speculation on foreign exchange rate fluctuations. This huge growth in financial markets is symbolized by the fact that by 1993 more than $1 trillion was moving around the world in transactions by the day, a 50% increase from just six years before. Of that $1 trillion, UNCTAD (United Nations Conference on Trade and Development) has estimated 95% to be speculative. This is a complete reversal from the time just preceding the break down of the Bretton Woods system, when only 10% of capital in international exchanges was estimated to be speculative and the other 90% related to `real' economy' investment. There has been a huge shift in the functioning of the international economy, to use IMF terminology, a `structural adjustment' of which liberalization is just one factor.

The period preceding the beginning of deregulation and liberalization, the 23 years between 1950 and 1973 or so called Bretton Woods `era', was one of high average growth rates for the developed world, and modest growth for many in the lesser developed world. The period of liberalization following 1973 has seen a sharp decline in average growth rates for the developed world, and a move into negative growth for much of the lesser developed world. For example, according to OECD figures average annual growth for Western Europe between 1950-73 was 3.8%, for North America, Australia and New Zealand it was 2.4%, for 10 African countries it was 1.8%.

Between 1973-92 the growth rate for Western Europe had slipped to 1.8%, for North America, Australia and New Zealand 1.2% and for 10 African countries -0.4%. What is more, these negative effects of deregulation and liberalization were predicted in the late 70s by Nobel Prize laureate in economics James Tobin, who anticipated a shift toward a low growth, low-wage economy. The growth of financial capital has led to pressure for an anti-inflationary approach to monetary and fiscal policy on the part of governments and central banks, therefore depressing both growth and employment. In the face of this process Tobin proposed a tax on foreign exchange transactions, which came to be known as the Tobin tax, to ensure the deprivation of investment in the real economy would be circumvented. It has never been seriously considered by the governments of developed countries.

2.1.1. Prospects for Regulation
None of this receives any attention in the White Paper. Instead we are informed in Chapter 4 that "capital controls take many forms" and that "these controls can act as a barrier to foreign investment, particularly if they discriminate against foreign investors." This will not do, so "it is for this reason that, until recently, the international financial institutions were pushing countries to remove these controls, and to remove them quickly." Until recently. Now, slightly more experienced, it is recognized "that the sequencing of liberalization with reform is crucial" for "there are risks associated with capital account liberalization." It is recommended therefore that "in countries which have weak financial sectors and are at the earlier stages of liberalization, there may sometimes be a case for specific measures to discourage excessive short-term capital inflows," but only sometimes. Developing countries who may feel encouraged by this in the hope they are being spared gruelling IMF-style structural adjustment can think again, for "such measures should be viewed as a temporary means of facilitating the reforms needed to ensure orderly and sustainable liberalization." What is more, "the UK Government believes that both the IMF and World Bank have an important role to play in promoting pro-poor economic growth and integration of developing economies into global markets" despite the fact that in the light of its attempted management of the 1997 financial crisis, the IMF came to be thoroughly discredited and its reform packages widely regarded as inappropriate.

In the face of this criticism the IMF has taken a hard line stance and insists its neoliberal approach is the correct one, as a result it is acknowledged in the White Paper that "there is still a threat of financial instability." So what is needed is "improved surveillance - better monitoring" along with "a framework of codes and standards," and in the face of "instability" it is envisaged that "there will continue to be a role for the IMF in resolving crises."

The "strong and effective regulatory systems" proposed in Chapter 1, that "are needed at the national and international level" are nowhere to be seen. Instea, we are informed that "progress has been made toward better disclosure and transparency of cross-border financial flows" and that this will "require reforms to the regulation of institutions that provide credit to highly leveraged institutions." The structure of the international financial system is not identified as a problem in itself, in dire need of regulation.

2.2. International Trade
The deregulation and liberalization process in effect from 1973, has also led to the growth of transnational corporations (TNCs), to the extent that these unaccountable and undemocratic institutions overwhelmingly dominate world trade. This receives some commentary in Chapter 1 of the White Paper, in that "around a third of world trade takes place within transnationals," when in fact the figure for intra-firm trade is close to 50%. However, this is misleading, for this activity cannot by definition be regarded as trade when what is taking place is simply transfers between branches of the same corporation.

Liberalization has enabled the growth of TNCs through the growth of stock markets and the proportion of company shares publicly traded, which allows for consolidation through corporate mergers and acquisitions once the regulations on these activities have been dismantled. For example, over 50% of Foreign Direct Investment (FDI) is accounted for by cross-border mergers and acquisitions. The growth of markets through liberalization also allows corporations to expand their interests into areas normally associated with the public sector, such as health, transport and energy. One of the most important processes though, has been the re-location of production and manufacturing to the southern hemisphere (or developing world) where is it cheapest, and the adjustment of northern economies from the predominance of `real' economic activity to service-based economic activity. This is a process that has been warmly embraced in countries like Britain, where deindustrialization has been so thorough that over two thirds of economic activity is attributable to the service industries sector. The process is usually referred to as increasing the `efficiency' of developed countries economies in accordance with market theory, whereby `competition' will yield the best results in almost any sector. Although this logic lacks any empirical foundation, it has been used by successive governments as a justification for the privatization of publicly owned assets, services and industries.

Though the reasons why this global `structural adjustment' has happened is too detailed and complex to explore here, suffice to say that during the Bretton Woods `era' of capital controls, regulation and relative economic stability, corporations amassed vast amounts of liquid wealth that simply needed somewhere to go. Deregulation and liberalization provided ample opportunity to put this liquid wealth to use, hence providing a stimulus to the financial services industry which has never looked back since.

