Upton-on-line - Diaspora Edition
16th February 2002 [Replacing what would have been the issue of February 21st]
In this issue
Upton-on-line provides a first glimpse of the strange maneuverings that herald the beginning of the French Presidential election campaign and (strictly for devotees) gives some ‘order-of-magnitude’ feel for what sort of initiatives might help developing
countries in the context of this year’s World Summit on Sustainable Development to be held in Johannesburg later this year.
But first, a quick report on reader reactions to last issue’s proposals for a Trans-Tasman Foundation. In a nutshell, everyone (or almost everyone) thinks there’s no problem. The most commonly expressed views held that,
contrary to upton-on-line’s musings, either familiarity hasn’t bred any contempt – or people enjoy it. Several
correspondents thought a foundation would look a bit self-absorbed and some (mysteriously) thought a foundation would
detract from focussing on other relationships. (Given that we don’t, as a society, tend to take any foreign
relationships very seriously, this was a bit hard to follow). Many of you read Geoff Miller’s piece as an argument in favour of doing nothing – which wasn’t quite his position. All in all, upton-on-line is
relieved to dive headlong into the tide of complacency with a clear conscience. Let’s hope we don’t all meet at the visa
application counter one day.
Republican rites
Crypto-republicans in New Zealand should cast their eyes in the direction of France over the next few months to observe
the punishments the French citizenry visit on themselves in the name of republicanism – namely, the election of a
President. While New Zealanders observed last year the arrival of Dame Sylvia Cartwright as if on a cloud in one of those 17th century court masques, the French are steeling themselves for a dour trial of
national re-consecration (as well as a pile of merde if a former Prime Minister, Alain Juppé is to be believed). Running a monarchy is just so trouble free. Scandal never gets beyond broken hearts and the lenses
of the paparazzi. Whereas when mortals are asked (as French presidents are) to embody the entire noblesse of la patrie
in their being, and they have real power to wield, human frailty becomes a much more potent threat to the very existence
of the nation. (If that sounds over-the-top to New Zealand readers, they must appreciate that there is nothing small or
shabby about the way the French think about the State and la gloire de la France).
The biggest circus in town
The weirdest thing about the performing troupe currently assembling itself is that one star turn hasn’t yet confirmed
that he will put in an appearance. For tactical reasons that are beyond Anglo-Saxon comprehension, the current
incumbent, Jacques Chirac, and the putative socialist challenger, Lionel Jospin, have spent the last 6 months failing to confirm their candidacies. For some reason it was considered vastly shrewd not
to announce formally their candidacies. The infinitely subtle permutations of recent months (“if and when the time
comes”, “at a date closer to the first round” etc) continued to be intoned even though it was as plain as a pikestaff
that people who are publishing books, opening campaign headquarters and giving briefings through their designated
campaign chiefs (not to mention leading the opinion polls) were going to be in the fray.
The pressure got too much last week for Jacques Chirac. Suffering a steady decline in his poll ratings and the whiff of new scandals to be revealed by a former political
operator who returned from exile and turned himself over to the police, the President decided to create a splash by
breaking the worst kept secret in France – that he had finally decided to offer himself once again to the French people.
This stunning move (motivated, the President declared, by a blinding and uncontrollable passion for France) has turned
his rival, Lionel Jospin, into an even graver, less humorous man than he normally is.
Having been quietly amused by the President’s former determination to delay an announcement because of the weighty
burdens of office, M. Jospin’s allies have now adopted even graver tones. Faced with the fact that their man hasn’t even
mounted his horse while the President has left the starting gates and is quickly sympathising with every disgruntled
pressure group in sight, prime ministerial advisers are now stressing the importance of having at least one of the
country’s top leaders stay at the helm to the last. Needless to say, the Left hopes sincerely that it is M. Chirac who
will hit the iceberg first at which point the SS Lionel Carpathia will rescue the survivors.
But if the President and the Prime Minister are spoiling the fun there is no shortage of entertainment for the masses.
