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The MDGs and the free trade mantra

By Rahul Goswami

The Millennium Development Goals address targets and percentages without relating these to the effect of structural inequalities, denial of social justice, economic inequities and the imposition of adverse policies. How then can the MDGs usher in a just new world order?

A persistent fiction of our times is that the concept of development exists as a subset of global trade and the regimes that control it. At its most fundamental, the free trade ideology is designed to be and is used as a means of domination over the resources and livelihoods of the peoples of the South. The World Trade Organisation (WTO) -– which was created to regulate (most) world trade -– and international financial institutions have as their mandate the protection of this ideology. That is why they say, in a hundred tongues through a myriad media: “The solution for poverty is trade.” It is the “in trade we trust” currency we are being asked to adopt as the measure of all things.

Shorn of the thickets of legalese and minus the expensive seminaring and conferencing and portentous agenda-setting, the discussion about world trade is a simple one. The ideology of world trade permits and seeks to extend a basic rule of misdirection -– the global focus on poverty and the identification of ‘the poor’ (and their countries, or societies) as ‘the problem’. It is, rather, the quantity of wealth, its concentration and its protection that is the problem. It is wealth that creates the poverties that so fascinate our august global organisations.

It is these poverties that came together in a missionary symphony known, since 2000, as the Millennium Development Goals (MDGs). They number eight, fine-tuned with 18 ‘targets’. They have enjoyed being the dominant buzzword of this decade in the international development aid industry, and have spawned substantial employment-generation for ‘development practitioners’, a species that is today as ubiquitous as lawyers.

It is difficult, given that they sound like earnest homilies, to take issue with the MDGs. They promise to focus global efforts to: eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empowerment of women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria and other diseases; ensure environmental sustainability; and develop a global partnership for development.

Wonderful and stirring. How are they expected to work?

The MDGs are supposed to usher in a just new world order by employing a combination of strategies: providing more international aid to, and bringing about policy change in, developing countries. There has been abysmally little aid, and even that little has been of low quality.

Initially meant to reach 1%, and later 0.7% of the rich countries’ Gross National Product, actual overseas development assistance has steadily fallen throughout the prosperous 1990s, from 0.33% to 0.22% of the rich countries’ aggregate Gross National Product. Moreover, most assistance is spent for the benefit of agents capable of reciprocation: while India receives about $ 1.50 annually per citizen, high-income countries like the Czech Republic, Malta, Cyprus, Bahrain and Israel receive between $ 40 and $ 132 per citizen annually.

Furthermore, a large part of assistance is allocated to support exporters at home, or small, affluent elites abroad, and only a tiny fraction -- US$ 4.3 billion -- for basic social services targeted at the poor. If affluent countries spent as much on assistance as they have pledged to do, severe poverty worldwide could be essentially eliminated by 2015 -- the date goal for the widely-hailed MDGs -- if not before.

As for policy, the changes suggested and thrust upon the ‘poverty-as-problem’ developing countries typically involve free market-obsessed deregulation that has already created employment stagnation and greater income inequalities.

These contradictions appear to be entirely invisible to the official aid industry, which seems to be in a state of more or less permanent celebration vis-à-vis the MDGs. That the dismantling of states via policy ‘reform’ (call it the ‘structural adjustment’ of yore, or the ‘poverty reduction strategy papers’ currently in vogue) ensures that the MDGs, however vapid, will never be achieved is a logical loop that is happily ignored. Yet such intellectual astigmatism is not entirely unexpected, at least for those who have been observing the inner workings of the mechanisms unleashed by the processes of national and international deregulation, aided by governments left, right and centre, scurrying away from their basic social responsibilities.

Take agriculture and India. The establishment line is that India is a modern (even post-industrial) economy, whereas agriculture -- and even the misnamed subsistence agriculture -- remains its base, the backbone of the functioning production-exchange cycle that enables societies to live. This is so not only in the artificially depressed prices of inputs it supplies to industry. Manufacturing growth in the country is still substantially linked to the demand generated by agricultural performance, as a rapid assessment of the last four decades of economic growth will reveal. That this is so even in agriculture’s present stunted state speaks for the sector’s vitality, and the boost that would result if it were freed of its present shackles can only be imagined.

It’s clear that such freedom is unlikely to ever be enjoyed by the sector under the ‘free trade is the best medicine’ regime of global thought and practice. The freer movement of trade and capital has been a fundamental characteristic of the past 25 years of globalisation. The WTO’s series of negotiations on the subject, initiated in 2001 officially as the Fourth Ministerial and colloquially known as the Doha Round, was the latest attempt to keep the process rolling. It now looks doomed and the deadlock between the United States, the European Union, Japan and the developing countries seems final, in this form, and therein lie the roots of another struggle.

