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LEAD STORY

Volume 16 Number 5

Globalization... as if People Really Mattered

01 October 2003

Can big business and activists agree on fighting poverty? Michael Smith reports.
As José Maria Figueres, Managing Director of the World Economic Forum (WEF) in Davos, drives to his office in Geneva, he sees the cows grazing in the fields by the road. Each cow benefits from over US$2 a day in agricultural subsidies. The cows, he says, are better off than the world’s 1.2 billion poorest people, who have to survive on less than $1 a day.

Figueres, a former President of Costa Rica, may be stretching a point: most of the European Union’s agricultural subsidies go to large dairy processing and food exporting companies, rather than direct to farmers, and still less to the cows. But his comparison serves as a graphic illustration of the appalling gap between the world’s rich and poor–a gap which Roderick Abbott, Deputy Director General of the World Trade Organization (WTO), fears will lead to increasing tensions between societies and cultures. ‘If this is not addressed we face the prospect of conflict or even violence,’ he says. The issue of Western agricultural subsidies was on the agenda of the latest WTO round of trade negotiations held in Cancún, Mexico, in September. (See facts file, p7).

Earlier, Figueres, Abbott and Ignatio Ramonet, co-founder of the World Social Forum (WSF) in Porto Alegre, Brazil, had made the journey up the mountain from Montreux to the Alpine village of Caux. They were taking part in a conference on ‘Globalization... as if people really mattered’, organized by Caux Initiatives for Business (CIB) from 11 to 15 July. It was the 30th annual conference for business and industry at the Initiatives of Change centre in Switzerland and attracted over 170 participants from 28 countries.

As you take the funicular railway up the mountain, the vast expanse of Lake Geneva shimmers below you on your right. Then the train passes through the Valmont tunnel and you emerge with the lake now on your left. The train has made a U-turn inside the mountain and your perspectives have completely changed. It is as if the mountain has moved.

Could the Caux participants find new perspectives on one of the defining and potentially most explosive issues of the 21st century–the increasing gap between the rich and poor nations? Could they find some common action on ways of moving the mountain, towards a ‘safer global civilization with more inclusiveness, more solidarity’, as Figueres put it? Could they ‘talk with each other rather than at each other’, as CIB Director Steven Greisdorf from Washington, DC, asked in his opening remarks? And could Caux provide the congenial atmosphere for an honest, trust-based dialogue?

dangerous gap
Opening the conference, Jean-François Rischard, Vice-President for Europe at the World Bank, saw ‘not one big fuzzy force of globalization but two forces, both running ahead of the world’s ability to deal with them’. The world’s population was growing towards eight billion (leading to increased scarcities) at the same time as new information and knowledge-based economies (shrinking time and distance) were mushrooming. These forces were growing exponentially.

But governments and other human institutions evolved much more slowly and a ‘very dangerous gap’ was opening up in the world’s ability to deal with crises. His talk echoed the title of his recent book High Noon: 20 global problems; 20 years to solve them (Basic Books, New York, paperback 2003).

Global warming and poverty reduction were the most urgent issues, he believed. In the Montreal Protocol of 1987 the world had agreed to reduce the emission of substances which create the ozone hole–and had succeeded in doing so. Surely then it could tackle other urgent priorities, such as deforestation and bio-diversity loss, water shortages and fisheries depletion, HIV/AIDS and malaria, terrorism and the need to overhaul the world’s ‘financial architecture’ towards greater justice. But the effectiveness of the Montreal protocol had so far been the exception that proved the rule, Rischard said.

Central to the Caux conference was a platform debate between Figueres and Ramonet, Director of Le Monde Diplomatique in Paris, founder of the Attac movement advocating global tax reform, and a representative of ‘the victims of the pitiless economy’, as he put it, who meet in the World Social Forum at Porto Alege. This alternative to Davos has brought together an eclectic gathering of non-governmental organizations, civil society bodies and environmental campaigners for the past three years. Many there see Davos as the epitome of a ruthless neo-liberal, or laissez-faire, capitalism. But Ramonet insisted that the WSF, with its 120,0000 participants, was not a movement of protest but of serious debate.

unsustainable
Yet it was Figueres, representing the corporate world that meets in the Swiss resort of Davos each year, who sounded like the socialist arguing for change. His comparison between the cows and the world’s poor highlighted the fact that the current system was ‘not only immoral in what it represents but unsustainable’. Would we advance to ‘a more inclusive world that is safer or move in the opposite direction, to a world that is more divided, meaner and less safe’?

