International Economics and Wealth

Global Challenges excerpt from the 2010 State of the Future report

This section includes the actions that have been suggested to address the following challenge:

The Rich-Poor Gap

How can ethical economies be encouraged to help reduce the gap between rich and poor? [Challenge 7]


The Rich-Poor Gap

How can ethical economies be encouraged to help reduce the gap between rich and poor? [Challenge 7]

SUGGESTED ACTIONS TO ADDRESS THIS CHALLENGE WITH A RANGE OF VIEWS

These actions were distilled from suggestion made by the Millennium Project experts' panel. Following each action are comments and suggestions from Millennium Project participants through interviews, web page, and other collaborations. Generally, each paragraph comes from another source/participant; hence, there might be some inconsistencies in the views expressed.

7.1. NGOs with support from government should expand microcredit mechanisms with banks, other NGOs, and international financial institutions to accelerate development of small-scale businesses and their access to land, technology, and training with special attention to women.

The vast majority of microcredit needs are still not being met. Successful payers like the Grameen Bank in Bangladesh are now diversifying. Grameen Phone makes cellular telephones available to the poor and Grameen Energy makes photovoltaic cells available to the poor. This is a good example of ethical capitalism: It has more than 2.4 million borrowers, 95% of whom are women; Borrowers own 90% of the bank while the government of Bangladesh owns the remaining 10%.

Microcredit lending agencies need more funding to reach out to more poor people. The Grameen Bank has been searching for ways to secure portions of its portfolio and sell the securities on Wall Street.  If successful, this could be a new way of capitalizing on the microcredit practice.  In order to pass rigorous credit analysis to tap into the capital market, microcredit lending institutions need to be commercially viable.  The financial sector needs to pay more attention to developing countries' need for capital. The World Bank said that the developing countries' net long-term flows fell to the an estimated $196 billion in 2001, $65 billion below the previous year's level and $145 billion less than the peak in 1997($341 billion).

The 1997 Microcredit Summit’s goal of reaching 100 million of the poorest families with financial and business services by 2005 has helped to bring more attention and understanding of the importance of this issue <see http://www.microcreditsummit.org >.

According to the Microcredit summit campaign report, as of December 31, 2000, 1,567 microcredit institutions reported reaching 30,681,107 clients, 19,327,451 of whom were among the poorest when they took their first loan.  Eight hundred twenty-seven institutions submitted a 2001 Institutional Action Plan outlining their progress within these four core themes.  Assuming five persons per family, the 19.3 million poorest clients reached by the end of 2000 affected more than 95 million family members. In order to reach 100 million poorest by 2005, the Campaign needs to have a 38% growth rate per year from its starting point of 7.6 million poorest families at the end of 1997.  The growth from 13.8 million poorest clients at the end of 1999 to 19.3 million poorest clients at the end of 2000 represents a 40 percent growth over last year. Currently the growth rate averages just under 37 percent a year, one percentage point below the rate required. In 2001, however, the Campaign was able to verify data from 138 institutions, representing 12,752,645 poorest families or 66 percent of the total poorest reported.  This was a 76 percent increase in the number of institutions verified in 2000, says the report.

The World Bank and the regional banks should increase their activities in microcredit and involve microbusiness entrepreneurs in their programs.

Before new microcredit is provided on a wholesale basis to countries, conditions should be attached that improve democratic governance, training, and education.

Expand using local rather than international financial institutions if possible.

Taiwan reached economic success through small business, but Korea transformed its economy through larger enterprises.

Since the need for food increases with population and income, agricultural credit must increase proportionally so that farmers can buy fertilizer and/or other inputs. We are clearly going to need more food; just think what would happen if everybody in China simply increased their food intake by 100 calories.

Technical assistance in agriculture, processing industries, and management training must go along with credit.

Link technology with financial assistance.

