22 May 1997 - 24 May 1997

Social Justice and the Relief of Poverty in the Global Economy: Tensions Between Social Priorities and Market Pressures

Chair: Baroness Williams of Crosby PC

We began with a vividly-shared awareness that in a world with a notable overall record of economic growth, greatly enhancing individual well-being in many areas, there remained nevertheless massive - indeed increasing - disparities and much acute poverty. There were strikingly widespread advances to note in respect of health, education and adequate food, but the rising tide had by no means lifted all boats. Well over a billion people lived in absolute poverty, and the number was not evidently falling. At least a hundred developing countries could not be said to be prospering; the poorest fifty or so had just three-thousandths of world trade. Such countries had little effective voice or leverage in world institutions - the priorities of the World Trade Organisation, for example, in no way matched their concerns. The difficulties were intensified by the global spread of television and other communications, underscoring disparity and longing for betterment, and by the temptation for the able and well-qualified in poorer countries to take their talents to richer ones.

None of us questioned the basic power, energy and creativity of the free-market model, or the need it imposed for structural adjustment The growth that resulted was an essential pre-condition for remedying poverty; redistribution without growth was no strategy. But growth did not automatically redistribute adequately, and it was therefore a necessary but not sufficient condition of relieving poverty. The world had not yet securely established a shared set of concepts to partner free-market doctrine and channel its working, without destroying its benefits, towards outcomes in disadvantaged countries (or among disadvantaged elements within countries) socially and morally more acceptable. Perhaps by the same token, political institutions were scarcely equipped or apt to countervail the global influence of international business.

We recognised that ultimately the alleviation of poverty had to be achieved by action from within the countries concerned, not primarily by instruction or charity from outside. That was especially so where - as was widely if not indeed generally the case - the fundamental causes of disadvantage related as much to political and social conditions as to inherent lack of resources; the spectacular contrast between Singapore and Zaire/Congo was cited as illustration.

It was nevertheless evident that external public aid on a substantial scale to the poorer countries remained an essential element in any tolerable global strategy. We perceived a significant evolution in ideas on how this might most appropriately be shaped and delivered, in terms both of donor-recipient relationships and of targeting. Most participants accepted that donors must take a robust view of their right to influence how aid was spent - all aid was in some sense interference, and narrowly-rigid concepts of sovereignty were out of place. It was urged however that conditionality was an imperfect mechanism if it meant that donors imposed upon recipients objectives or activities which the latter did not truly espouse. There was much merit seen in placing increasing emphasis upon concepts of partnership, whereby aid was related to programmes genuinely proposed and embraced by the recipients to match their own concepts and realities in tackling poverty. And no voice was raised in general approval of aid that was tied to the purchase of goods or services from the donor.

The debt problem aside (more of this below) our debate seemed to prefer sector-focused to general economic aid. But there accompanied that preference an acknowledgement that if aid was related, whether through the partnership concept or otherwise, to particular programmes, there needed wherever possible to be concrete objectives operationally related to the relief of poverty and capable of being specifically defined, measured, monitored and audited to sustain recipient commitment and performance. It was moreover important to look for objectives which recognised that effective counter-poverty strategies policies could not be one-dimensional, and which did not pose excessive temptation to distort action or information in order to secure external approval. The time dimension would often call for awkward judgement; aid effort must be prepared to abandon lines of action that were simply not working (or recipients who were culpably failing to deliver what was promised) but equally must recognise that in the difficult circumstances of poor countries appraisal would need to take a patient view of the realistic pace of change.

The problem of dependable data particularly bore upon the assessment of educational progress, which was of cardinal importance in any strategy. This must underpin the building of indigenous capacity for self- sustaining economic growth and social advance, and donors should give it very high priority. It was especially important in relation to women - who, with children, were often the prime sufferers in poverty, especially rural poverty - in order to release their energies and speed salutary social change. The education of girls played a crucial part in the restraint of population growth and the reduction of child mortality.

We were nevertheless reminded that if education was to have its due effect, it must be of a kind truly relevant to the individual’s circumstances; it was not to be expected that children would be held back from the labour market for schooling that neither they nor their parents saw as enhancing their prospects. That point triggered a comment that developed countries must be very wary of imposing demands, as in relation to the absolute prohibition of child labour, which in practice would simply worsen conditions in poor countries (and might, whether deliberately or not, have protectionist effects). There were clearly awkward tensions here; but we were reminded that the industrial world should give particular priority to removing trade barriers in fields which, as being labour-intensive in poor countries, gave particular stimulus to productive employment there, and which might also reduce single-commodity dependence.

Land reform, it was recalled, could be a powerful instrument of improvement, freeing markets and stimulating efficiency. The technological revolution in agriculture might however, so some thought, have passed its peak of productivity improvement in some regions. Water supply might increasingly become a key constraint, and investment in irrigation might come to rank not far behind investment in the provision of clean water. It was evident that environmental concerns must - for direct economic as well as other reasons - weigh significantly in the design of strategies; and it was important to construct genuine local economic incentives to good environmental practice.

Clean water, it was emphasised, was a fundamental condition of combating disease and premature death. It would play a part, alongside education, in breaking the damaging cycles of stimulus to unsustainable population growth. That growth, though generally slowing, was still too fast in many countries, and family-planning campaigns could still make a beneficial contribution. We noted at the same time that if productive employment could be found, the age balance in developing countries, with high proportions of working age, could be an economic asset - and also that migration, historically a key instrument of adjustment, was severely constrained by the policies of most of the developed countries.

