Poverty, Iinequality and Ddevelopment: Is the International Model Working?
Stressa near Milan (Italy) by Ms Benazir Bhutto
22 October 2004
I compliment President Gorbachev for focussing on the issue of poverty at this session of the World Political Forum.
We are gathered here today to seek change by challenging a human history that has always known poverty and suffering. Poverty is particularly distressing in that it exists side by side with enormous wealth.
We are familiar with the bad news. By the year 2020, of the world’s population of 8 billion people, six and a half billion will live in the developing world. Three billion will struggle, either below or above subsistence. The majority of the marginalized will live in urban slums with twenty big cities having populations exceeding ten million. These cities will be stuffed to the brim with unemployment, crime, delinquency and disease. My city of Karachi with Lagos, New Delhi, Dhaka, Nairobi and others will be typical crucibles of such settlements. Already in military run Pakistan we suffer from a 40 % poverty index. Another 30 % live on less than two dollars a day.
Meanwhile five Nations account for almost 60% of the World’s GNP. While the income of the world’s 20% rich increases, the income of the world’s fifty percent poor falls. The combined income of 300 individual billionaires equals the income of 2.7 billion persons representing 45 % of the world’s population. One report found that 20 years ago CEOS made an average of 40 times more than factory workers. Last year it was 400 times more and it is now climbing to a multiple of 500. This is not the way the world was supposed to be. The peace divided that was to come with the collapse of the bi-polar world never came.
Today debt repayment far exceeds aid. In 2000 lower-income countries paid creditors more than $100 billion dollars, triple received in aid grants that year. From 1992 to 2000, debt repayments as a share of a poor country’s earnings rose from 14 to 19 % in repayment of principal loan. Interest repayment rose from 8% to 10%.
I believe the incidence of poverty is directly related to issues of governance.
There is a school of thought that believes the alleviation of poverty lies in authoritarianism. They point to the Asian tigers of the twentieth century.
I do not subscribe to this view. Indonesia, Philippines and Pakistan are three countries that had prolonged periods of authoritarianism. Authoritarianism failed to provide a golden era of economic prosperity. Instead it made the transition to democracy, accountability and transparency all the more difficult. Authoritarianism left a legacy of weak political institutions, inexperienced political leadership, a crony capitalist class, powerful militaries, ruthless intelligence agencies, violent ethnic and sectarian groups, distorted press, disempowered citizens and gross poverty. Significantly, authoritarianism in Indonesia, Philippines, Pakistan (as well as other countries) also created a culture predicated on the use of force. It is unsurprising that terrorism emerged in countries where power flowed from force rather than the majesty of law.
In Pakistan debt servicing and military expenditure consumed all income. We had to borrow to spend on health and education sinking deeper into the debt trap. In 2001 Pakistan joined the war against terror. It’s debts were re-scheduled. Geo-strategic currents bought us a temporary reprieve. But that reprieve is not being used to reverse the fundamental fault-lines of our economy. This brings me to a major point—governance. Countries that spend huge amounts on militaries and have non-democratic systems can not hope to combat poverty. Countries with dictatorship or authoritarian rule tend to run up huge debts.
Often governments and financial institutions loan huge amounts to dictators. This is done for political or strategic reasons. A blind eye is turned towards how this money is spent or mis-spent. However, as soon as the short-term goals are met and democracy is restored, financial institutions come down hard pushing for fiscal responsibility.
As in the case of Pakistan, when the dictator falls in the dust, the new democratic government is forced to de-accelerate the economy through harsh macro-management. Reducing budget deficits quickly puts unrelenting pressure on popular governments. It destabilises democracy. It allows for powerful, entrenched establishments to re-emerge in the form of autocracy or outright dictatorship. The system of governance is hit and the malaise of poverty increases.
The end result is that dictatorships have fuller treasuries than democrats. But the dictators treasuries are not spent on poverty alleviation.
Some times the periods between democracy and authoritarian rule is too short for the public to tell the difference in the quality of life. The masses can then become disillusioned with democracy. Dictatorial forces indulge in propaganda against democrats. Disillusioned from democracy and dictatorship, the dangers of the radicalisation of the masses. For example, in Pakistan, parties that are sympathetic to the Taliban and Al-Qaeda claim that neither democracy nor military dictatorship works and that theocratic rule should, “be given a chance”. Thus when people feel alienated from the democratic model of development, they can choose another system that is even worse.
Despite the skewered position, democrats still do better as Pakistan’s experience shows. Growth, investment and revenue rates are all better under democrats.
In its Millennium Declaration, the United Nations General Assembly set the goal promised to halve the number of people in the world without access to drinkable water by 2015 as well as other laudable goals. The question is: how to meet these promises?
I would identify three areas that can alleviate poverty:
First democratic political systems of national governance that the international community could support and encourage.
Second, economic support by the international community.
Third equitable international trading practices.
In dealing with the first point, namely, systems of governance, I would stress that democracy and development go hand in hand. Certainly this is the experience of the people of Pakistan. Democracy has many facets. It is the holding of fair and impartial elections, the smooth transition of power, an independent judiciary, an impartial investigative process, a well trained and a neutral police force. Democracies need peaceful borders to cut down on military expenditures. Diversion of financial resources to women’s development, literacy, increase in water availability, health, a crime free society is critical to internal stability. In the absence of such factors, there is the danger of failing states, mafias, ethnic strife and violence amidst a sea of poverty.
The second factor is an international commitment to poverty alleviation. The G-8 once discussed committing 0.7 percent of its GNP to poverty alleviation. Other measures were tabled including a tax on military sales. The sins of the father can not be visited on the children. Some form of international commitment towards debt relief is needed in the battle to fight hunger to reduce poverty to meet the millennium development goals.
The third factor is balancing free trade with a moral imperative. We need to work together to balance free trade with a social safety net. We need to focus on how the market changes and train a work force to meet the markets requirements.
If we are able to tackle these three areas, it is my firm belief that history will no longer have to bear mute testimony to the ravages of poverty.
It is time the international community took heed of these trends so that inequality as a mode of economic, class and gender experience slows its headlong march into local conflict and global fault-lines.