Indeed the circus ring is filled with hopefuls. This is a direct result of France’s excellent two round system of
elections in which everyone has a bash first time round and then (assuming no outright winner in the premier tour) the
two leaders battle it out to the death. Those eliminated in the first stoush have not only the glory of their moment in
the sun but the satisfaction of being courted for their endorsement of one or other candidate in the second round (with
the prospect of all sorts of future favours should their candidate be in the money).
Already turning summersaults in the ring are Alain Madelin (France’s most economically liberal candidate who is about as right wing as Bill Clinton), Francois Bayrou (a sort of centrish candidate who supports anything that is not extreme), Arlette Larguiller (who leads a splinter group explicitly dedicated to being extreme[ly] left), Robert Hue (the Communist candidate – presumably not extreme enough), Noël Mamère, the (extremely) Green candidate, Jean-Marie Le Pen (standard bearer for the National Front) and Charles Pasqua (a sort of disgruntled conservative patriot.
[For New Zealand readers to gain a feel for how surreal this all is, they should simply imagine that Helen Clark and
Bill English were having to battle it out as equals with Owen Jennings, Warren Kydd, Keith Locke, Liz Gordon, Nandor
Tanczos and Ross Robertson – all good New Zealanders just like their French counterparts are all faithful servants of
the Republic. It’s just that …]
The third man
But unlike New Zealand, France has a third man – Jean-Pierre Chevènement. This is the man who could upset the applecart (or the French horticultural equivalent). M. Chevènement has profited
from the debilitating tussle that has characterised France’s leadership since 1997 when the right lost the parliamentary
elections and M. Chirac was forced to co-habit with Jospin. Condign smiles in public at European Summits have been
matched by endless guerilla warfare between the two at home. M. Chirac has been only to happy to revel in being a Head
of State who is out amongst the people listening and sympathising but being able always to direct criticisms with
alacrity to his Prime Minister who, in most domestic matters, has ultimate control.
This, M. Chevènement charges, has led to a “Janus-faced” leadership lacking in conviction and integrity. A three-time
Minister in socialist administrations (including Jospin’s), M. Chevènement is undeniably from the left. But he has been
busily blurring that impression. His most recent resignation (in 2000) was over Jospin’s proposals to devolve certain
powers of self-management to Corsica. This rubbed up against the fiercely ‘sovereigntist’ strain of republicanism to
which M. Chevènement adheres. All of which fits nicely with traditionally rightist views about preserving law, order and
the integrity of the Republic.
This is all wonderfully nuanced to appeal to the most exotic constellation of constituencies. Le Monde has identified at
least seven ‘families’ within the ‘Pôle Républicain’ as Chevènement’s movement is known. There are the former
Trotskyists of which Jean-Pierre himself is a former acolyte (only in France is this still a badge of honour – another
former comrade, the Prime Minister himself is busily trying to dis-own it); disaffected communists; a small bunch of
radicals; a group of bright young things of indeterminate orientation; members of something called the Citizens’
Movement; another camp of disgruntled ‘sovereigntist’ right wingers and finally what le Monde calls “les inclassables”.
If it sounds like Winston Peters starting from the other side of the tracks, that’s probably not a misleading comparison.
And, surprise, surprise, M. Chevènement talks with passion and respect for the memory of Général Charles de Gaulle whose heritage, he says, Messieurs Chirac and Jospin have ‘consciously and methodically liquidated’. This is about as
close as you get to alleging treason in France and it has done M. Chevènement no harm at all (as well as pandering to
right wing voters who would previously have had their hand wither if it had thought of voting for a Trot). While the
also-rans bump around at the 3 – 5% mark, he is rising towards 15% in the polls with the possibility of his heading off
either Chirac or Jospin being not altogether implausible. And to emphasise his superior and different trajectory he
grandly declined to take part in the first debate between presidential candidates who, in his (apparently accurate
estimation) are mere minnows in comparison. The minnows can’t believe he’s getting away with it – but they can talk of
nothing else.
