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Finding new ways to give aid

By James Cumes - posted Thursday, 15 September 2005


Can we expect anything more of the aid which is now proposed? Can our hopes be higher for the alleged expansion and modest diversification of aid which is now proposed?

The short answer is that, if it is no different from past aid, is the odds are it will be no more effective than past aid.

The evidence is that cancellation of debt will, in itself, have negligible impact on expansion of fixed-capital investment which is the key to sustainable, long-term growth. The same is true of relaxation of restrictions on the trade of the least-developed countries. Those restrictions, including subsidies, should be removed: but, in itself, the increase in foreign-exchange revenues will not be enough to affect economic development and growth dramatically. And, in any case, those revenues will need to be applied in ways distinct from those of the past if more beneficial results are to be achieved. We must again bear in mind the ways in which revenues from oil and, for example, diamonds, have been squandered.

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None of that means we should not offer relief; nor does it mean the kind of emergency aid proposed by Bob Geldof and Bono should not be extended and expanded. On the contrary, it should and our continuing awareness of the desperate need of the people living in poverty should provide a stimulus for us to try constantly to find longer-term and more satisfying solutions to the problems of chronic or long-term poverty everywhere.

We must remember that the problems of poverty are not confined to developing countries. We have substantial and widespread poverty in the world's richest countries. We have inequalities which are unacceptable or should be unacceptable to all societies, rich or poor. We have instabilities too - and speculative and corrupt practices - which are unacceptable. Those instabilities and practices afflict all countries, everywhere, the richest as well as the poorest.

Here may indeed lie a key to the solution of the problem of poverty in the poorest countries. We in the rich countries can resolve our own problems by resolving the problems of the poorest countries at the same time as we ameliorate the misery of the poor in our own countries whom we have neglected for far too long. The two can and should go together.

Let us go back for a moment to the years immediately after World War II. After the Great Depression of the 1930s and World War II, we were determined to construct a postwar world society that avoided both economic depression and armed conflict. At the multilateral level, we created the United Nations with economic and social responsibilities as well as responsibilities for world peace. We set up such organisations as an array of regional and technical commissions within the framework of the United Nations to report through an Economic and Social Council to the General Assembly of the United Nations. We created a Food and Agriculture Organisation, The Bretton Woods twins - the International Monetary Fund and the World Bank - an International Labour Office, a General Agreement on Tariffs and Trade. These and many others flourished in the years between 1945 and 1970 but have sadly languished since.

We can eliminate poverty everywhere. People as different as former President Bill Clinton and Jane Goodall have assured us not only that we should but that we can do it in a reasonable period of time. I too believe we can.

But we will need to change the policies we have adopted over the last 30 years. Those policies have emphasised reliance on the "free" market and the private sector. They have advocated reduction of the role of government and public investment. They have advocated a "freedom" in economic policies that guarantees power and privilege for the relatively few and instability, inequality and or poverty for most of us.

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As we learned in the decades before World War II, a "perfect" market economy can never deliver economic stability and full employment, except for relatively brief moments. Economic stability and full employment with high levels of growth and innovation can be delivered only by a mixed economy, that is, one in which public participation in the economy is substantial, imaginative and energetic.

That does not mean a centrally-planned economy. It means a mixed economy in which we avoid the inadequacies of both the centrally-planned economies and the present so-called "free" market economies.

It means the widespread adoption of policies, similar to those adopted between 1945 and 1970, by means of which we can resume our conquest of poverty, inequality and social and political instability everywhere in the world. Without it, we will never have reliable, persistent full employment and relatively equal opportunity, we will never have well-founded peace and peaceful change and we will never have, in fulfillment of our universal human aspirations, a spontaneous co-operative resumption of such enterprises as the conquest of space. Without it, we may never again land on the moon, whether it be an actual moon landing or a satisfaction of our human aspirations in other visionary ways, such as the conquest of poverty everywhere on our own planet Earth.

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Article edited by Eliza Brown.
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About the Author

James Cumes is a former Australian ambassador and author of America's Suicidal Statecraft: The Self-Destruction of a Superpower (2006).

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