2.2.1. Trade and Investment
The liberalization of international trade rules, or pursuit of `free trade,' has arrived at the later stages of the liberalization process. It became a major priority in the mid 1990s with the establishment of the WTO, following the completion of the Uruguay Round of trade negotiations under the General Agreement on Tariffs and Trade. These crucial developments have allowed for an expansion of the agenda for liberalizing trade from a reduction in tariffs and other trade barriers, to the establishment of trade rules. The components of these trade rules have been kept mostly from public view for good reason, as they defy any common sense notion of `free trade' and have been crafted at the behest of corporate lobby groups.

Under the banner of `free trade' corporations are able to further consolidate their dominance over the global economy by creating a `level playing field' between them, for once they have subjected smaller businesses and traders to `competition,' economies of scale dictate that the largest corporations will inevitably wipe everyone else out; everyone that is except small sub-contractors employed to produce and manufacture for corporations on their terms, establishing industrial complexes in Export Processing Zones (EPZs) such as the maquiladoras in Mexico. This is another aspect of the FDI that goes to the developing world, for it also consists of large corporations like Nike subcontracting out production to be undertaken in EPZs. It is predominantly young women who gain employment in EPZs, in conditions that have received widespread condemnation from human rights groups for well over a decade.

i. "Employment Dividends for Women"
In Chapter 5 of the White Paper, we are enthusiastically informed that "the expansion of world trade has brought employment dividends for women," as "women's employment has grown at a faster pace than men's in the last twenty years." As if to reflect on global `structural adjustment' we discover that "in 1978, for example, Bangladesh had only four garment factories. By 1995, it had 2,400, employing 1.2 million workers, 90% of them women." Gaining employment in virtually unregulated EPZs which are notorious for their environmental degradation and large scale human rights abuses, are nothing to worry about for we are informed that "these are significant gains for women." Although to a significant extent we are not even talking about ‘women’, but young girls who are enticed through misleading impressions conveyed upon them to work for less than a living wage in degrading sweatshops. Research has often revealed a common thread to the background of the girls and young women who find themselves in these adverse environments. It is often discovered that they travel a great distance from their families who have been dispossessed by ‘free trade’ in agriculture, under the false impression they will make money to support them. They instead find themselves stranded in circumstances which in many cases, it would be no exaggeration to say, are reminiscent of a concentration camp scenario.

As EPZs compete with each other the world over for attractive inward investment conditions, corporations simply seek the best deal on offer, often re-locating production at will. The use of subcontractors allows for this to be done with ever decreasing constraints, with the additional advantage of distancing corporations from the sweatshops that manufacture their products. This short-term and debilitating aspect of FDI is acknowledged in Chapter 4, whereby "developing countries are developing ever more generous tax regimes to attract potential investors," and recognizes the "need for greater international co-operation to avoid this ‘race to the bottom.’" In the same chapter it is alleged that "TNCs can contribute significantly to economic development in host countries" in recognition of the "need to encourage links to the domestic economy, including linkages with domestic suppliers and sub-contractors."

The `race to the bottom' is on, and the UK Government ominously envisages "regional trade agreements and certain WTO provisions, such as Trade-Related Investment Measures [TRIMs], offer[ing] the potential for increasing investor confidence in developing countries by ‘locking in’ policy commitments to which most countries are already committed", albeit reluctantly for many of them and with increasingly vocal discontent regarding the entire WTO machinery. This is one of the reasons why the negotiations failed in Seattle, so to claim in a misleading manner that "most countries are already committed" to policy commitments such as TRIMs can be interpreted as an attempt to create the impression that developing countries are willfully involved in these processes. The reality is that they do not have any other option, for they are "locked in" to global economic processes administered by Northern countries, in the incarceration sense of the term. TRIMs are specifically designed to tighten the straight jacket, by containing provisions that prevent the governments of developing countries placing numerous conditions on inward investment, including performance requirements. This essentially amounts to giving corporations a free hand and "increasing investor confidence" in this sense, while leaving developing countries to compete ever more fiercely between themselves for a share of FDI.

In the light of all this, any attempt to introduce an international tax treaty as put forward in the White Paper, is unlikely to yield substantial results that will be of benefit to developing countries. All the more so when we are informed of the government's intention to encourage "socially responsible behaviour " on the part of corporations, by "working with business to produce an integrated strategy which will consider where voluntary initiatives by business can add most value." The key word here is "voluntary," as corporations are constantly lobbying governments to forfeit any regulations on their activities that could be beneficial to the environment and labour, in favour of "voluntary initiatives." The results are likely to lead to a wider proliferation of EPZs, accompanied by declining labour and environmental standards throughout the world.

2.3. ‘The Spread of Democracy’
Democracy is a crucial component in achieving social and economic justice, the two key factors that lead to sustainable poverty reduction. The assertion professed in Chapter 2 of the White Paper, that "globalisation has been associated with democracy," directly contradicts the prevailing trends entailed in the global economic integration process. What the evidence reveals are two predominant tendencies at work, in no order of relevance, and both of major concern to the state of democracy in the world. One tendency is the transfer of decision making power from national governments to inter-governmental institutions (IGOs), forming quasi-governmental structures in the process. This tendency is leading toward what the Financial Times has described as a "de facto world government." The other tendency, which is inextricably linked in with the first, is the rapid concentration of wealth and power underway through vast corporate mergers and acquisitions, currently taking place at an unprecedented rate.