7.2 Replace welfare attitude with entrepreneurial spirit.

Internet access in developing countries is beginning to stimulate entrepreneurial spirit.  Nevertheless, there will still be some need for welfare for those who cannot take care of themselves. It is not possible to immediately make this change in the developing world that has little entrepreneurial culture; hence, the public should be supported during the transition.

Development assistance will get the greatest impact when helping real entrepreneurs; non-entrepreneurs are doing the “development ceremony” of taking money without changing reality.

The entrepreneurship spirit should be applied to donor countries as well. Too often after the Cold War, aid allocations were driven by the geopolitical aims rather than by poverty-reduction goals. In an interview with the Wall Street Journal reporter, American philanthropist George Soros said "I drew a few conclusions what's wrong with the way aid has been given in the past. The first is that generally it serves the interests of the donors first and the needs of the recipient second.

The main cause of misery and poverty in the world is bad government. Given the sovereignty of states, it's very difficult to impose, from the outside, conditions. But offering incentives, encouragement, empowerment for countries that are moving in the right direction, that have government that are seeking to improve conditions, is one way to helping them.

7.3 Governments and international organizations should create and implement a “Global Partnership for Development”, as a new kind of global “Marshall Plan” with collaboration between high-income countries and those with less industrial and entrepreneurial cultures.

This has become the 8th UN Millennium Development Goal accepted by 189 Member Countries.
A study led by the Central European Node of the Millennium Project has examined implementation strategies available in the Chapter 8.3 in this CD.

Such a partnership is the basis for the Monterrey Consensus and should be the new role for reorganized Bretton Woods Organizations in cooperation with the Organization for Economic Cooperation and Development (OECD), WTO and UN organizations. To be powerful, the plan has to be based on more than humanitarian instincts. This effort should be seen by poorer countries to be in their interests, yielding increased stability and growing markets.

Foreign aid has been discredited as an instrument of the Cold War, and as donor governments are cutting domestic spending, how can they increase foreign spending? Increase international trade and investment instead.

International measures should support national policy and action for full employment, raise skill and education levels, and prevent the marginalization of the least developed countries.

Include a new social contract between business and government.

The previous Marshall Plan worked because Germany and Japan had an entrepreneurial and industrial culture that could manage the inflow of capital; poorer regions in Africa do not have this culture.... The plan has to be flexible for different conditions in different countries, must focus on the poor majority, and should manage boundless appetite versus restricted resources. The plan should be star by establishing of a “brain center,” something like a Club of Rome. Then the plan should be adopted by the relevant implementing organizations, such as the UN, NGOs, etc.

International resources should be allocated by the plan, and a mechanism to distribute funds and regulate implementation needs to be established to keep organized crime and monopolies from capturing these resources. UNDP should play a key role.

Since the rich have more to lose than the poor if the gap leads to instability and migrations to richer areas, the rich should see this plan as insurance. Both the rich and the poor have to change their minds to make this work: the rich have to be serious about investing in the development of culture in poorer areas and the poor have to be willing to change. International organizations should be active in preparing the intellectual background for implementation of this global plan.... Historically, the Marshall Plan was only for a couple of countries and targeted to limited problems; it was not conceived as a global plan. This action would be more successful if it targeted a limited number of countries.

7.4 Scrutinize and encourage improvement of ethical standards in business by facilitating global dialogues, creating incentives for private sector investment into the common good (environmental protection, education, etc.) and conducting studies on ethics including the ethical implications of unbridled capitalism.

Transparency International is trying to do this. In some cases, a solid campaign of public education can be more effective than laws, e.g., cigarette smoking public education in the U.S. was very successful. Extend results to the wider educational systems.

In a knowledge-based society ethics will play a new role in business relationships. It is very important to analyze the evolution of ethics and there should be a global study with input from scientists of different nations, religions, and cultures. This exploration should be coordinated by UNESCO.

Ethical standards cannot be developed by dialogues and studies along; public pressure can help to build them. Growing stakeholder power will do this, which will be more effective than a regime imposed by government. Incentives form the final stage; education is the first stage. Balance trade-offs between incentives and sanctions.