Wondering how to jump
All of which has M. Chevènement whipping everyone else into a lather. No-one knows yet whether he represents a tidal
wave about to demolish the French political landscape or whether the ever-resourceful President or his ever-dogged Prime
Minister will yet hold the centre ground. But looking at the rumblings that have swept governments from power in Norway,
Italy and Denmark recently and the signs coming from the Netherlands and Germany, it cannot be a reassuring time to be
in office in France – even when left and right are both, in a sense, ‘in power’.
READER WARNING:
Serious Stuff for Serious People: the next article is strictly for those interested in the development debate that is
going to play out its next rounds at conferences this year in Monterey and Johannesburg
Are the leaders of the rich countries really interested in helping developing countries?
Later this year upton-on-line will struggle, along with wide-bodied plane loads of wide-eyed visionaries, to the UN
World Summit on Sustainable Development in Johannesburg. This immense undertaking is the decadal follow-up to the Rio
Earth Summit of 1992. World leaders, no less, are expected to parade there and account for their actions or inactions
over the intervening ten years – and ponder the way forward.
It goes without saying that the world has changed out-of sight since then. Most leaders will be commenting on
commitments that, given the high-speed revolving door of contemporary politics, will have the feel of pre-second world
war treaties about them. (It would be extremely interesting to know just how many leaders – if any – have been around
for the entire decade!)
Preparatory to this politico-archaeological dig, upton-on-line has just returned from a gathering in Delhi where he was
invited to say a few words about what politicians might consider promoting in the name of helping the development
prospects of the worlds poor. What follows is a (slightly amended) version of the paper he delivered. It asks a single,
very specific question: if world leaders decide to focus on the issues that could make the biggest difference, what
would they be (assuming they decide to attend it).
First some premises
The 1992 Rio Conference was about environment and development. The implicit – and uneasy - understanding was that the
ability of developing countries to engage on many environmental challenges was dependent on their own economic
development – and the help of rich countries in facilitating it. Without that development part of the bargain being
addressed, there was never much prospect of truly global engagement on some of the environmental concerns that came to
the fore at Rio.
So here are two starting premises:
1. There is nothing remotely ‘sustainable’ about grinding poverty. Being poor in human and physical resources is no
passport to environmental sustainability – quite the opposite. A combination of all or some of
2. - illiteracy,
- poor life expectancy,
- chronic public health challenges,
- weak or dysfunctional government,
- an absence of clearly defined property rights and
- over-use of common assets like clean water
makes for a spiral of declining ecological services and deepening poverty.
3. Leaders who spend time going to conferences should focus on the big issues first.
4. So, if world leaders really want to make a difference to the development prospects of the 2.8 billion people who live
on less than US$2 per day, what are the policies they should target for immediate and urgent attention? What follows
provides a feel for the relative magnitude of some of the options.
Official Development Assistance
Official development assistance is the most familiar. We know that current transfers from rich countries to the rest of
the world total $53.7 billion – that’s down from $60.8 billion in 1992 (and represents, in real terms, a fall of 7%).
Since the Pearson Commission in 1969, a target for ODA of 0.7% of the GDP of donor countries has been in vogue. It has
been formally endorsed as a target to be aimed for on numerous occasions, most recently in the Millennium Development
Goals.
Should leaders focus on this option? Meeting it would take the total quantum of ODA from $53 billion to $160 billion. It
would certainly make a good deal of basic humanitarian assistance possible. But there is not the slightest indication
that anything like this is going to be made available – indeed some donor countries are looking at significant cuts.
Philanthropy
It would be anomalous indeed if world leaders decided to spend their time exhorting private citizens to step into the
breach given the yawning gap between their own rhetoric and performance. But for the sake of completeness it is worth
recording the current state of philanthropy as a source of development assistance – if only to calibrate whether this is
a source potentially worth waiting for.
If you put together the available data from the US and Europe the figure is significant, but not critical when set
against the other sources. Last year, charitable foundations on both sides of the Atlantic donated somewhere between
US$3 - 4 billion – and that’s a generous estimate.
Furthermore, the immediate outlook is bleak for private philanthropy. It is a sector that has been hard hit by the
collapse in high tech stock values making any near-term upside look remote.
