The world should have a vested interest in resolving inequality, not just protecting its own, says Joseph Stiglitz
Picture yourself as a poor African farmer, scraping a living on a hectare or two. While you may not have heard of globalisation, you are affected by it:
you sell cotton, which will be woven into a shirt by a worker in Mauritius in a style designed by an Italian, to be worn by some well-off Parisian. You are better off than your grandfather, who relied on subsistence farming. But you are also the victim of globalisation, and the unfair global economic regime that has been crafted – and, in some cases, made increasingly unfair
- over the years.
The price of the cotton that you sell is so low because America spends up to $4bn a year subsidising its 25,000 farmers, encouraging them to produce more and more cotton – the subsidies even exceed the value of what they produce -and as they produce more, the price of cotton falls lower and lower.
You had thought about supplementing your income by buying a cow and selling its milk. But the price is so low that it does not pay: your fresh milk has to compete with powdered milk from America and Europe, who subsidise their cows at $2 a day, more than you and any of your neighbours actually make.
You wonder, what would life be like if you were treated as well as Europe treats its cows?
Your sister used to supplement the family income by working in a factory in the city, but almost 10 years ago the government was forced to take away its mild tariffs, and the factory closed down: something called the “Uruguay round” said that tariffs and subsidies on the goods you produced that competed with those produced in Europe and America were illegal.
Your nephew went down with Aids, and you understand that there are drugs available that could cure it, and that your government would even be willing to supply those drugs at a price you can afford. But US drug manufacturers say you have to pay the American price, which you understand is an unbelievable $10,000 a year. That amounts to the entire income you will make in the next 20 years. Admittedly, you don’t understand modern economics, but you can’t see why those little pills should cost so much, especially as you understand a South African firm is willing to sell them for a fraction of the price. But the Americans say no, something called intellectual property rights gives them the right to stop others from producing these drugs – at the expense of your nephew’s right to live. You understand their desire to earn profits, but is there no limit?
American presidents have come to Africa more often than they used to, and they all say they care about the continent and its problems. But you do not understand why they are making life for your people so difficult.
The African farmer may not have a college education, but he may well know as much about the meeting that is happening in Cancun as the average American or European – because his life is far more dependent on the outcomes.
In November 2001, the nations of the world got together to start a new round of trade negotiations in Doha, and in order to emphasise that the first item on the agenda was rectifying the imbalances of the past, it was called the development round.
In Cancun, trade ministers will assess their progress – and there is more than a little cause for concern. The rich countries appear likely to once again use their economic muscle to get what they want, at the expense of the poor.
The last set of trade negotiations was so imbalanced that the poorest region in the world, sub-Saharan Africa, not only didn’t share in the gains – it was actually worse off.
The strategy that the US, and to a lesser extent Europe, seems to be following is the usual: hard bargaining, extreme positions, last-minute concessions, arm twisting, peer pressure, tacit threats of cutting off development assistance and other benefits, and secret meetings among a small number of participants are all designed to extract concessions from the weakest.
Europe at least seemed to be beginning on high ground with the Everything But Arms initiative, which unilaterally, without demanding political or economic concessions, opened up European markets to the poorest countries of the world. EU consumers benefited, it cost European producers a negligible amount, and it was a strong demonstration of goodwill. (Admittedly, Europe has done little about what many of the developing countries care the most about – agriculture – leading cynics to refer to the initiative as Everything but Farms.) America committed itself to doing something comparable but has so far offered nothing concrete.
Agriculture is crucial for developing countries – most of the people in the third world depend on it, yet, after bickering between themselves, Europe and America seem to have made an agreement to keep progress to a minimum.
Since 1994, America has doubled its subsidies, rather than phasing them out:
the “concession” that may well emerge is, rather than a redressing of the imbalance, a mere rollback to the levels of a decade ago. In intellectual property, America has been the only country to hold out on granting access to drugs to the poorest countries, such as Botswana, that are too small to produce their own; the great “concession” – already in the works – will be to agree to what everyone else has already agreed to, but to do nothing about the more fundamental problems, such as biopiracy, in which multinationals patent traditional foods and drugs, forcing developing countries to pay royalties on what they all along thought was theirs.
While something should be done about existing problems such as the proliferation of non-tariff barriers, America is also making new demands on developing countries -that they open themselves up to destabilising speculative capital flows. Just as the IMF has recognised that such flows do not promote growth, but actually result in greater instability, and have accordingly scaled back pressure on developing countries for capital market liberalisation, America is trying a new forum, the WTO, to push this agenda, which may be good for Wall Street but is bad for developing countries.
Slowly, developing countries are coming to the realisation that having no agreement is better than a bad agreement. Yes, an international rule of law is required for governing international trade; the current regime does go some way to restricting the brutal exercising of economic muscle by the more powerful.
There is the start of this international rule of law, albeit one that is unbalanced and unfair to the developing world. The developed world was right to commit itself at Doha to redressing those imbalances. But from today’s perspective, it increasingly appears that Doha was little more than an attempt to get the developing countries to sit down at the bargaining table.
There the intent was not to redress these imbalances but rather to use economic power to create new ones.
A failure at Cancun will not only be a setback for those wanting to see a fairer, more inclusive global trade regime, with the benefits accruing not only to multinationals in the north but to the poor in the south. It will represent another manifestation of the failures of global democracy so evident this year: the system of global decision-making does not reflect the interests and concerns of the majority of the world’s population. It is not one person one vote, not even one dollar one vote. But it will also represent another manifestation of the failure of democracy within our societies.
Most Americans and Europeans want a global economic system that is more balanced. If the issue of access to life-saving Aids drugs were put up to a vote, the overwhelming majority would not support the position of the pharmaceutical companies. These trade negotiations demonstrate, as much as anything else, the power of special interests, often driven by campaign contributions, in determining political outcomes. The problem is that in this case, it is the poorest people in the world – the billions living on less than $2 a day – who are asked to pay the price.
o Professor Joseph Stiglitz, of New York’s Columbia University, was chairman of President Clinton’s council of economic advisers, and from 1997 to 2000 was senior vice-president and chief economist of the World Bank. He was the co-winner of the 2001 Nobel prize in economic science.