Socially responsible investing in the USA alone now stands at $1.3 trillion of assets managed with “clean”, “green” and often ethical criteria. Many such funds have out-performed the Standard & Poors Index since 1990.

7.5 Governments of lower income countries should include entrepreneurial skills and business math in their public education curricula, with some assistance from NGOs and international organizations.

Much training of entrepreneurs has been done, but we have not put the skills in the public curriculum yet; we will think about doing that. This is a good idea and would be another step forward.

Government should support this but not lead; government leadership comes first by agreeing to increase economic growth. In Latin America and the Caribbean, growth should average 6%, but it is only averaging 3%, which is insufficient progress to ensure a more stable future and to reduce poverty in a sustainable manner. Economic growth by entrepreneurs creates jobs.

Include technological change as part of this.

Math skills should also be taught to small business entrepreneurs and middle management.

Middle- and high-income countries need this too. Include interaction/communications between rich and poor, languages, and global ethics in the curriculum.

Some countries are already doing this.

7.6 Governments, UN organizations, NGOs, and telecommunications corporations should collaborate to bring low-cost computer communications technologies to poorer countries.

The World Bank has finally taken this on as a key to development policy. NGO’s like VITA and Greenstar are creating satellite transceivers run by solar panels to connect rural areas to Internet for development information and Internet-based businesses without being connected to telephone and electricity grids.

While my son sees information technology as "the way to go," it is clearly the way to communicate; it is a significant means to enhance the education of all our people; and it enables them to be a participant in what is happening in the world. This, in part, is also the reason for our support of the SIDSNET. In particular, I welcome the offer of Japan to establish a dedicated IT programme in Okinawa and appreciate the resources they have earmarked for that purpose. The offer and the mechanics for its operation is deserving of our thoughtful consideration. --- His Royal Highness Prince Ulukalala-Lavaka- Ata, Honourable Prime Minister of The Kingdom of Tonga.

Governments and UN organizations should accelerate programs that arrange for the provision of low-cost computer communications equipment and training in schools, libraries, business, and hospitals in low-income areas.

UNDP’s informatics programs in Africa teach people how to use the Internet. Provision of low-cost tools is the next step. Encourage the private sector to help also.

Make sure that the equipment gets into schools and that more is spent for education.

Telecommunications corporations, in collaboration with NGOs, should create low-cost, hand-held computers with direct satellite access for low-income regions to access educational software and telephony, with elementary literacy as the first priority.

It will spread rapidly and cut across systems, like the hand calculator did.

Make sure all schools can get access, not just the poor ones.

Create a mentoring system to make it work.

This action is necessary for a healthy global economy.

Make sure it is not just for the elite.

7.7 Encourage employee ownership, e.g. Employee Stock Ownership Plan (ESOP) that makes corporate shares available to employees.

It is a necessary action, because the role of employees is changing. This idea is realized best of all in Japan and it will be helpful to study their experience.

This will happen when there is a change in stakeholdership.

However, first the economic infrastructures of the developing world must be fixed.  In many Latin American countries, for example, there is no personal income tax because a) large parts of the population do not make enough income to be taxed and b) there are no tax collection standards in the governmental systems.  Similar problems exist with the financial markets of these countries.  No one really knows what stock is or how to trade it, and the trading systems that do exist have far too much time-data lag.  This step, while necessary, is far more complicated than it appears at first glance.

7.8 Governments and development organizations should create toll-free numbers and computer networks for people from low-income countries who now live in high-income countries to volunteer some time to participate in the development of their original country via telecommunications.

The Republic of Cape Verde is a small set of islands of the west coast of Africa is developing “A Tele-Nation Like No Other” at <www.capeverdeusaembassy.org>.  This web site called Virtual Cape Verdi is designed to facilitate innovative use of the Internet and other ICT in government, business, and society in order to share information and promote sustainable development.