On July 24, 2006, WTO Director General Pascal Lamy halted the five years of negotiations that began in Qatar. The talks were to yield a trade deal but broke down because the US, as usual, demanded all take and little give in return, expecting that it could strong-arm developing nations into accepting whatever it proposed, as has always been its practice. No longer, as countries with growing clout -- like Brazil, India and others -- refused to buckle under.

Opposition to the refusal of the US to cut its farm subsidies has been widespread enough for the European Union (EU) trade commissioner (and US ally), Peter Mandelson, to accuse the US of trying to exact a “disproportionate” price from developing countries. The grotesquely imbalanced equation is that the US refusal to cut farm subsidies elevates the wellbeing of the 2% of that country’s farming population -- less than 6 million farmers -- above that of at least half the rest of the world -- or 3 billion people -- who depend on agriculture for their livelihood, including more than 60% of India’s population.

Such inequity was noted even by the fourth report of the National Commission on Farmers in 2004, which observed: “It was hoped that the Indian farmers would gain from trade liberalisation and access to international markets for their products. The reduction in domestic support as well as export subsidies by other countries, particularly the Western countries and Japan, etc, was expected to enhance competitiveness of our agriculture and result in gain to our farmers through exports. However, this has not happened.”

In India, as elsewhere in the less industrialised world, the premise behind the push for liberalisation as a key poverty reduction mechanism is that while poor urban consumers will lose from higher food prices, a greater number of poor rural producers will gain. Research conducted by the World Bank, for example, estimates that an average 10% increase in agricultural prices as a result of liberalisation would lift 200 million people out of poverty in 72 developing countries for which data is available.

Such research makes a grossly insensitive mockery of actual conditions in India, with over 2 million farmers of Vidarbha in Maharashtra sunk in debt on account of their continuous losses in cotton farming. There, as much as elsewhere in the agricultural sector, but transformed into a horrible spectacle unfolding over recent months, the suite of problems besieging farmers has been primarily financial, policy-related and, ultimately, dictated by trade.

For all the official commiserating noises made by the authorities over Prime Minister Manmohan Singh’s Rs 3,750 crore ‘special package’ for the affected farmers, the issue of fresh bank credit has not been resolved. Moreover, price protection for the Indian cotton crop was withdrawn under pressure from the World Bank and other international financial institutions in order to protect US cotton-growers (recipients of a $ 2.5 billion export subsidy) who have dumped raw cotton in India. This is a constructed catastrophe that the Vidarbha Jan Andolan Samiti had complained about and then warned against for months.

Internationally, such an agri-disaster is an indicator of how the development agendas of countries and regions are derailed by the illogic of global trade.

‘Delivering on Doha: Farm Trade and the Poor’, a volume published by the Institute For International Economics, warns that “recent research derived from household surveys finds that the short-term effects of agricultural liberalisation for the poorest people may be either neutral or negative. Liberalisation-induced price effects may not trickle down to poor farmers at all... to the extent that higher prices do trickle down to rural areas, other research shows they could have negative effects for the poorest people because they are often net buyers of food rather than net sellers”.

Until the Vidarbha suicides, the discussion in India on economic reform was preoccupied with issues of fiscal and trade policy, financial markets and capital account convertibility. Among policymakers and the cabals that influence such groups, the perception was that reform would be more popular if it ran parallel to equal concern with standards relating to basic needs (health, education, food security, livelihood, community-building) and governance concerning basic social and infrastructure services, along with the need for greater transparency.

Hence the drive to universalise knowledge of and recognition of the MDGs, which are high-minded regarding the increasing poverty reflected in health, education and access to other basic services of the majority of the peoples of the world, but which ignore the need for environmental sustainability, growing inequities, and human rights. Just as trade regulations address mercantile and financial issues without recognising that trade is an act between peoples, so too do the MDGs address targets and percentages (for example MDG Target 10: Halve by 2015 the proportion of people without sustainable access to safe drinking water and sanitation) without relating these to the effect on real persons of structural inequalities, denial of social justice, economic inequities and the imposition of adverse policies.

Can an understanding of the link between trade and development bring about a change in India’s economic agenda? The ideology of free trade contaminates policymaking, with many officials and ministers either ignorant of the link or politically helpless to act responsibly.

Unsurprisingly, the principles of free trade, which are presented as inherently good, are absent in the North’s approach to agriculture. In this sector, free trade is turned on its head because the WTO has allowed the North to use trade-distorting subsidies. Thus, it is a system that suffers from a schizophrenia that the Indian government chooses not to see. The recent collapse of the Doha Round of negotiations may, in the long term, mean a significant shift in the globalising process, but what is urgently called for is a recognition of the impact of trade regimes on development.

(Rahul Goswami is an independent writer based in Goa)

InfoChange News & Features, February 2007