2.3.1. The IMF, World Bank and WTO
The role of the inter-governmental institutions (IMF, World Bank and WTO) in global affairs is not challenged, rather, it is emphasized in Chapter 4 that "the UK Government believes that both the IMF and the World Bank have an important role to play in promoting pro-poor economic growth and the integration of developing economies into global markets." This commitment covers economic policy (IMF) and infrastructure related development (World Bank), through the promotion of policies that have not altered in any substantial form from the development strategies of the 1960s. The descent of the developing world into a vast chasm of debt resulting from the adoption of such unsustainable development strategies, has been exacerbated by IMF and World Bank sponsored Structural Adjustment Programmes (SAPs). This failed to deliver "pro-poor economic growth," but has accentuated the role of the IMF and World Bank in global economic management, at the expense of national sovereignty and democracy.

As for trade, it is stated in Chapter 5 that "if open trade is to work for the world's poor we need effective multilateral trade rules made by an institution in which developing countries are properly represented, and an institution capable of enforcing them." One may be forgiven for assuming that such a role would be naturally bestowed upon the United Nations Conference on Trade and Development (UNCTAD), as many developing countries requested during the failed attempts to establish a Multilateral Agreement on Investment (MAI). However, this is not to be, for we are informed that "this is precisely what the World Trade Organisation (WTO) is and represents," despite the recognition cited earlier, that the WTO "still bears the heavy imprint of a much smaller group of mainly northern countries that have dominated negotiations since the founding of the General Agreement on Tariffs and Trade (GATT)."

Assurances are often made on the part of various authorities that because these institutions are composed of member states, democracy is not under threat, as it is the interests of member states - of which many have democratically elected governments - that these institutions serve. Yet these institutions are not accountable to member states, and their decision making power covers ever broader ground, while the processes themselves are undemocratic.

i. The IMF
The White Paper states that "the IMF has a central role in promoting international financial stability and in contributing to the establishment of sound macro-economic and financial policies." These so-called "sound policies" were thoroughly discredited in the aftermath of the 1997 East Asian financial crisis, owing to the catastrophic failure of IMF's ‘rescue packages.’ Since the early 1970s, the IMF has gone from a Bretton Woods institution, formed at the end of the Second World War to facilitate trade through the regulation of exchange rates, to a body that dictates and implements the economic policy of national governments. The deregulation of the international financial system has been aggressively pursued by the IMF and led to the now inherent volatility and instability that caused the East Asian ‘tiger’ to collapse after years of exponential growth. Since the early 1970s and the ascent of IMF-sponsored deregulation, speculation has come to account for up to 95% of all capital flows, where as prior to this it was only 5%, real economy investment constituting the rest.

ii. The World Bank
The World Bank is another huge and powerful unelected bureaucracy which compliments the IMF's role in ‘structurally adjusting’ national economies and irresponsibly lending for environmentally destructive infrastructure projects. There have been recent allegations of corruption in the Bank's dealings regarding such infrastructure projects in Africa. Along with the IMF, the Bank has played a leading role in sinking the ‘developing world’ into ever greater debt, through the pursuit of unsustainable, capital-intensive and energy-intensive development models. These policies have produced a global infrastructure suited not to the needs of developing countries but to those of external investors, predominantly based in Western Europe, North America and Japan. The costs for this development are born out by the poor through debt service and displacement in the face of huge infrastructure projects with which the Bank is associated, particularly dam construction. This is all a long way from the Bank's original purpose as another Bretton Woods institution established to assist Europe in post-war reconstruction.

iii. The WTO
The WTO is ostensibly democratic, and as pointed out in the White Paper, "developing countries are a majority of its 140 members." However, this is a convenient notion which does nothing to negate the following points:

• Developing countries play no significant role in formulating the agenda for WTO negotiations. Neither does civil society, and this public exclusion applies to both the developed and the developing world;
• Decisions are made in secrecy, away from public view and possible scrutiny. This ‘lack of transparency’ gained formal recognition by the WTO itself after the Seattle negotiations in November 1999. This concession was due in large part to the demonstrations which disrupted the negotiations and emboldened the negotiating position of many developing country representatives;
• There is a severe imbalance in negotiating power between WTO member states as mentioned earlier, which undermines the supposed democratic structure of this institution;
• The disputes settlement procedure is one of the most controversial aspects of WTO operations, being highly secretive and undemocratic. Its judgments override national laws and international treaties on the environment and human rights, with penalties and trade sanctions imposed for non-compliance.

How did the WTO evolve from an outgrowth of the General Agreement on Tariffs and Trade (GATT) treaty with an objective to reduce barriers to trade, to an organisation that has the power to override national and international laws on human rights, labor standards and environmental protection? The question answers itself. The WTO has been able to do this by formally identifying such legislation as posing ‘barriers to trade’ and in so doing, systematically fulfilling its function in undermining them. These ‘barriers to trade’ are eliminated through devices such as TRIPs (Trade-Related Aspects of Intellectual Property Rights), TRIMs (Trade-Related Investment Measures) and GATS (General Agreement on Trade in Services).

The adoption of these `annexed agreements' has nothing to do with free trade. Rather, they are in violation of the ideal for they constitute a major market intervention, all the more so because this has taken place at the behest of corporate lobby groups whose interests these agreements quite blatantly serve. To take just one example, TRIPs were placed on the GATT agenda under the influence of the Intellectual Property Committee (IPC), a lobby group composed of some of the largest and most powerful corporations in the world. Under the agreement, WTO member states are obliged to adhere to an ‘intellectual property’ regime, a convenient arrangement that allows corporations to stifle competition in products they have patented. The government's position on this issue is elaborated in Chapter 3 of the White Paper. According to this administration, "developing countries have an important interest intellectual property protection, as a way of encouraging investment, research and innovation from which they should benefit." If we could, we would possibly ask the scores of dead Indian farmers if they agree, or at least before they committed suicide because their unknowing use of patented seeds landed them in huge debt to Northern agribusiness.