Geekcorps < www.geekcorps.org > is a non-profit (501)(c)(3) organization that connects computer volunteers from the high-tech world with small businesses in emerging nations. Geekcorps and its partner businesses in developing nations evaluate technical needs. Then Geekcorps selects volunteers with the expertise to meet those needs. Geekcorps trains its volunteers to teach their skills to people from different backgrounds.

By 2020 there will be around 4 billion Netizens. Many of these could become tele-citizens.

The UN Secretary General in Millennium Report called for such high-tech volunteers and UNDP and the UN Volunteers is beginning to create this action. This could be the next generation of our work.

Good if very low-cost equipment is available to the developing country.

A very good idea to counter the “brain drain”.

Make it clearer that this is not simply job matching to get people to come home.

According to the World Economic Forum, industrialized countries, with only 15% of the world's population, are home to 88% of all Internet users. Finland alone has more Internet users than the whole of Latin America. When national boundaries disappear, can personal linkages become stronger?

7.9 Allow employees access to their own company’s Intranet to see elements of the planning system, work flow, production indicators, etc. so that they can more intelligently participate in the business.

Transparency is very important.  Fairness and free flow of information go together.

Participatory management has to be learnt and practiced.

7.10 Governments, with assistance from UN organizations, should encourage third world countries to establish policies that limit their “brain drain.”

Brain drain from China has bottomed out and may be reversing.  As global trends in democratization and opening of economic systems continue the brain drain could diminish enough that the return of educated 3W citizens could become a new force to help close the development gap.

With global communications, advanced work like software development in India can be imported to create work that is worth doing and attractive.

Action 7.5 can help.

NDP’s governance programs give financial incentives to reverse the brain drain.

This requires political changes in Africa.

Handle with extreme caution.

Corporations and NGOs can help.

This is not a policy; it is an economic issue.

Include capital flight.

Brain drain is an old and weak concept; social mobility is important because it gives people the flexibility and freedom to come and go in the new global economy. MNCs are helping to bring much-needed capital and jobs into poorer countries. They should be actively aided by the UN and its member states.

7.11 Governments, with advice from international organizations, should permit the IMF to issue new Special Drawing Rights (SDRs) to reduce developing countries debt.

The proposal for a special issue of SDRs has already been authorized by the IMF and approved by the 72% of the membership; all it needs is the approval of the US Congress to attain the 85% supermajority that is necessary to make the issue effective.

If the allocation of these resources are controlled and monitored by the independent body, independent form both donor and recipient countries; they can be efficiently channeled into pro-poor projects.

7.12 International organizations and governments should establish means by which deeply indebted countries could declare bankruptcy or receive debt cancellation.

The joint IMF-Bank program known as the Heavily Indebted Poor Countries Initiative (HIPC) offers some of the world's poorest countries a chance to reduce the debt they owe to international financial institutions and foreign governments provided they implement IMF-mandated economic reforms.  To date 26 countries are receiving some form of debt relief: Benin, Bolivia, Burkina Faso, Cameroon, Chad, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Ethiopia, Honduras, Madagascar, Mali, Malawi, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Sierra Leone, Senegal, Tanzania, Uganda and Zambia. Total committed assistance is estimated at $42 billion (in nominal terms).

According to the World Bank and IMF progress report, the progress is delayed more than expected. Since September 2001, only two countries (Mozambique and Tanzania) have reached their completion points. Of the five countries that were expected to reach their completion points in late 2001, four have yet to do so.

However, the challenge of achieving and maintaining external debt sustainability has become more difficult with the deterioration of the global environment. According to the EURODAD report, adverse terms of trade variations due to the decline in the commodity prices induced and average loss of nearly 15% of their export earnings. Again, the report pointed out that less optimistic scenarios about the future commodity exports make it clear that many HIPCs face the risk of seeing their NPV ratios exceed 200% by 2010, instead of being below the threshold level of 150% < www.eurodad.org >.

Apparently, without sharp rebound of the commodity prices, more resources are needed to boost the HIPC initiatives. Critics of the HIPC Initiative are vouching for 100% debt cancellation. It would, however, be unfair to completely cancel the debts of some countries, while those that have borrowed less in the past (but are equally poor) receive no relief.

