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Text File | 1994-05-02 | 58KB | 1,155 lines

<text> <title> A New Vision for Global Human Development </title> <article> <hdr> Human Development Report 1992 A New Vision for Global Human Development </hdr> <body> For the first time in human history, the world is close to creating a single, unified global system. But an agreed and participatory system of global governance remains a distant dream. This has left an urgent and disturbing question wandering unanswered round the corridors of power: In a period of rapid economic globalization, who will protect the interests of the world's poor? National governments find it increasingly difficult to offer such protection. The speed and efficiency of the international money markets, the autonomy and reach of multinational corporations, the dominance of a group of rich nations over the ever-expanding flows of international trade--these and a host of other forms of global integration have greatly weakened the economic authority of the nation-state and its ability to promote human development and protect its citizens. A remarkable globalization of the world economy has taken place in the past few decades. While world output tripled, world trade quadrupled. World commercial bank lending has also grown rapidly--twice as fast as world trade. Many of the global movements today are information-based--through ever-expanding networks of cables and satellites. The world capital markets transmit more than $300 billion a day through international data networks. And TV crews roam the globe collecting and transmitting information in world events as they happen. Today, more than ever, a new global culture is emerging. From music to movies to books, international ideas and values are being mixed with, and superimposed on, national identities. Such common information flows are an achievement, but they carry a risk--the loss of cultural identity and diversity. But they also allow the world to face up--as a community--to issues of common concern and common survival. The traffic in drugs, the spread of pollution, the streams of illegal migrants--these and many other problems are becoming impossible for individual countries to control unilaterally. And if global opportunities continue to be unevenly distributed, the consequences of the most persistent human problem of all--poverty--will increasingly overflow national frontiers. The existing framework of global institutions The existing framework of global governance is weak, ad hoc and unpredictable, with international economic decision-making disbursed over numerous institutions and forums, mostly dominated by the rich countries, leaving developing countries powerless and vulnerable. The Group of Seven The Group of Seven industrial countries (G-7) represents the closest approximation to governance of the global economy. It consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States--with additional participation from the European Community as a whole. These countries have only 12% of the world's population. The G-7 is an elite group, hardly representative of a broad spectrum of political and economic interests and unlikely to defend the global interest if this conflicts with its own. Alternative forums and proposals are already appearing to offer representation to developing countries. The "G-15" summits bring together leading Third World nations, and there are proposals for some presentation of the developing countries in the G-7. The developing countries have also organized themselves in other forums, such as the G-24 and the G-77, to exert pressure on the industrial nations. But these have had only marginal influence. A more likely development is that the G-7 will expand itself through a careful process of co-option to pre-empt any challenge to its global economic clout. Russia is the most likely new candidate for membership. The International Monetary Fund The International Monetary Fund (IMF) has drifted away from its original mandate. It was created to maintain monetary stabilization and allow payment imbalances to be resolved in an equitable and controlled fashion--with the burden of adjustment reasonably shared between surplus and deficit countries. This has not happened--certainly not in recent years. Why? Largely because the Fund cannot exert any authority over the rich industrial nations, whether they generate surpluses or deficits. Floating exchange rates and sophisticated money markets have taken care of many of the temporary imbalances between industrial countries. And a new monetary system has been created in Europe. One development that might have given the IMF a more central role in global monetary management was the introduction of Special Drawing Rights (SDRs). But the richest nations would not allow SDRs to make any significant contribution to international monetary assets. Developing countries do need the IMF, however. They have often fixed their exchange rates to the currency of a major trading nation and exercised tight controls on foreign exchange--policies that inevitably result in temporary balance of payments deficits. Even for short-term problems, however, the IMF has been in no position to create and supply the liquidity that developing countries needed. These limitations were fully exposed when the debt crisis struck in the early 1980s. IMF lending to developing countries certainly shot up between 1980 and 1986. As a result, their debt to the Fund increased from $9.5 billion to $42.4 billion. But in the subsequent period, 1986-90, the IMF was actually withdrawing funds from developing countries--a net transfer of $6.3 billion a year. The IMF has exerted a strong influence over developing countries by setting stiff conditions on the loans it offers. This conditionality has generally been monetarist and deflationary, obliging governments to reduce their demand for imports by curtailing overall demand--cutting back on both private and public spending. These cutbacks have often reduced consumption, investment and employment--and stifled economic growth. An alternative strategy would have been adjustment with growth, which would have aimed more at promoting production, both to increase exports and to meet a higher proportion of local demand from local production. Although there have been indications of a change of IMF policy in this direction, there is as yet no well-articulated agenda of reform. The World Bank The World Bank is no closer to meeting its mandate, either. It was established to borrow the savings of the rich nations and to lend them to poor nations--to finance sound development projects and programs, particularly where private investment failed or was inadequate. In fact, it has done little to recycle global surpluses to deficit nations. In 1990-91, the current account surpluses of seven of the world's countries were over $150 billion (40% generated by Japan). The private financial markets recycled most of this to richer industrial countries (with some $100 billion going to the United States). The World Bank, rather than sending some of the rest to poor countries, actually withdrew $500 million from them. Nor did the Bank offer developing countries much protection from the harsh terms of the international money markets. It lends money through two main channels. The most significant is the International Bank for Reconstruction and Development (IBRD), which offers funds at rates that now float in sympathy with world market rates. This is a major shift from the World Bank's original role of cushioning developing countries against fluctuations in market interest rates. The Bank was supposed to raise capital and lend it at rates that it could afford to subsidize because of its own strength and that of its industrial country partners. The Bank's conces