The real maths of the world

  • 14/01/2004

Our world did change in 2003. The US war on Iraq made sure that the rules of 'engagement' were changed, perhaps for a long time to come. The change I see most visible is that the world has become overtly aggressive and rude. And it is not just the US. Let us be clear that the stamp of 'aggressor' politics, where terms are set with singularly determined self-interest built on raw power (money or caste), has left a visible emboss in our part of the world as well. The fact that high-level corruption was not even an issue in the recent elections should make us rethink. It is certain that the boundary between right and wrong, just and unjust is getting blurred and re-engineered.

But if our world is changing, it is equally not changing. On the one hand, we have the challenge of learning to live and share the resources of each village, each region and each country, in a manner that is both equitable and sustainable. On the other, there is the increasing challenge of living in one increasingly interconnected and interdependent world. But building common futures will demand cooperation and that in turn will demand, indeed force, the need for fairness and justice.

Indicators on the growing interdependence of the world are fascinating and should help us to realise the imperative to understand the impact of the rich on the poor better. Simon Upton, the former New Zealand minister who now heads the roundtable on sustainable development at the Organisation for Economic Cooperation and Development (OECD) in Paris, has worked with colleagues to put together indicators of how national policy impinges on global development. The trends clearly point towards the need for international policy reform.

Take the issue of official financial flows, at lending and repayments - what countries borrow and how much they repay in terms of interest on the loans. In 2000 a total of US $53.6 billion was received, by the many low and middle-income countries of the world, from global multilateral banks and bilateral aid agencies. In that same year, these countries returned - in repayment and interest on loans - a total of US $77.6 billion. In other words, poor countries borrowed only to repay earlier loans. But with the net outflow over US $24 billion, who can say the rich are supporting the poor?

In fact ironically, in these circumstances, the rich are being supported by the increasing tax burden on poorer countries. So, Peru ends up with paying as much as 25 per cent of its government tax revenue in repayments and interest. This when, through the foreign direct investment Peru received, the profits to the investor abroad were a whopping 42.5 per cent return on investment in the year 2000 alone.

Combine this with the fact that the bogey of foreign direct investment (FDI) is exactly that. A bogey. Even as recently as 2000, 86 per cent of the investment was within the OECD countries. Therefore all this talk about globalisation and the movement of capital to countries with lower labour costs does not add up in reality. The reality is that the whole of Africa received as little as US $7.5 billion in FDI; even Asia got a pitiable US $18.6 billion or 1.2 per cent of the world's investment. China was the exception, with US $100 billion. China and OECD countries, therefore, made up for 92.7 per cent of the world's foreign direct investment. The rest were fed crumbs, graciously returned after cooking up repayments and loans and sheer profits.

This combines with the problems of declining terms of trade - particularly for agricultural and commodity trade - to put poorer nations in a real squeeze; these countries are forced to overuse and degrade their natural capital even further. Another indicator that Simon Upton and his colleagues have cobbled together is to understand the percentage of demand and supply of cropland and grassland in different regions of the world. And whereas the rich parts of the world have an excess of supply over demand, the situation in the poorest part of the world was reversed. In these countries there was, in 1999, 9.5 per cent shortfall in the demand from grasslands over supply. It is no wonder that these countries increase the intensity of the use of these lands, to eke out whatever they can to survive today.

In fact, what this means is that these countries do not only devalue their currency. They literally devalue their land and their natural resources as well, just so they can pay for the imports they need to manage their economies. Many years ago, the United Nations Environment Programme had similarly looked at interdependence and had found that because of the declining terms of commodity trade that the poor depend upon, in 1971, whereas one tonne of banana was enough to buy one steel bar, by the 1980s the same tonne could only purchase half that steel bar. Similarly, it took 10 times more beef exports to buy the barrel of oil in the 1980s, than it did in the 1970s. This when the rich world's cattle and agriculture is massively subsidised - US $2 per cow is paid each day in subsidies in Europe alone, which makes it even more difficult for the poor world to compete.

When we put together all this, some things are crystal clear. The poor end up massively subsidising the gargantuan consumption of the rich. They have precious little to invest in their future. And in spite of all this, they still try and do the best they can - whatever's possible within their abilities - to conserve their environment and make sustainable use of it. This arithmetic has to become the sums of tomorrow.

- Sunita Narain

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