However, that aside, "the UK Government believes that the agreement allows WTO members sufficient flexibility to implement domestic IPR [Intellectual Property Rights] regimes which take adequate account of their circumstances." An important testing ground is the attempt by the US at the behest of the pharmaceutical industry, to prevent South Africa importing affordable drugs intended for the treatment of AIDS. According to the US, this irresponsible behaviour violates the TRIPs agreement, therefore South Africa should be importing the expensive products of Northern pharmaceutical industries, unaffordable for the average South African AIDS sufferer. The government recognizes that "one concern in this area has been that patenting regimes will restrict the availability or increase the cost of essential drugs, seeds or technological process, and thereby reduce poor people's access to them." Therefore, "a key issue here is the extent to which national IPR regimes permit the importing of goods from the cheapest legitimate international source" with emphasis on "legitimate," as "the TRIPs agreement does not prevent governments from doing this, and there are no proposals from TRIPs signatories to restrict this flexibility." This explains why the US has taken the South African AIDS treatment case to the WTO, and has also been complaining about India's lack of compliance with the TRIPs agreement. However, one can find consolation in the government's claim that, "we are committed to monitoring the impact of TRIPs, including on poor people's access to drugs."

In all these cases the citizenry of sovereign states are powerless, as are their national governments, for failure to comply with IMF policies or WTO rules can lead to virtual economic sanctions. The case of the so-called ‘banana wars’ between the US and EU is instrumental in this regard. When the WTO ruled that the EU was discriminating unfairly in favour of Carribean banana producers, it failed to take into consideration the concerns and livelihoods of those who would be most adversely affected by the decision. Where were the voices of Carribean banana farmers in this dispute? Or the EU-based small businesses that would be hit by trade sanctions authorized by the WTO, and imposed by the US on the EU for non-compliance with the ruling? The voice of powerful TNCs such as Chiqita, who were instrumental in influencing the US government to take the issue to the WTO, were clearly taken into account. On the other side of the spectrum, if a banana farmer in the Dominican Republic wishes to dispute the WTO ruling, a ruling which affects his livelihood, who does he lobby, if he at all has the resources to do so at all? His national government, the WTO or Chiquita Corporation?

The government's response to this lack of democracy is to be found in Chapter 5, where we are informed that "two lessons stand out from [the] Seattle [round of negotiations]. First, developed countries must give greater weight to the needs of developing countries whose agreement will be needed if another Round is to be launched." This sounds positive, but "second, developing countries, who now make up a majority of WTO members, could make significant gains from a new Round if they can exert their influence more effectively." They can only do this if the WTO is truly democratized in such a way that developing counties, who make up the majority of the world's population, have a proportionate influence in formulating the agenda. There is nothing to indicate that this will happen.

2.3.2. Subverting Democracy
The growth and spread of democracy in the twentieth century has much more to do with the struggles of ordinary people organising in the face of overwhelming odds, than economic processes and technological advances (although technological advances do play an important role, currently in the form of the internet). The developed world has played a less than admirable role in these struggles, including successive UK governments, often siding with the oppressors over the oppressed. Support for Indonesia's genocidal Suharto regime did not waver when the present administration assumed office, and the government continues to enthusiastically support notorious human rights abusers such as the governments of Turkey, Colombia, and Nigeria, as well as outright totalitarian regimes as in the case of Saudi Arabia. Incidentally, these are also states with favorable attitudes toward western business interests, a common theme to be found in every case of a developing country acquiring the support of western governments. The case of the Illisu Dam in Turkey is a prime example, where the British government supports the project as it is to be undertaken by a domestic firm, although it will displace an estimated 30,000 ethnic Kurds if constructed. A considerable contribution to the Turkish government's war and expulsion programme in the Kurdish populated region.

Inequality and severe disparities in wealth and income are another feature of countries that maintain a favorable business climate, despite the wealth in natural resources that some of these countries, such as Nigeria, contain. The White Paper contains various assurances on the government's commitment to subdue the arms trade, the drugs trade and corruption, an intertwined web of factors impeding aspirations of democracy and stability in the developing world.

i. Arms
Despite the assurance made in Chapter 2, that "the UK Government has taken a number of steps to tighten controls over arms exports," it is worth asking why the UK manufactures arms to export in the first place? A large ‘defense industry’ is not a necessity to economic health, as demonstrated by Germany and Japan. Curiously, the ‘defense industry’ in Britain remains the one area of manufacturing not to suffer from de-industrialisation, and Britain controls over one quarter of the world market, granting it the status of the second largest arms exporter in the world after the United States. This can be explained by the fact that this is one manufacturing industry sector not subject to market forces, for it is publicly subsidised. Defense contractors rely on the government, specifically the Ministry of Defense (MoD), for the majority of their orders. Exports are often underwritten by the tax payer through the Export Credit Guarantee Department (ECGD) and the weapons and components are sold predominantly to authoritarian regimes in the developing world. The present administration's pledge to pursue an ‘ethical foreign policy’ has failed to stem this flow of arms to oppressive governments in the developing world. A year into New Labour's first term of office, Channel 4 News reported an increase in the rate of arms exporting licenses being granted, citing Department for Trade and Industry figures (C4 News, 13 May, 1998).

