EuropaWorld 4/5/2001 Fighting Global Poverty: Where Will We Find The Cash?

In July 1944 - less than a month after the D-Day landings - the New Hampshire town of Bretton Woods was itself invaded by a conference of 44 nations who set themselves the gigantuan task of planning a new world financial order to follow the expected defeats of Germany and Japan. Bretton Woods led directly to the creation of the World Bank and the International Monetary System. The challenge then was to lift Europe and Asia out of war-induced penury: almost sixty years later the same institutions are facing an even more Herculean but fundamental task; eradicating global poverty.

Poverty, of course, is nothing new. The billion or so people struggling to sustain themselves on less than a dollar a day have not suddenly become impoverished. Their brothers and sisters died from preventable diseases in exactly the same way as their own children are dying today. They have no education - but then neither did their parents or grandparents. For these people daily life continues in much the same wretched way. What has changed is that the rich countries have got richer.

By degrees these rich countries have arrived at the conclusion that global poverty is unsustainable. Driven by a mixture of pressures: public opinion, fear of illegal immigration, of population growth, of environmental destruction and by the threat
to security and to commerce of conflicts in developing countries, the rich world has conceded that it should share resources more equitably in the twenty first century than it did in the twentieth.

In this the United Nations, and particularly its Secretary-General, Kofi Annan, has played a key role. In a flourish of rhetoric the United Nations Millennium Summit, held in New York in the autumn of 2000, set clear objectives for poverty reduction, for health care, for access to basic education and renewed the 1996 pledge to halve world hunger by 2015. Annan's strategy has been to obtain pledges from world governments to meeting these development targets.

But now comes an even greater challenge that will coincide with Annan's second term if, as widely expected, he is re-appointed by the General Assembly later this year. It is one thing for governments to will the ends: willing the means is a great deal harder. A commitment to halve poverty makes an encouraging headline and maybe even creates a feeling that the bureaucracy has a heart; but willing the means entails raising taxes or reducing services. Votes are counted on European and American doorsteps, not on African or Asian ones. Only four small European countries fulfil the UN guideline of contributing 0.7 per cent of their Gross National Product to development aid. Most countries do not even come close; indeed the average is only 0.25 percent.

What this means is that an ever-widening gap is opening up between the costs of meeting the international development targets set at the Millennium Summit and the resources that governments in the developed world are prepared to provide. The effects can be seen almost daily in a catalogue of underfunded UN appeals and in more serious warnings from some of the UN agencies. Governments have tended to defend themselves by proposing that aid should be better targeted and its delivery reformed - but these do not address the fundamental problem: there is simply not enough money in the aid system.

Last week Jacques Diouf, the indefatigable head of the United Nations Food and Agriculture Organisation warned yet again that on present trends we shall be fifteen years late in delivering the target of halving global hunger by 2015. Urging the world community to devote more resources to agriculture he said that many of the health problems afflicting people in Africa stemmed from, and were exacerbated by, hunger and malnutrition.

Practically all the agencies are short of cash. The World Food Programme - the UN's emergency food aid arm which feeds some ninety million people around the world - has just announced a fourth successive month of cuts in food rations for the Osire refugee camp in Namibia, home to 20,000 refugees. While new arrivals from conflicts in Angola and the Democratic Republic of Congo flood into the camp, the agency is racing against time to find fresh resources for the operation, which has received just 30 per cent of the funds it needs for the year. Food stocks will run out altogether unless further funds are received.

The United Nations Refugee Agency - UNHCR - which cares for some 22 million victims of conflict and persecution, has also just announced a cash crisis. It faces yet another budget deficit this year, cuts in staff numbers and operational reductions. Although its budget of almost a billion dollars is agreed with the 57 governments who pledge to support its operations, not all deliver what they pledge and the agency's finances are plagued by late payments. The UNHCR chief, former Dutch Prime Minister, Ruud Lubbers, is on the record as saying that this situation "cannot continue." He is slashing expenditure accordingly.

Meanwhile at last week's African AIDS summit Kofi Annan was calling for a new fund of '$7-10 billion annually' to help bring HIV/AIDS under control. It is extremely doubtful that anything approaching that sum will ever be raised. Everybody agrees the scale of the crisis; the question is where can that sort of cash be found?

Which brings us back to Bretton Woods, or at least to the Bretton Woods institutions - the World Bank and the IMF. In New York this week they were joined by finance ministers and central bank governors at a meeting of the UN's Economic and Social Council.

The UN Secretary-General knows that if governments really are going to provide the quantity of money necessary to realign the rich north and the poor south on a convergent path, then it is this audience that must be convinced. In his address to the meeting he urged them to focus on the goals for reducing poverty and achieving development set by at Millennium Summit.

"I know you share my sense of the urgency of meeting those targets and delivering on those promises," he said. "My concern is that unless we succeed in mobilising far greater amounts of resources - both public and market-led investment - our plans to eradicate poverty and to accelerate development will be thwarted."

Quite so. Yet the question of where to find cash on this scale is a real one. The world economy is slowing down. Forecast growth this year is 2.5 per cent, according to the UN, down from 4 per cent last year. The prospect of endless growth at the rates of the last few years is at best uncertain. So where can the money be found?

There are two possibilities - though it is safe to assume that neither were addressed by the august gathering in New York. The first is military expenditure: a mere 10 per cent reduction in world defence expenditures would generate sufficient funds to provide all the world's population not only with basic social services - education, health care and nutrition, water for drinking and sanitation - but with an income level above the poverty line for their country.

The second is a tax on international financial transactions - the so-called Tobin Tax - named after the Nobel Prize winning US economist, James Tobin. Such transactions - and the overwhelming majority are for speculation rather than for trade - amount to some $1.5 trillion daily. Nor are they without cost to the world's productive economy. Indeed many parts of Asia have not yet recovered all the jobs lost in the financial collapse of the nineties which was triggered by financial speculation. A small tax on such transactions would serve to stabilise the world's financial system - something that appeals to bankers and finance ministers.

But in addition to stability the tax could also generate anything up to $300 billion annually for development. A deal of technical work has been done to show showing how such a tax might be implemented without evasion or disruption. Moreover, senior financial figures, including even George Soros, have been reported as saying that they believe now that the Tobin Tax ought now to be considered.

Indeed it already is for the European Parliament debated the tax last year, the decision being lost by a single vote - reportedly that of a communist unwilling to appear to condone speculation. As an European official said recently, the world will be killed by such perfection.

The great advantage of a Tobin Tax is that it would provide revenues independent of governments that could be used directly for development, debt relief, health, peacekeeping as well as promoting convergence in the world order. It would provide a way for rich governments to get themselves off the hook of paying for the ends willed by their rhetoric but not their electorates. And for the poor of the world it would at last provide a glimmer that this coming century might be better than the last.