We paused upon the role and performance of state structures within the poorer countries. It would, so most of us believed, be a mistake to react so sharply to the errors of overblown and over-ambitious statism as to deny the state any substantial economic role; mixed models - as so successfully during Japan’s re-emergence - would generally serve best. But the achievement of competent governance was a widespread and often intractable problem, with corruption and over-large but underpaid public services interacting to drag down national performance. The record of external pressure in improving matters was so far not encouraging, sometimes perhaps through failure to recognise that in many settings it was more immediately important that governance should be effective in delivering what it intended than that it should conform fully with Western open democratic models. That said, it was evident that fair and dependable frameworks of law and taxation - and realistic systems of financial credit attuned to local circumstances - were needed in order to stimulate domestic investment (too much capital took refuge overseas) and to release the potential for successful enterprise. External actors could not create or impose such systems, but they could play a part with constructively-informed advice and engaged support.

We touched at several points upon the contribution of the international financial institutions (IFIs) such as the World Bank. Their proportionate role in global aid affairs was often overrated, whether for praise or blame; but they were of particular importance in the management of debt. The debt burden upon poor countries prompted vigorous interchange. In extreme cases the burden seemed clearly unconscionable; we were told, for example, that in Mozambique debt service absorbed twice, and in Ethiopia four times, the amount of public expenditure available for health and education combined. Sweeping demands for wholesale unconditional debt-forgiveness nevertheless found no supporters. Aside from the damage it would do to propensities for future lending, and from the unacceptability of writing off obligations without undertakings on what the beneficiaries would themselves thereafter do to improve their own conditions, it would clearly be unjust to release the perhaps-improvident from duties which others - sometimes indeed much poorer - had already conscientiously strained to fulfil. Alleviation was manifestly and urgently needed in many instances, but it needed to be undertaken on recognisably-fair principles - especially where the IFIs were involved, since it was hard for them to apply subjective-seeming discretionary decisions - and to be coupled to properly-verified policies for how the recipients were to exploit the relief granted. We speculated that criteria for relief might give special allowance for countries faced with re-building after armed conflict or major natural disaster.

At many points in our discussions we recalled the role played by non-governmental organisations, both external and indigenous. Their contribution might vary widely - for example, in many developing countries there was little civic culture to value NGOs, and significant risk of state capture. Transparency and accountability were as desirable in respect of NGOs as of governments. It was however beyond doubt that in principle a rich and necessary contribution could be made in advocacy, initiating, facilitating and monitoring; and governments should involve the NGO world and listen to its knowledge and experience.

We found little time to talk about the responsibilities of international business - perhaps too often cast as villain, since corporations could not ignore market realities. But we believed that their responsibilities did extend beyond the purely commercial. We wondered briefly whether more might be done by international consensus to reduce risks that developing states might compete in beggar-my-neighbour ways to attract mobile business by tax regimes that damagingly depressed public income, though we heard voices sceptical of the real weight such factors had in decisions about location.

It was evident, as we sought overview, that no single strategic model could fit the challenge of alleviating poverty in the diverse mix of national circumstances where it arose (though we did recognise that peace itself and basic law and order were cardinal needs everywhere - we had scarcely managed to do other than take this truth as given). We thought however that more might be done to identify success stories and disseminate awareness of them; and that the main external actors, whether national or international, might try harder to improve coordination - for example within the European Union - and to reduce overlap and rivalry. Undergirding all this, we were sure, there must remain a recognition that for reasons not just of moral concern but of long-term self-interest the developed world must not allow the aid impulse to falter.

This report reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman : Baroness Williams of Crosby PC
Director, Project Liberty, Harvard University


Dr Mushtaq Husain Khan
Lecturer in Economics, School of Oriental and African Studies, University of London

Mr Krishnan Srinivasan
Deputy Secretary General (Political), Commonwealth Secretariat

Dr Peter Boone
Lecturer in Economics, London School of Economics and Political Science
The Hon Robert K Rae QC
Partner, Goodman Phillips and Vineberg, Toronto; Premier of Ontario 1990-95

Dr Sally Kosgei
Permanent Secretary, Ministry of Foreign Affairs

Ms Mercedes Tira Andrei
Washington Correspondent, Business World (Manila)

Professor Robert H Cassen
International Development Centre, University of Oxford
Mr Julian Filochowski
Director, Catholic Fund for Overseas Development
Lord Judd of Portsea
Formerly Director of Oxfam and Voluntary Service Overseas
Professor Richard Layard
Professor of Economics, London School of Economics & Political Science
Professor Michael Lipton
Director, Poverty Research Unit, University of Sussex
Sir William Ryrie KCB
Vice Chairman, ING Baring Holdings Limited; formerly Executive Vice President and Chief Executive,
International Finance Corporation, World Bank
Professor John Sender
Head, Department of Economics, School of Oriental and African Studies
The Rt Hon Clare Short MP
Secretary of State for International Development
Professor Jack E Spence
Associate Fellow (lately Director of Studies), Royal Institute of Internal Affairs
Mr Charles Wookey
Assistant for Public Affairs to Cardinal Basil Hume, Archbishop of Westminster

Mr Mark Borthwick
Executive Director, US National Committee for Pacific Economic Cooperation
Professor James K Galbraith
Lyndon B Johnson School of Public Affairs, The University of Texas at Austin
Mr Pete C Garcia
President/CEO, Chicanos Por la Causa, Phoenix, Arizona
Mr Le Xuan Khoa
President, Southeast Asia Resource Action Center, Washington DC
Ms Cheryl G Sullivan
Former Executive Assistant for Family and Health Policy to Governor Evan Bayn and Secretary, Indian Family and Social Services Administration
Dr James T Sykes
Associate Director, Institute on Ageing, University of Wisconsin-Madison
Brigadier General Albert C Zapanta (retd)
Executive Vice President, United States-Mexico Chamber of Commerce, Washington D