Foreign Direct Investment
Would it, alternatively, be plausible to maintain that private investment flows from developed to developing countries
should be the principal engine for development? First the statistics.
Certainly, FDI has shown more promise in terms of its trajectory than ODA. In 1992, flows to developing countries
totaled $36 billion. By 1999 that figure was approaching 160 billion. Unquestionably, such investment brings with it a
range of direct and indirect benefits – employment, skills and the ‘crowding in’ of additional investment.
What can the political leaders of rich countries do to stimulate additional foreign direct investment? There are some
policy tools available, like building legal capacity, or helping to create transparent and business friendly
environments. Some might be tempted to turn to export credit guarantee agencies to expand trade flows and credit lines -
but it has to be asked whether these are not even more self-serving than some of the direct aid grants that have been
designed to create business for donor countries.
Ironically, many companies that are potentially large foreign investors would point to both the quality and quantity of
ODA as a pre-condition to many markets becoming attractive. Without minimum levels of education and personal health and
security, the attractiveness of many countries is slight.
It is also important to acknowledge that, while overall FDI figures are large, a small number of developing countries
have attracted the lion’s share of investment. China alone, for instance, has swallowed up US$321 billion or 45% of all
of the investment flowing to the Asian region since 1990.
The reality is that not all developing countries are equally attractive to investors – and it’s not always a question of
the quality of governance and institutions. Take the Kyrgyz Republic, which, despite all the text book reforms,
attracted in 2000 only 10% of the FDI that poured into the Central Asian Republics. Countries with serious corruption
and governance problems, but huge natural resources, have proved much more attractive than this little country of 4
million people with few natural resources but hard-won WTO membership.
At the most optimistic estimate, roughly one third of the 2.8 billion people referred to earlier live in countries that
are, at least currently, attractive to foreign investors. FDI will be a powerful engine for development but it is by no
means a complete solution.
But aside from that, it is hard to see why leaders would attend a conference to promote something over which they have
relatively limited control.
Taking trade liberalisation seriously
Unlike the destination of capital flows, governments have very considerable influence over the basis on which goods are
permitted to flow across their own borders. So perhaps world leaders should choose to give real impetus to pulling down
some of the barriers that keep developing country goods out of their markets, and eliminating the subsidies that help
keep them uncompetitive? The numbers certainly make this look a promising area.
Subsidies paid out by OECD countries amount to between US$560 billion and US$725 billion per year. That’s more than ten
times the figure for ODA and about three times the value of FDI flows to developing countries.
Take the main offender, agriculture. This sector absorbs some $362 billion a year in subsidies from OECD countries, or
1.4% of those countries GNP. Compare this figure to the 0.24% of GNP provided in development assistance by those same
countries.
The specific statistics are barely conscionable. Last year, the EU spent over US$2 billion on subsidising EU sugar
farmers alone to produce a product which can be produced more efficiently and cheaply in the developing world.
Similarly, in the US, oilseed farmers received nearly US$12,000 per year in support. Compare that to the average wages
in most developing countries. Overall tariffs and subsidies in the developed world cause annual welfare losses of almost
US$20 billion for developing countries. This is equal to some 40% of annual ODA provided by OECD countries to the
developing world.
Regional snap-shots of the impact of these policies paint an even grimmer picture. Sub-Saharan African countries, for
instance, suffer an annual trade loss of US$20 billion because of the combined effect of tariff quotas, barriers and
subsidies. That figure is US$6 billion more than ODA disbursed in the region.
So, what would the value of the liberalisation of trade be worth to developing countries? Estimates vary. Based on what
we know of other liberalisation efforts, the outcomes can only be positive. Take NAFTA, which increased trade and
boosted employment by 22% in Mexico, 10% in Canada and 7% in the United States.
More generally, the World Bank has estimated that removing obstacles to trade would boost the incomes of developing
countries by anything from US$200 billion to US$500 billion a year. Even if you take the lowest estimate this is almost
the same as current FDI and ODA flows combined. So if world leaders were going to talk seriously about trade
liberalisation, they would be talking about some seriously big numbers.