The assured "steps to tighten controls over arms exports" seem to amount to nothing more than "an EU Code of Conduct on arms exports," which is likely to have no more effect than the government's ‘ethical foreign policy’ has had on arms sales to authoritarian regimes.

ii. Drugs
According to the views expressed in the White Paper, "many of the world's violent conflicts are fuelled by the trade in illicit drugs and high-value minerals," and one might add, facilitated by an international arms trade in which Britain is a major player. However, this is a simplification. Many of the world's violent conflicts are fuelled by the adverse socio economic conditions they find themselves in. Conditions which the developed world has been instrumental in both imposing and exacerbating, through unsustainable development models and encouraging heavy indebtedness. The illicit trade in drugs and minerals is often a consequence of these conditions.

The debt crisis, discussed earlier (see 2.3.1.), was met by IMF-prescribed export-led growth strategies. In accordance with neoclassical doctrine this means a country pursuing its comparative advantage and maximizing exports in order to balance payments, stabilize its currency, and most crucially - meet its obligations to creditors. This has led to many countries engaging in unsustainable natural resource depletion at a huge cost to the environment. For some countries in Latin America, specifically Colombia, Bolivia and Peru, this logically resulted in the pursuit of their comparative advantage in cocaine production. Coca is the only viable crop in which to make a living for farmers in these countries, traditional agriculture does not pay, which is largely because of subsidised agriculture in the developed world and the fall in coffee prices in 1989. #

A ‘war on drugs’ is not a long term solution to this problem. A genuine ‘war on poverty’ would be more appropriate or better still, the pursuit of sustainable development models in accordance with the needs of the populace. The ‘war on drugs’ is a misleading public relations tool to justify selective military intervention, while the corruption that fuels the drugs trade in both the developed and the developing world is not addressed.

iii. Corruption
This assessment has established that the drugs trade has been encouraged, intentionally or not, by export-led development strategies imposed by the IMF on countries such as Colombia and Bolivia, who have in turn had to shift to large scale coca production in order to service debt. So when it is asserted in the White Paper that "in order to break the vicious circle of conflict and illegal trade, more effort is required to deprive warlords of their ill-gotten gains," which warlords are being referred to?

Under the Clinton administration the ‘war on drugs’ took the form the ‘Plan Colombia’ initiative, a $1.6 billion military aid package ostensibly designed to aid the Colombian government and armed forces in this struggle. Human rights groups have contested the purpose of this initiative, claiming that the military aid is to be used to assist the Colombian government in its civil war against Marxist guerillas, in particular the FARC (Revolutionary Armed Forces of Colombia) which is the largest rebel group. The British government is also participating in this initiative by providing military support to the Colombian government, a country identified by numerous organisations as the worst human rights offender in Latin America. Groups which include Human Rights Watch and Amnesty International as well as the US State Department, have linked official Colombian government forces to the paramilitaries, which are responsible for the vast majority of human rights abuses in Colombia. Paramilitary forces are also identified as having close links to the drugs trade and the cartels. The largest paramilitary organisation led by Carlos Castano, openly acknowledges his forces dependency on the drugs trade for funding. US and British military aid will assist such "warlords," and assist the drugs trade in the process. If this is what is meant by government's commitment "to supporting developing countries in their in their effort to implement effective anti-corruption strategies," then the signs are far from encouraging.

The US has long assisted governments in Latin America known to be heavily implicated in the drugs trade. A genuine 'drugs war' would target domestic offenders first, before going after those implicated on the supply-side. This does not mean street level dealers and users, but the North American and West European banks that facilitate the drugs trade through large scale money laundering. These institutions operate with virtual impunity, and have been further assisted by financial deregulation. The same can be said for the chemical companies that supply Colombia with processing equipment and materials crucial to cocaine production, further assisted by liberalization mechanisms like NAFTA (North American Free Trade Agreement). The regulation and prosecution of the corporations that bear a huge responsibility in their facilitation of the drug trade cannot be expected in a liberalized global economy.

3. Conclusion
The government's global poverty elimination strategy as set forth in the White Paper is encapsulated in the views expressed in Chapter 5, section 252. Here, we are informed that "developing country exporters find the proliferation of regulations and standards hard to comply with," regulations and standards "such as on labour, the environment or animal welfare." Therefore, "a balance needs to be struck..... which enables developing countries to export their way out of poverty." For those countries with an industrial capacity, this means the wider proliferation of notorious Export Processing Zones (EPZs), for those that do not, the government concedes that "not all developing countries will go down the same path as East Asia." For these countries, "including most of those in Africa and Latin America," it is recommended that "the best export prospects over the next few decades are in natural-resource-based products." The logic of this recommended strategy is based on the observation that "the fastest growing developing countries have been those which promoted exports" or, in other words, export-led growth.

This is a very narrow view of possible development models, an assertion that opponents of corporate-sponsored globalisation have long maintained. The recommended export-led model is to be coupled with "open trade," which we are assured "is not to be confused with unregulated trade," for "where there are no rules, the rich and powerful bully the poor and powerless," so "the process of opening up - to both trade and financial flows - has to be carefully managed." It is envisaged that "the benefits will not automatically reach poor people, who face many barriers to participating in the market economy," but the implication is that eventually they will, possibly by 2015 going by government forecasts. What this amounts to is the old `trickle down theory' based on the premise that if enough wealth is created, it will eventually reach the poor. In order to achieve this, restrictions on business activity must be dismantled in order to create a `free market' environment in which wealth can be generated. These are the fundamental ingredients for sustainable global poverty reduction according to the UK Government. Will this approach work?