Recently, USA proposed that 50 percent of the resources of the International Development Association (IDA), the World Bank's fund for concessional loans to the world's poorest countries, be distributed as grants, not concessional loans. At the same time, the administration wants to tie the US's contributions to the future effectiveness of IDA programmes. However, European Union argues that the proposal would jeopardize the Bank's long-term resources for development. The EU is presumed to lack confidence about US-commitment to the long-term viability of the Bretton Woods Institutions.

In April 2002, the IMF published "A New approach to Sovereign Debt Restructuring". The absence of a predictable, orderly and rapid process for restructuring the debts of sovereigns that are implementing appropriate policies has a number of countries and it can lead to a situation with unsustainable debts to delay seeking a restructuring, draining its reserves and leaving the debtor and the majority of its creditors worse off, explains the IMF.

At present, there are 2 approaches; the newest approach is a statutory framework, based on an amendment of the Articles of the IMF, which can facilitate an agreement between a sovereign debtor and its creditors. In this new approach, creditors are be able to decide by a qualified majority on the terms of a restructuring deal and make these terms legally binding on all creditors. A contractual approach on the other hand seeks to achieve similar results through the widespread inclusion of collective action clauses (CAC) in bonds and other debt contracts since there is a wide range of gaps in the positions between debtor countries and creditor countries. The international consensus will take time.

Most recently, the G8 Summit in London agreed to a substantial debt cancellation for the 18 poorest nations of the world. With the US and other rich nations pitching in $16.7 billion over the next 10 years, a total of $40 billion in debt is now being written off. In total, 14 African and 4 Latin American countries with 296 million people will be debt-free. The IMF is also contributing $6 billion from its existing resources, and the G8 has also promised to fully cover billions in loans from the selected countries to the World Bank and the African Development Bank. The basis for selection also represents a rewards-based system, focusing on countries which have shown their willingness to battle corruption and which exhibit transparency. However, because of this, major countries such as Nigeria and Congo are being denied because of concerns of government corruption and instability. Even still, the G8 agenda is seen as a substantial benefit to countries which can now divert funds previously reserved for debts to paying for schoolteachers, infrastructure changes, and domestic poverty alleviation. The next round of G8 talks is scheduled for July in Scotland, and will focus further on trade issues with respect to poverty.

7.13 Governments, with some leadership from international organizations, should increase efforts to promote free trade among developed and developing countries.

According to the World Bank report, the export share of the 49 least developed countries shrank from 3 percent in the 1950s to around 0.5 percent in the early 1980s, and has hovered around this very low rate over the last 2 decades.  Despite the existing preferential access schemes for developing countries' exports, the world's poor face tariffs that are more than twice as high as the non-poor face. Besides the tariffs, subsidies for agriculture alone reaches $ 345 billion, which is about 7 times the amount of official development aid. According to the Oxfam, if Africa, East Asia, South Asia and Latin America were each to increase their share of world exports by one percent, the resulting gains in income could lift 128 million people out of poverty. 

Furthermore, Oxfam contends that the EU and the United States are exporting at prices less than two-thirds of the costs of production. These subsidized exports from rich countries are driving down prices for exports from developing countries, and devastating the prospects for smallholder agriculture.

Therefore, in order to make trade work, developing countries need better market access for products of interest to them and support in expanding capacity. The agreement reached at the Fourth World Trade Organization (WTO) Ministerial Conference in Doha (November 2001) to launch a new round of trade negotiations creates the expectation that the international trading system will be significantly improved.

However, there is another side to the issue of agricultural subsidies in the United States and the EU: domestic and security concerns.  Both regions have traditionally strong and vocal agricultural sectors and strong civil societies.  Politicians do not want to make large numbers of their voters unhappy by cutting their income drastically and/or forcing them to close down their s subsidies.  The security part comes from the idea that it is a bad idea for one nation to rely on another for food if the situation can be avoided.  No one likes having to import food, so the domestic farmers have to be protected.