Opening borders to people
It has become commonplace to describe the planet as a global village. The internet and television have made it possible
for one half of the world to see a glamourised version of how the other half lives. People are understandably determined
to try to gain access to this enhanced quality and quantity of life. To this general pressure for migration must be
added the specific - but related – pressures of war, persecution, violence and the denial of human rights.
That pressure is currently held at bay by stringent immigration controls in rich countries. One other way to improve the
development prospects of poorer countries would be to extend the argument for free trade in goods and services, to the
free movement of people. It would be a powerful – and controversial - way forward.
The most direct benefit migration provides to developing countries is through expatriate remittances. The total value of
global remittances has risen from less than US$2 billion in 1970 to almost US$100 billion in 1999. The importance of
remittances varies but for a number of developing countries they are a critically important source of income and foreign
exchange. Egypt, for instance, received US$5.1 billion in remittances – not far short of the US$6.9 billion income
received from the Suez Canal, oil exports and tourism combined. According to the Central Bank of the Philippines, that
country’s economy has benefited by upwards of US$7 billion in the form of remittances (easily dwarfing ODA and FDI flows
over the same period). Jamaica has benefited from a steep increase in remittances, with an increase over a ten-year
period from 4% of GDP to nearly 10%.
Some doubt the development benefit of migrant remittances on the grounds that they tend to fund consumption, not
investment. But it is undeniable that many forms of consumption such as housing, better food, education and health will
improve productivity and thus development prospects. If this is so, what might we expect from even a relatively minor
easing of the migration restrictions currently in place in developed countries?
Suppose, for instance, the five leading economies of the G7 could be persuaded to approve work permits for an inflow of
migrant workers equivalent to 4% of their current work force. The returns to developing country economies alone can
plausibly be estimated to be of the order of US$200 billion (while the gains to global economic welfare are much higher
again). Contrast that with the potential gains from the Trade Round which, if delivered, might on past experience not
actually accrue until as much as five years after the Round is completed - whenever that is.
Conclusions
Putting these possible engines for development side by side, it is not hard to see where the largest possible gains
could be made.
These numbers are rough – but defensible – estimates. They show that the sort of development gains that a combined
cross-border liberalisation of product and labour markets would produce are roughly an order of magnitude greater than
the current level of ODA for which there appears to be little prospect of upside.
So does this mean that leaders will weigh their priorities accordingly? Who knows? Any fair presentation of this table
would have to observe that the political difficulties of opening borders to more migrants are probably an order of
magnitude more difficult than voting a little more for ODA budgets.
The figures tell their own story. Upton-on-line ventures just one personal opinion and it is this: that leaders should
not try to cover their inaction on any of these fronts with words. That has been the past practice. Developed countries
have been ‘aiming’ to lift their ODA to 0.7% GDP for a very long time. It hasn’t happened. The draft text for the
forthcoming Monterey Conference on Financing for Development limply ‘acknowledges’ concern on a raft of issues such as
non-tariff barriers and tariff escalation.
There is a fairly high level of summit fatigue out there. There have been too many declarations without follow through –
and not just on development. One thinks of the FCCC with its ‘aim to’ target of stabilising greenhouse gas emissions at
1990 levels. In upton-on-line’s judgement, if leaders are not in a position to make commitments they should be plain
about that. It will be small comfort for those hoping for major gains, but a concrete list of positive initiatives –
however modest - would be preferable. Whether that would be enough to give environment ministers hope of progress in
their field is another matter. Because it is as clear today – as it was at Rio – that no country is going to sign up to
a serious environmental agenda by surrendering its right to development.
Possible Sources of Assistance to Developing Countries “Ballpark Figures”
Official Development Assistance
(Currently: US$53.7 billion or 0.22% of GNP of OECD DAC Members)
US$160 billion
(0.7% of GNP
of OECD DAC Members)
Philanthropy US$2.8 - $4 billion
Foreign
Direct Investment
US$160 billion
Reductions in Trade Barriers US$200 – 350 billion
Migration Remittances (Currently: US$100 billion) US$200 – 220 billion