3.1. Unmodified Global Economic Integration
This report has attempted to demonstrate that it will not, by evaluating this strategy on both theoretical and empirical grounds. In so doing, it has not been necessary to emphatically point out that this White Paper contains many striking contradictions. While volatility in the international financial system is recognized and insufficient regulations recommended, commitment to continued financial liberalization remains. Although globalisation is acknowledged to contain "dangers," an unwavering commitment to globalisation in its unmodified form also remains. There are many more examples, but what becomes clear is that certain negative aspects of globalisation have to be acknowledged because they are all too evident and well established. So what we find in the White Paper are vague recommendations and proposed initiatives that are in no way sufficient, such as those concerning the environment detailed in Chapter 6, or on debt cancellation as set forth in Chapter 7.

i. The environment
One fact that is all too evident and well known is that "the poor contribute least to environmental problems, yet are the most vulnerable to their ill effects. They are forced to live in the most degraded and ecologically fragile areas." So the need for regulation and the responsibility of countries like Britain is acknowledged, whereby "it is the consumption patterns of people in developed countries that currently make the major contribution to global environmental degradation." Our hopes may begin to rise with such statements, but this is offset in the declaration that precedes all of this in Chapter 5, section 255, in that "we believe that trade agreements and multilateral environment agreements should be mutually supportive and have equal status." Furthermore, "we will also continue to promote mechanisms which increase incentives for the private sector to be more environmentally responsible." Such incentives could involve the enhancement of university research funding into renewable sources of energy, to match the oil and gas research that outnumbers it five times over. This would possibly lead to increased investment in renewables as technologies advance and the commercial opportunities grow. But despite such possibilities, the incentives that are on offer seem to add up to nothing more substantial than voluntary initiatives in the hope that these will encourage "socially responsible behaviour."

Yet it is acknowledged that "voluntary action is not enough." Before we raise our hopes again however, we are informed that "without effective regulation in developing countries, many companies, not least national and state-owned enterprises continue to degrade the environment." What this seems to be implying, is the regulation of domestic companies in the developing world and incentives and voluntary initiatives for companies based in the developed world. Even if this were a misinterpretation of what is suggested in the White Paper, it would not be far from actual policy. It is Northern based transnationals that bear the heaviest responsibility for environmental degradation in the developing world, and any "effective regulation in developing countries" is regarded by the WTO as an unfair trade barrier and the IMF as non-compliance with its development models. The private sector in the developed world owes a vast debt for the environmental destruction it has inflicted on the developing world and the wealth it has extracted in the process. Reparations have long been in order in addition to the imposition of restrictions on resource-plundering Northern TNCs, yet the government's attitude is adequately expressed in the statement that "the role of the private sector in promoting better environmental management is vital."

ii. Debt
The debt burden endured by developing countries seems all the more criminal in consideration of the fact that it is the resources of these same countries, both natural and human, that have made the developed world so prosperous. If the horrific human cost was not enough to make a convincing argument for unconditional debt relief, then this additional factor ought to tip the scales in its favour. Needless to say, this is not the scenario that the privileged sectors of the developed world choose to recognize, for it would damage the fundamental base of their affluence. Under increasing pressure they have become willing to concede conditional debt relief, albeit with considerable reluctance, through the HIPC initiative (Heavily Indebted Poor Countries, or alternatively Half-hearted, Inadequate, Piecemeal Cancellation according to Jubilee 2000). The justification put forward for this approach, is that without conditions these irresponsible countries will become heavily indebted once again. This convenient shift of responsibility is designed to assist those irresponsible lending institutions based in the developed world, in shielding them from blame for the debt crisis. It is also motivated by a desire to assist them in gaining their returns on the credit they supplied, as well as the principal (original amount). This is done by enlisting IMF to operate as a global debt collector, in promoting policies such as export-led growth that ensures creditors will be repaid.

The debt crisis has therefore been cynically turned into an opportunity, and is used to further the liberalization agenda. This is commonly described as a ‘poverty reduction strategy’ as prescribed by the IMF. So in Chapter 7 of the White Paper we find that "it has now been agreed that greater flexibility will be shown in assessing countries' eligibility for debt relief, with the focus on those conditions that are essential for poverty reduction and growth." The hypocrisy intrinsic to this approach is barely disguised. "[T]here are a number of countries that are some way from qualifying for their HIPC relief - and the overwhelming reason for this is the persistence of violent conflict in these countries" states the world's second largest arms dealer and conceptual proponent of the humanitarian bombing mission. Even if we are to take such statements as genuine, the conditionalities place cure before prescription, in that violent conflicts are fuelled by harsh socio-economic circumstances that are further exacerbated by debt.

In addition to unconditional debt relief, the government could pursue its own proposal as set forth in the White Paper, where "the process of developing poverty reduction strategies is putting developing countries in the lead, devising and driving forward their own development strategies." This is an ideal that can not be realized within the context of export-led development as advocated as a principal poverty reduction strategy in the White Paper. This is only reinforced when that strategy is encapsulated within a WTO and IMF administered framework as the government envisages. The government will argue that "international support is conditional on economic, social and environmental policies which will systematically reduce poverty." "Conditional" is the operative word here, as those policies are not designed to reduce poverty but merely use poverty reduction as a cover for the pursuit of an agenda that will in fact inevitably increase poverty. Thus we return to where it all began: theoretical arguments on economic development.

One may conclude that all we are witnessing is a continuation of North-South policies that have long enriched the former and devastated the latter"but the UK Government believes that it represents an important shift from the structural adjustment of the 1980s and 1990s." What does the South believe? An instructive view quoted in the Jubilee 2000 Coalition's News and Action publication (Issue 4, March 2000), was expressed by Ethiopian Prime Minister Meles Zenawi: "The choice we face under HIPC is to abandon rational thinking in economic policy or wallow in the quagmire of unsustainable debt - a choice between the devil and the deep blue sea."