The world economy was stagnating, he said, and there was ‘no clear engine of economic growth, either by sector or region’. China and India, with a third of the world’s population, were achieving growth rates of seven to eight per cent, far higher than the industrialized West. But they represented only eight per cent of the world’s economy–‘not enough to pull the global economy forward’. There was an urgent need for strategic investment, especially in health and education, and a development with nature and not against it. The environment was, after all, ‘not a cost but a business opportunity’.

market driven
For his part, Ramonet acknowledged that many of those who 10 years ago were heralding liberal, market-driven globalization as ‘a miracle solution to every problem’ were now speaking out about its dangers–among them international financier George Soros, Jeffrey Sachs of Columbia University and Nobel Prize winning economist Joseph Stiglitz. None of these men could be accused of being wild, leftist enemies of the system, Ramonet said.

If Figueres’ statistics on cows were not enough, Ramonet pointed out that 54 countries, representing a quarter of humanity, have become poorer through the 1990s, according to the United Nations Development Programme. (This figure is disputed by the International Chamber of Commerce, which claims that poverty gaps are narrowing.) ‘While we are meeting,’ Ramonet said, ‘2,500 children will die of easily treatable diseases.’ The USA was giving its cotton farmers subsidies worth more than three times its total aid budget to Africa. And, as Sachs had written, 400 American millionaires were earning more than the combined incomes of the 166 million people in the four African countries that President Bush visited in July.

‘The gospel of globalization does not work,’ Ramonet declared. ‘Globalization is not to blame for the world’s inequalities–but it isn’t helping to solve them either.’ The market and the state were in conflict (the market seeking to reduce the state to a minimum), as were the values of selfishness and solidarity.

Canadian diplomat Kimon Valaskakis, founder of the Club of Athens global governance group, who moderated the debate, said he was surprised how close the two men seemed to be in their diagnosis of the world’s problems.

good rapport
But it was less clear what joint action, if any, the WEF and the WSF might take. An ‘earth summit’ between the two global bodies was premature, Ramonet said, and an earlier televised debate had been ‘a dialogue of the deaf’. The WSF had already tabled specific proposals: the abolition of Third World debt, the outlawing of tax havens–‘the havens of the corrupt’–and the so-called Tobin tax on international currency transactions, to aid the poor world. The proposal was less radical than the original introduction of income tax, he maintained.

What, I asked Figueres afterwards, might the business world learn from Porto Alegre? As he paused to collect his thoughts I felt the clock ticking towards high noon. Then he replied that the business community was already committed to ‘corporate social responsibility’. This was now high up the agenda of many leading businesses. He had a good personal rapport with Ramonet, and the two men respected each other. Figueres had earlier told the conference that Davos was also ‘a platform for dialogue’ and ‘a catalyst for action’. But he was not buying into the Porto Alegre agenda, at least publicly.

If Caux was an opportunity to move mountains, then at least understanding the nature of the mountain could be regarded as progress. And further such dialogues are not ruled out.

Meanwhile, there was no shortage in Caux of stories of corporate social engagement. Edward Bickham, Executive Vice-President for external affairs at Anglo-American mining corporation, said the company was giving treatment to the victims of AIDS among its South African employees, 24 per cent of whom are HIV positive ‘and who are bound to die of the disease in the next five to 10 years’. The company was partnering with non-governmental organizations and local communities in efforts to treat and prevent the spread of the disease. Anglo-American had adopted the Global Mining Initiative in 1998, to align the company’s policies to sustainable community development.

