3. Creating an Equitable Global Economic Order

Build a more equitable global economic order by pursuing trade and investment agreements and regulation of financial flows that contribute to reduced social inequities

We cannot build a prosperous world economy on misery, degradation and ignorance. In the twentieth century, our government, supported by peoples’ movements, passed laws to provide universal schooling, to protect workers and enact a framework to regulate corporate activity, and to provide universal health care. The outcome has been a virtual explosion in the health, wealth, choice, knowledge, productivity and creativity of our society. We need to develop a similar framework for people’s protection and well-being on a global level, as a secure foundation for economic globalization.

One reason why poor countries remain mired in poverty is because of the way the world’s financial and trade systems are organized.

Poor countries carry huge debt loads. The ‘80s brought the so-called “debt crisis”, when the debt load of developing countries – at an astounding $1.1 trillion – supposedly peaked. But by 1997, that debt had doubled, to $2.3 trillion! Growing debt means growing repayments to banks and creditors in the North – $1.9 trillion between 1981 and 1997 – and less money for the world’s poorest.

Repeatedly, the World Bank tells Southern countries how to solve their problems. Open your economies to the world, it advises. Boost exports. And, internally, slash government spending and privatize services. Most have complied – with disastrous results for people. Instead of developing an economy in which people grow food to eat and work is organized to supply local as well as international markets, more land is converted to serve large agribusinesses and often the most modern factories produce mainly for export.

Mexico took the advice to privatize health services seriously. During the ‘80s, its health budget declined from 4.7 per cent to 2.7 per cent of public spending. This, in a country where almost 50% of its 84 million people are characterized as ‘extremely poor’ and can ill afford to pay the new ‘user fees’ for medical services. Every day, 80 Mexican babies die from malnutrition before the age of one. At the same time, Mexico’s richest man has assets greater than the annual income of the country’s 18 million poorest citizens.

More and more the economies of Southern countries are tied into the global economy – a process referred to as “globalization”. Change is occurring rapidly, but the cost of that change is being borne by the poor.

The economic benefits of globalization, meanwhile, are being captured by financial institutions and their investors – the same interests that take advantage of the lack of global economic regulation.

A new set of rules is currently being written. At the December 1996 ministerial meeting of the World Trade Organization (WTO), the rich countries failed to get agreement from developing countries to work on an investment treaty, what some have called, “an international charter of rights and freedoms for corporations.” Developing countries feared they would lose even more control over their economic futures – control to direct their economies to create equity as well as growth. So the rich countries took another tack. In 1997, as members of the Organization for Economic Cooperation and Development (OECD), they were negotiating a Multilateral Agreement on Investment (MAI) among themselves. They will urge other countries to join once it is finalized.

This foot-in-the-door strategy gives MAI backers, Canada among them, more leverage with countries that opposed them at the World Trade Organization. The MAI process is driven by a belief that equates corporate interests with the common good, and does not acknowledge the need for equity along with growth.

“We are writing the constitution of a single global economy,” boasted Renato Ruggiero, director-general of the WTO, at the time of the 1996 ministerial meeting.

But when our politicians meet to re-write Canada’s constitution, they wouldn’t dream of ignoring the views and opinions of citizens.

Public consultation and participation to ensure equity is every bit as vital for the “constitution” of the global economy.

If transnational corporations want a charter of rights and freedoms
then they should also be subject to an international code of conduct
that protects the rights of nations and their citizens.

Like the market, trade and investment aren’t ends in themselves. Instead, they’re tools that must be controlled by societies committed to growth with equity. Responsibility and accountability must go hand-in-hand with rights and freedoms. If transnational international code of conduct that protects the rights of nations and their citizens.

Trade and investment agreements must recognize the special needs of the South and give poor countries more say in their own affairs. This is particularly important as trade barriers fall, and Southern economies lose protection and preferential access to Northern markets. The world isn’t a level playing field, and some players are far stronger than others. We need to respect the right of countries to democratically determine local, regional and national strategies that promote sustainable development.

Only a few countries, like Brazil, for example, have developed significant strength in manufacturing. More than 100 developing countries still depend on raw material exports for foreign exchange earnings. The prices these commodities earn have fallen on average 3.4 per cent every year between 1979 and 1994, and projections for the remaining years of the decade are bleak.

A fairer international trading system would acknowledge the weakness of most developing economies by providing preferential access to Northern markets. And international help needn’t focus solely on the export sector. It can strengthen the ability of each country’s domestic economy to produce what’s required to meet their citizens’ basic needs.

It’s also essential that compounding indebtedness, particularly for the 41 poorest countries, be addressed. At World Bank/IMF meetings in 1996, an initiative was launched to enable the poorest countries to achieve sustainable debt levels by 2002. The plan was to provide comprehensive relief. But it’s inflexible, will reach few countries, and its speedy implementation is bogged down by a few donors’ intransigence. Debt relief must not come at the expense of cuts to aid flows – that would be like giving a little with the right hand and taking away a lot with the left. And debt relief must be part of a broader strategy to reform international financial institutions themselves, making them focus on eliminating poverty.

A more equitable global economic order also requires other concrete actions. Supporting curbs and taxes on speculative currency trading would be a good start. A tax of less than 0.5 per cent would add stability to the international economy, and raise billions of dollars that could be used for basic health and education worldwide.

Unregulated markets and free trade are good for accumulating investments and profits by global corporations. But they don’t necessarily help the poor meet their needs. They contribute to a dangerous instability as they widen the gap between rich and poor, and a volatility that threatens to ‘melt down’ global as well as national economies.

Global trade and prosperity depend on programs designed specifically to tackle poverty and inequity around the world. They also depend on the democratic reform of international trade and financial institutions.

Just as we built a framework for national prosperity that Canadians value over the past century, we can help build a framework for global prosperity. We can end the widespread incidence of poverty, instability and injustice.

Canadian Centre for International Co-operation Archives – Agenda 3