The commitment to an unmodified global economic integration process remains a firm priority, a commitment that inevitably will not lead to poverty reduction but its increase. This is nowhere more evident than the professed support for a revival of the defunct MAI (Multilateral Agreement on Investment) to be found in Chapter 4, where we discover that "the UK Government believes there would be further benefits for developing countries from a multilateral investment agreement negotiated through the WTO," the previous attempt having failed through the OECD (Organisation for Economic Cooperation and Development). Although this is already partially underway through the implementation of TRIMs at the WTO, it is a matter of great concern to those developing countries who were opposed to the original MAI proposals, that its revival is sought by the British government. Hence the need for another round of WTO negotiations, to push for further liberalization agreements like the MAI. The government's commitment is adequately expressed in Chapter 5, for "while the failure of the WTO Ministerial Conference at Seattle in 1999 was a serious setback...it would be a great mistake if the world community were to give up on a future multilateral trade round."

3.1.1. North and South
The Ethiopian Prime Minister's reference to "rational economic thinking," is based on the simple but correct assertion that human wellbeing also translates into economic wellbeing. The government may pay lip service to similar sentiments, while failing to recognize, or intentionally deny, certain realities. An example can be found in the final chapter of the White Paper (Chapter 8). Here we are informed that "international institutions have undergone significant reform over recent years," which depends on one's definition of "reforms." If it is meant in the traditional sense, that is, improvements made on a structural level, then the evidence is lacking. The potential of the United Nations for democratic decision-making on a global scale has yet to be realised, largely owing to the existence of the Security Council and in particular its permanent members.

A year on from the Seattle negotiations, the WTO is still no more democratic. Its stated intention of increasing transparency is evidenced by the decision to hold the next round of trade negotiations in Qatar, a suitable location for any organisation whose idea of democracy is transparency behind closed doors. Then we have those loyal adherents of structural adjustment, only to find that "the international financial institutions are increasingly strengthening their contribution to poverty reduction," although admittedly, "they have the capacity to be more effective."

So in Chapter 1 we are informed that "after increasing between 1960 and 1990," the inequality between countries "has more recently started to fall." This assertion fails to reveal anything about prevailing trends, the negative or positive performance of one single decade is not instructive. The Financial Times recently gave a more revealing assessment, in the estimation that "at the start of the nineteenth century, the ratio of real incomes per head between the world's richest and poorest countries was three to one. By 1900, it was ten to one. By the year 2000 it had risen sixty to one." It has to be stressed again here that this disparity has grown within the framework of an international trading system established and dominated by the North, it is not the result of an isolated process of independent development on the part of the wealthiest economically advanced countries.

However, even this assessment fails to reveal the whole picture, for the most accurate view is not to be found in disparities between countries but in disparities between the global population. Here we find a process of wealth concentration of benefit to a miniscule minority who find themselves within the top 5% of wealthiest individuals in the developed world, but not far behind are the wealthiest individuals in the developing world. The family of Indonesia's former head of state General Suharto is a case in point, estimated to have accumulated $40bn or more in an extremely poor country. This places Suharto in the same wealth category as Bill Gates.

The rise of inequality in the United States is particularly revealing, here the real incomes of the richest 5% of the population rose 75% between 1980 and 1999, while during the same period the real incomes of the poorest 20% rose 10%. The Gini coefficient measure of inequality has been used to show sustained rising disparities for the majority of countries to which it has been applied, and in 1999 the United Nations Development Programme's annual Human Development Report revealed that "more than 80 countries still have per capita incomes lower than they were a decade ago." The same report reveals that the ratio of per capita incomes of the wealthiest fifth of the world's population to that of the poorest fifth stood at 30 to 1 in 1960, by 1990 it had doubled to 60 to 1 and by 1995 it stood at 74 to 1. An additional factor crucial to this assessment is the relegation of the two regions not located in the North to the `Third World,' during this period where inequality "has more recently started to fall." Those regions are East Asia and the former Soviet Union, where in the latter case, every single country except Poland has experienced negative average annual growth during the post-communist period of the 1990s, according to World Bank figures.

i. The Industrial Revolution
While sustained rising inequalities between countries and peoples is generally accepted, its causes are not. Three hundred years ago, before the Industrial Revolution began, the inequality between countries and continents was not particularly significant. That is not to say there were no differences but that these were most significant between societies and even within societies in the form of status, what we would today identify as social class. Stages of development in the technological and organisational sense differed also, so in north-western Europe the foundations for an industrial revolution were laid much earlier owing to progress (in the narrow conventional sense) in these areas. Such advances enabled the development of British cotton manufacturing into a factory system during the eighteenth century, the crucial starting point of the divergence between the North and the South in terms of wealth and development. What made this possible was the possession of colonies from which the cotton was derived, and the free labour in the form of slaves in order to supply it.

Were it not for this substantial market intervention on the part of the British state, the Industrial Revolution would have developed more slowly, possibly not at all. Without infant industry protection, British textiles would not have been able to compete with erstwhile Indian rivals. Without the use of force, Britain would not have gained dominance over a lucrative trading system that had long existed in Asia. The same is true of the economic development of north-west Europe generally, the ability to develop rested on the resources derived through an imperial system established by force - how else does one establish an imperial system? The imperial system abroad was coupled with highly protectionist measures domestically to stifle the development of external competitors. Such interpretations are still denied, for the simple reason that the international trade and financial system is based on the relations established between North and South hundreds of years ago, during western Europe's imperial crusade. It is no accident or coincidence that the only country to develop economically outside of the traditionally defined ‘North’ was Japan, the one country in the ‘South’ to resist colonization and expand as an imperial power itself. Similarly, it is no accident or coincidence that the only country within the North that did not economically develop was Ireland, a former colony (and still partially occupied).

