The Hindu Business Line : Shanghai Global Conference

AT THE height of technological progress and economic globalisation, increasingly propelled by global market fundamentalism, most developing countries are at an impasse. The spectre of poverty, hunger and disease continues to haunt a vast majority of the people. For example, poverty in Africa rose by 43 per cent in the past decade, and the situation is fast deteriorating, with 300 million people living in deprivation.

In an era of growth in world trade outstripping the growth in global output, Africa's share in exports has dropped to 2 per cent in 2001, from 5 per cent in 1980. The so-called global boom in manufactured exports has yet to trickle down to Africa. Its share in the world's manufactured exports has been stuck at minuscule 0.8 per cent the past two decades.

In addition, the continent's $360-billion debt overhang has been strangling the economy. Consequently, the Millennium Development Goal of halving the number of people living in abject poverty by 2015 is beyond the realm of a possibility for Africa. Of course, given the nature of global economic system, the prospects are equally bleak for other developing countries too.

Economists and development gurus, under the spell of neo-liberalism, continue to cling to abstract ideas and trade theories, which just strongly presume that trade liberalisation will promote growth and alleviate poverty in the long run.

One must remember what J. M. Keynes quipped: `We are all dead in the long run'. We wonder whether development practitioners are aware that their policy prescription can have consequences for the socio-economic well-being of vast majority of the world's population.

Trade liberalisation and increase in market access to improve the economies of the fifty poorest and least developed countries (LDCs) has failed to achieve long-term reductions in poverty, according to The Least Developed Countries Report 2004 of the United Nations Conference on Trade and Development (Unctad).

"The LDCs themselves can maximise the poverty-reduction effects of international trade by pursuing a development-led approach to trade rather than a trade-led approach to development," the report underscores. With rapid and deep trade liberalisation, imports have grown faster than exports.

Since these countries have exposed themselves to international competition, particularly on unequal footing, without adequate preparation, import substitution industries have collapsed.

According to Unctad, LDCs' "development partners should not imagine that preferential market access or multilateral trade liberalisation will substitute for international aid as a central mechanism for supporting poverty reduction."

Comprehending the deplorable health issues of the least developed countries is difficult, with a paltry average per capita income of 72 cents a day. They account for only 11 per cent of the global population, but experience close to 40 per cent of worldwide AIDS deaths.

It is high time that the world communities take this horrific situation seriously, and come with wholehearted development programmes with a human face. Given the current focus on security issues and war on terrorism, human development issues of the LDCs have been fast disappearing from the world radar screen.

While delivering a speech at a unique Shanghai Global Conference on "Scaling Up Poverty Reduction," sponsored by the World Bank and the Chinese government (May 25-27), the Chinese Premier, Mr Wen Jiabao, stressed that widespread poverty in most developing countries poses major threats to peace and development.

"Reducing and eliminating poverty is not just limited to the economic realm, but assumes a political dimension," he said succinctly. "It is not just an urgent task facing individual country, but a shared responsibility for the international community as a whole."

Widespread poverty in developing countries is closely related to the prevailing "unfair and irrational international political and economic order," among other things, said Mr Wen. He urged the developed countries to provide more aid and debt relief to heavily indebted poor countries, with other development assistance.

Also speaking at this conference, Brazilian President Lula emphasised the importance of economic growth with social fairness, by moving away from the Washington Consensus that insists that liberalisation and privatisation, among other policies, as the best strategy to promote growth and eliminate poverty. He forcefully said: "Hunger is actually the worst weapon of mass destruction. It claims millions of victims each year. There will be no peace without development and no development without social justice."

Surprisingly, in his opening address at the conference, attended by more than a thousand delegates from more than 120 countries, the World bank President, Dr James D. Wolfensohn, declared: "This is not a conference for teaching the Washington Consensus. The Washington Consensus has been dead for years. It has been replaced by all sorts of other consensuses." One wonders whether Washington Consensus is really dead.

Unless a policy paradigm shift occurs, outdated economic theories would continue to shape the way we understand the problems of developing countries, and attempt to address them. Of course, one thing is certain. The colossal failure of neo-liberalism, and the devastating social and ecological consequences of unbridled marked-led economic growth have come to the centre-stage of economic policy arenas.

Developing countries have increasingly recognised Washington Consensus as a sort of Washington Coercion, and the collective challenge and resistance has deepened.

China, the emerging economic giant, has begun to tackle the myriads of negative consequences of growth-centred development strategy, after its stellar economic growth performance for more than two decades.

The growing urban-rural income gaps, increasing unemployment, over-exploitation of natural capital, and alarming devastation of the environment are the result of boosting high-speed economic growth at any cost.

Now, China is redefining its development strategy towards human-based approach to development, with a major thrust on equity, social progress, and harmonious and ecologically sustainable development. Since two-thirds of the country's 1.3 billion people still live in the countryside, rural development and rural well-being is the cornerstone of China's renewed development strategy.

The new Prime Minister, Dr Manmohan Singh, the original architect of economic reforms in India, mostly backed by neo-liberal economic doctrine, has sent clear signals that his government is firmly committed to waging a battle against poverty.

This is no easy task, particularly by marching along the same development path. A change in the development path is imperative to achieve the stated objectives of the new government.

Now the most opportune time has arrived for India and China, accounting for nearly 40 per cent of the world population, to break away completely from the reigning Washington Consensus, pronounced dead by the World Bank President Wolfensohn, and espouse a new development philosophy for the developing world.

"The outstanding faults of the economic society in which we live," said Keynes in 1936, "are its failure to provide full employment and its arbitrary and inequitable distribution of wealth and incomes."

Of course, we would be absolutely correct in saying the same with greater intensity, what Keynes observed, about the present world in which we live. We have to challenge the dominant neo-classical economic theory, as Keynes challenged the reigning classical economic orthodoxy, and led a revolution in economic thinking, what we know as Keynesian Revolution.

If Keynes were with us today, he would have challenged his own theory, and formulated a new one, particularly in the light of electrifying changes that have happened in the global socio-economic landscape.

(The author is Emeritus Professor of Economics, University of Prince Edward Island Charlottetown, P.E.I., Canada.)