Before the time consuming result of the development round, cooperative policies can alleviate the restriction on the trade of the poor. The recent European Union's "Everything But Arms" initiative mitigates the problems by removing barriers on exports from the least developed countries. A study (Hoekman et al, 2001) said that even if USA, Japan, EU, Canada were to grant LDCs duty free access for only tariff peak items, non-oil LDC exports would increase by an estimated 11 percent, while other developing countries' exports would decline only marginally by an estimated 0.1 percent.

Technical assistance to the least developed countries is important as well. In this context, on 11 March 2002, World Trade Organization member governments pledged CHF 30 million for the new Global Trust Fund that will boost technical assistance and help developing countries to build capacity and participate fully in the Doha Development Agenda.

7.14 International organizations and governments should create”New Global Architecture” to reduce volatility of currency markets – possibly a “Global Securities and Exchange Commission.”

Currency volatility is a big obstacle to developing countries ability to fight poverty. The Asian crises reinforced the lesson that even gains made through many years of rapid and sustained growth can be quickly reversed. With too many crises since 1997, net private capital flows dropped from an average of $154 billion per year from 1992 through 1997 to $50 billion per year from 1998 through 2000, said John B. Taylor, Undersecretary of the U.S. Treasury. Developing countries have had to put increasing amounts aside in reserves with low interest rates as insurance against such instability over the last 25 years.

One method that is being used now is the “fixing” of currencies to larger, more stable currencies, such as the dollar, yen, and euro.  Poorer countries are often fixing their currencies to that of the nation or region that they trade the most with.  The realization that economic stability is more important than economic independence is starting to take hold in many places.

The decrease in volatility can boost trade and growth, eventually, benefiting all. The Bretton Woods institutions should take the leadership and responsibility for this. If not, then a new international organization will be needed for monitoring capital flows and policy. This should be the major focus for the IMF if it is reorganized.

Opinions are divided on issuing tax on currency transactions: Recently, the tax on currency transactions became a new resource for development although there is no strong support for this. A study calculates that a turnover tax of 0.01 % to 0.1 % would generate between $20 billion and $ 200 billion a year (22 March 2002, Financial Times). The IMF argues that government transparency and good fiscal management will reduce currency instability.

Support the use of a fee-based system for central banks that makes currency transactions transparent with online prices, and provide information on counter parties and purposes of trades so as to reduce speculation.

Similarly to the taxation on the currency transactions, some groups advocate the tax on the military Tobin tax, levied on every cross-border military deal. War and conflict is major source of the poverty. According to the United Nations, small arms fueled 46 of the 49 largest world conflicts of the last decade.

7.15 Increase research into alternative progress indicators that reflect qualitative factors such as social and environmental issues.

The State of the Future Index (SOFI) is beginning to do this - See Chapter 2 on SOFI in this State of the Future.

Replace "increase research" with "start incorporating."

It is an important action but we should add new indicators, which would reflect social, environmental, and living standard issues. As one measurement of progress, the Integral Indicator of Living Standard includes three indicators: life expectancy, literacy, and GDP per population. But it is not enough. We should also add an indicator that reflects the health of the population (not only life expectancy), and cultural richness or spiritual satisfaction. An international program for this proposal should be developed…. Should be specific to local situation and should be created by local think tanks. Examples are the UN’s Human Development Index (HDI) and the World Bank’s Wealth Index.

7.16 Expand international programs of retraining to help avoid technological and managerial obsolescence.

It is not a bad action, but sometimes these programs lack cultural sensitivity as if the Western mode was the only model.

They are helpful for international relations, but absolutely useless at an internal level. The programs could be more efficient if the training courses are prepared by an international panel.

Such training programs are increasingly culturally sensitive and have matured from the earlier technical assistance and training programs.