Anant Nadkarni, who runs the Indian Tata Group’s corporate social responsibility programme, said the company was the first corporation in the world to introduce a sustainable human development index, submitted to the United Nations Development Programme. Another Indian businessman, from the public health industry, told how he had turned down a bribe from a politician who had wanted to pocket World Bank aid intended for hospital equipment. ‘Yes, but what happens if one of us lands up in hospital and needs urgent care?’ the businessman had challenged him. The politician had, evidently, repented and his state will now have the best-equipped hospitals in India, said the businessman.

Such business initiatives play their part in tackling global poverty. As Fr Dominique Peccoud, SJ, special advisor to the Director General of the International Labour Organization, observed, ‘A divorce between criteria of efficiency and moral considerations’ would have been unthinkable for Adam Smith, the father of liberal economics.

integrity
There were also the personal responses to globalization: the Washington financial consultant who said that his family had downsized from two cars to one, to save the environment; the Australian airline employee who said he had turned down a pay increase, with the support of his trade union, in order to show solidarity with the world’s poor; the Dutch accountant whose stance against a dubious practice in his company had become a model for training new employees; and the Nigerian woman who was helping to set up an all-Africa grassroots campaign for corruption-free elections. As CIB Director Steven Greisdorf quoted, ‘Integrity is a quality of spirit that exists within each of us.’

And what about the support for Europe’s cows? Roderick Abbott stressed the ‘current new emphasis’ on eliminating the ‘distorting effects’ of agricultural subsidies in the European Union and the USA – a distortion that means European and American produce undercut the price, and livelihoods, of Third World farmers. ‘We are challenged to achieve a fairer spread of benefits from trade liberalization,’ he said. ‘If the current WTO negotiations do not deliver in acceptable fashion on the development agenda, then we certainly run the risk of some form of confrontation down the road.’

Michael Smith is Joint Co-ordinator, UK, Caux Initiatives for Business.

Fact File

Over three-quarters of the world’s 1.2 billion poorest people are small farmers.

Rich countries allocate $311 billion a year in agricultural support to their own farmers and agribusinesses, as much as sub-Saharan Africa’s entire economic output. This leads to massive overproduction, and undercuts the price of third world produce and the livelihoods of poor farmers.

Europe is the biggest exporter of sugar, even though it has the world’s highest production costs. East Anglian and French sugar barons benefit from $1.6 billion of EU subsidies, depriving countries such as Thailand and Malawi of international markets.

Sugar import tariffs to Europe can be as high as 140 per cent and cost Mozambique almost as much as it gains in European aid.

Africa has less than two per cent of the world’s exports and imports. Doubling its exports would result in income worth four times the aid it receives.

Total rich country aid to Africa is the equivalent of only 12 days of Western farm subsidies.

Under a Franco-German deal of 2002, European farm subsidies are set to remain at $48 billion a year till 2012. Much of the subsidy goes to large farm lobbies and agribusinesses.

Common Agricultural Policy (CAP) price guarantees mean that French and German agribusinesses receive over 3,250 euros (about $3,800) for every ton of butter, regardless of market prices. European dairy production far outstrips European demand.

Yet CAP subsidies are failing France’s small farmers and the rural population has declined by a third in the last decade.

Scrapping CAP could raise per capita incomes in Sub-Saharan Africa by 13 per cent.

In 2002, the US government’s farm bill allocated an extra $83 billion in farm subsidies. US subsidies to its 25,000 cotton growers have reduced world prices by a quarter, costing West African countries $200 million in lost foreign exchange. Eleven million West Africans depend on cotton for their main income. Removing US subsidies would allow them to compete profitably at two-thirds of US production costs.

US maize farmers received $9 billion of subsidies in 2002, wiping out thousands of jobs in Mexico’s southern state of Chiapas.

Trade, however, aids development and over 40 per cent of US imports come from developing countries, compared with Britain’s 16 per cent.

As we went to press these issues were due to be on the agenda of the World Trade Organization’s latest ‘development round’ of negotiations, in Cancún, in September.

Sources: Oxfam, ‘Washington Post’, UK’s Institute of Economic Affairs, ‘The Independent’, London, ‘Guardian Weekly’. See also essay by Kevin Watkins, head of research, Oxfam, ‘Prospect’ magazine, London, August 2003.