3.2. What is Required
Any serious attempt to tackle world poverty requires that its causes are recognized. The White Paper identifies three major factors that have held the Least Developed Countries (LDCs) back. They are: lack of education, technology and access to markets and capital. This is correct but only to a certain extent, for this explanation applies only within the framework of the global economic system as it is currently structured. It is the structure itself that imposes such adverse conditions - and it is consciously designed to do so. Although the professed commitment to ‘free markets’ and ‘free trade’ on the part of IGOs is pure deception, a genuine commitment to such ideals would not result in greater equality due to the very nature of the market mechanism. Under a free trade system the benefits will still be disproportionately distributed to those whose conditions are preferential to begin with, this could be in terms of climate, natural resources, skills, knowledge and a whole array of other factors. Herein lies a major flaw in Ricardo's theory, because even in a world of immobile capital, pursuit of comparative advantage would not necessarily yield fair outcomes. A fair trade system could improve matters considerably, but this would necessarily mean eliminating the market as an allocation system, for it will always allow participants with preferential conditions to skew the benefits of trade in their favour.

Yet this only scratches the surface of the problem. The government's commitment to free markets is based on a conception of how wealth is created, and poverty subsequently reduced. It is as Vandana Shiva once explained in a globalisation debate on the Channel 4 programme Weekly Planet in 1998: "I'd like to come back to this assumption that for there to be wealth, it has to be created and that it gets created by capital. And I think that's the beginning of the fundamental flaw. Because wealth is created first in nature in the form of natural resources, then through people and their labour and their effort - and then capital comes along." The wealth, in other words, is created by people and their natural environment, a fact that may seem obvious enough. However, for this to gain widespread recognition would take a major shift in the perception of how economies should be structured and how they should function. Yet equitable sustainable development requires nothing less.

3.2.1. Sustainable Development
The only viable strategy for the elimination of poverty is the same as it has always been, and that is for wealth to be distributed equitably. Current levels of food production for example, are such that starvation and malnutrition could be eliminated, yet these problems exist because of distribution and the market principles that direct it. The same goes for almost any resource one cares to investigate, for it is access to resources that determines wealth distribution and the structures of governance that dictate accessibility. For there to be equitable wealth distribution there has to be a sustainable development model that incorporates the following basic principles:

1. The natural resources of this planet are the common property of every living creature and organism, not the private property of a few individuals;
2. No one individual has any more right over common property than anyone else;
3. Natural resources are finite and therefore it is incumbent on those with the conscious ability to exploit them to their own advantage to ensure they are managed in a democratic fashion, with access dependent on conditions such as necessity and environmental impact;
4. Organised economic activity such as production and manufacturing should be orientated towards meeting peoples needs as a primary consideration, and to improving the standard and quality of life as a secondary consideration;
5. The fruits of productive labour should accrue to the rightful owners of it, that is the labourers themselves, their families and communities in which they work and not to individuals through the exploitative conditions enforced under the private ownership of production;
6. These principles should fall within a framework of genuine participation, democracy and self-determination. This would include self-management in the work place through workers councils, coupled with community level or grass roots level participative decision making;
7. Decentralized organisational structures should be encouraged and nurtured so that society at large would become federalized and/or regionalized and then organised on the principles of voluntary cooperation.

In conclusion, to quote from Chapter 1 of the White Paper, "it is clear that development strategies must be adapted to local circumstances and must be nationally owned and nationally led by developing transition countries."'

Just how committed the developed world is to "nationally owned and nationally led" development strategies is evidenced by the international reaction to events on the island of Bougainville, formally under the sovereignty of Papua New Guinea. In 1988 the indigenous people of the island began an uprising and expelled the British-based TNC Rio Tinto Zinc, in response to the environmental destruction and devastating pollution caused by its mining operations. The Papua New Guinea Defense Force (PNGDF) intervened with the substantial support of Australia, in a standard response to any attempt anywhere in the world to extricate plundering Northern business interests. The war that followed cost the people of Bougainville a tenth of their population and was in many respects a residual conflict from the colonial period. The island came to be a part of Papua New Guinea after a long period of occasional transfers from one colonial master to another, like so many people in the South, the desires of the population were ignored while territories were carved up and new client states created in the post-colonial transition to indirect colonialism.

What is unique about Bougainville's uprising is its `green' character, as demonstrated in a recent Channel 4 documentary (The Coconut Revolution, C4, 20 January) where it was claimed that Bougainville Islanders have "managed to create what may be the world's first true eco revolution." In a successful rout of the PNGDF from the majority of the territory, the island was essentially cordoned off in a seven year long blockade and internationally isolated, leaving the inhabitants to fend for themselves. This in turn helped foster a self-sufficiency culture in Bougainville which has produced an eco-friendly form of development, largely based around the coconut and its extensive use as a source of oil, soap, medicine and even mosquito repellent. The development of traditional herbal medicines are claimed to work as cures for malaria, leprosy and cancer, with an additional possibility of a treatment for AIDS as well as a safe herbal contraceptive for women. Using materials left over from the mining area, the Bougainville Islanders have developed their own source of electricity through the construction of small hydro-electric power plants. They have also developed a grade of coconut oil that can be used to fuel motor vehicles that is far less polluting than diesel but can achieve twice the mileage.

Bougainville is only one recent example of possible alternatives to the export-led development model that is advocated by the UK Government in its White Paper on international development. The international reaction to the Bougainville uprising is revealing: a country and a people rejects a particular form of `openness' meaning open to exploitation and plunder not by isolating itself, but by being isolated forcefully from outside. Independent development is not encouraged and never has been, it is stifled and destroyed.

Victor Milinkovic

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