Debt Crisis


A world divided
Martin Wolf, FT, July 14, 1999

The biggest challenge for human development is to help failing states, particularly in Africa

Never before has the world been both so integrated and so divided. But for a big proportion of the world's population the ongoing march of globalisation is irrelevant. Theirs remain lives of quiet desperation. What, if anything, can and should be done about this?

The Human Development Report, published by the United Nations Development Programme, reminds the affluent of some harsh facts about the world they live in. As it notes:

By 1997, the fifth of the world's people who live in high-income countries generated 86 per cent of world product; the bottom fifth produced 1 per cent.

The top fifth generated 82 per cent of world exports; the bottom fifth produced just 1 per cent.

The top fifth make up 93 per cent of the world's internet users; the poorest fifth are 0.2 per cent.

Ten countries accounted for 84 per cent of global research and development in 1993.

In 1820, the ratio in living standards between the very richest and poorest countries was some three to one. But then modern economic growth took hold: by 1913 the ratio had risen to 11 to 1; and, by 1950, it was 35 to one. It was 44 to 1 by 1973; and had reached 72 to one, by 1973.

This is the story of cumulative global divergence.

There is an equally important story of convergence. The standard of living of the UK, once the forerunner, has been surpassed by the US, Canada and Australia and by most of western and central Europe.

In east Asia, too, convergence has advanced. Japan was first and then Singapore, Hong Kong, Taiwan and South Korea. Now mainland China and India - with close to two-fifths of the world's population between them - are starting to grow more quickly than the most advanced countries.

Already, the people of 49 developing countries have life expectancies of over 70. In China, with its population of 1.2bn, female life expectancy is 72 years and male life expectancy 68.

Yet there are three excellent reasons for rejecting the complacent view that time would cure all ills.

First, a huge number of people are mired in desperate poverty: some 1.3bn have incomes of less than a dollar a day.

Second, more than 80 countries have lower incomes per head than a decade ago. In sub-Saharan Africa many have lower incomes per head than in 1970. A loss of 17 years in life expectancy is now projected for the nine countries in Africa with an HIV prevalence of 10 per cent of the population, or more.

Third, failing societies pose threats to the rest of the world. These include disease, terrorism and migration. Unhappily, they pose an even greater threat to themselves: of the 61 big armed conflicts in the world between 1989 and 1999, all but three were civil wars.

Even if one is not a thorough-going egalitarian, it is impossible to avoid being as moved by the misery as one is disturbed by the instability.

The UNDP report concentrates on finding solutions in improved global governance. But very small states, such as Singapore, have achieved high living standards without exercising any power over the global economy. The problem of failing countries is not that they are small and weak, but that they are dysfunctional. They have been unable to provide the basic goods of political and social stability, protection of property, and personal and political freedom.

They have also failed to follow policies conducive to enterprise, trade, thrift and investment.

Yet all this is not only the result of their rulers' mistakes or malfeasance. Many countries suffer from big handicaps. Low levels of economic development necessarily imply fragile tax bases. These, in turn, can make it impossible to pay public servants adequately.

In an intriguing recent paper, David Bloom and Jeffrey Sachs of the Harvard Institute for International Development also argue that endemic diseases, such as malaria, adverse climatic conditions and poor transport links, lie behind most of Africa's difficulties. (David Bloom and Jeffrey Sachs, Geography, Demography and Economic Growth in Africa, Brookings Papers on Economic Activity, number 2, 1998, Washington DC.)

These explain the poverty that makes states weak and keeps people poor. Their argument has force, even if it is not the whole truth.

In response, Paul Collier of the World Bank argues that political and policy failings have been still more damaging. Dictatorship and dirigisme were a lethal combination, he states, particularly in undeveloped, ethnically diverse and fragile societies. He estimates that by 1990, 39 per cent of African private wealth was held outside the continent.

According to the Human Development Report , 30,000 African PhDs now live outside the continent.

The fundamental challenge of development is to reverse the dire fate of failing states, particularly those in Africa, and to put these countries back onto the first rungs of the ladder of development.

The first part of the solution, as Mr Bloom and prof Sachs argue, is to help provide cross-border public goods. There should be generous finance of research into vaccines against prevalent tropical diseases, as well as into tropical agricultural technologies. But the public goods must include peace. There is a strong case for a well-financed, UN-mandated international intervention force: a UN foreign legion, in other words.

The second part is improved governance. Where countries are failing, donors should be willing to pay and, if necessary, help recruit judges, officials, soldiers, police, medical personnel and teachers. Again, such operations could be mounted under UN auspices, in some kind of protectorate. Aid should be withdrawn from countries governed by corrupt and incompetent dictators, but should go, generously, to democracies with decent policies.

The third part is better policies. These should include liberal trade and openness to foreign direct investment. They should also include privatisation and foreign ownership of infrastructure, particularly of telecommunications and electric power. To achieve this, countries will need to sign international agreements, in order to make commitments to liberal treatment credible.

The growth process of the past two centuries has, indeed, opened up staggering gaps between the world's most and least advanced countries. These gaps are going to grow. That seems inescapable.

What is essential, however, is to ensure that those at the bottom at least start on a sustained rise. In China and India, this seems to be happening, as it is in much of Latin America. Presumably, even Russia and Ukraine will sort themselves out, in time.

Yet many countries, particularly in Africa, have been going backwards. The challenge is to rescue societies that are on the borderline of the dysfunctional - or already over it. This is where the world's efforts must be concentrated. It will take generosity mixed with determination. It cannot be successful without the public goods that underpin development, the first good of all being decent government.

If this means some sacrifice of sovereign independence, so be it. The fate of hundreds of millions of people is far more important.

Top of Page
Början på sidan