7.17 Observe standard central bank rules on the issuance of currency to avoid inflation.

This moderates problems but does not eliminate them because it gives governments and commercial banks the opportunity of embezzlement. The central banks work through commercial banks that are profit-oriented rather than service-oriented. Thus it enriches a privileged elite at the expense of the ordinary citizen. The issuance of debt-based currency promotes consumerism and prevents sustainable development.

An alternative Foreign Exchange facility has been proposed, which would be operated as a public utility, allowing central banks and the UN to regulate speculators.

7.18 To reduce the technological gap, developing countries should be open to trade and to foreign direct investment.

Trade must not undermine domestic or international environmental standards, must encourage environmental progress, and must be based on democratic procedures.

The Internet is globalization on steroids. It will boost efficiency and enhance market integration domestically and internationally, particularly in developing countries that are most disadvantaged by poor access to information. While the Internet should enhance global growth, it also brings increased danger of economic marginalization to countries that cannot access it effectively.

Taking advantage of electronic commerce requires policies similar to those needed to capitalize on the opportunities for trade: improved international coordination, for example in ensuring interoperability of communications technology and confronting challenges to domestic tax and financial systems; an open economy promoting competition and diffusion of Internet technologies; and efficient social and infrastructure services, in particular a competitive telecommunications sector and a well-educated labor force.

7.19 Richer countries should reduce their trade barriers to poorer countries.

This should be mutual between rich and poor countries.

High trade barriers imposed by industrial countries on agriculture and processed food imports, along with agricultural subsidies, have contributed to the relatively poor performance of developing countries’ exports. These trade barriers have particularly hurt the poorest countries, which because they also struggle with weak trade-related infrastructure such as transport and communications, and a lack of skilled manpower, find their options to diversify into other exports with greater potential for growth severely limited.

The trade barriers maintained by the rich countries could endanger the world trade order under the favorable trade circumstances for the rich countries; According to Oxfam, while the price of coffee, one of major products of the LDCs, have fallen by 70 percent since 1997 costing some $8 billion loss to the exporters, developing countries will lose approximately $40 billion a year in the form of increased license payments to Northern-based TNCs, with the USA capturing around one-half of the total.

One possible solution to this problem is the formation and growth of free-trade areas.  They have exploded in numbers and depth in the years since the end of the Cold War.  They are especially advantageous to members when they include both developed and developing countries.  The developing nations get preferential trading terms and more chances for economic development by MNCs.  Richer countries get access to cheaper labor and lower prices on low-tech goods.  Certain forces within each type of society, however, have lost due to the rise in popularity of free-trade areas.

ADDITIONAL ACTIONS

Millennium Project participants suggested these actions later on through interviews, Internet correspondence, and/or continuous updating of the Global Challenges.

The efforts to define what "ethical markets" mean are very important e.g., UNDP Human Development Report 1999, but was very vague. The suggestions "to formulate the codex of behavior of transnational corporations" is needed but is unrealistic.

Poor people have to be fully involved in the process of growth and development and governments should make a macro-policy of partnerships between the rich and poor.

Outside commissions should supervise technical and managerial assistance for the privatization of state-owned enterprises.

Fund programs that promote constructive uses of leisure time.

Increase participatory processes between labor, management, and consumers.

Explore use of public voting via Internet on potential corporate decisions of global importance.

Seek and apply effective modern qualitative management approaches that are emerging.

International organizations, with some leadership from governments, should study the feasibility of a global tax structure that is unbiased between rich countries and poor ones. The IMF and the World Bank Group are studying this now, but it may take decades to implement the recommen¬dations. Study desirability first, then feasibility. Include both agrarian and tax reforms. For example, the agrarian reforms the US forced on Korea and Japan accelerated growth, as did locally initiated agrarian reforms in Taiwan.

Get the world to agree that economic growth is the common goal.

Human development is the end, economic growth a means. The strength of the links between human development and economic growth depend on investments in health, nutrition, education, skill training, and research and development, as well as accessible opportunities for people to contribute to economic development through social, political, and economic participation.

There is consensus about how to fight poverty [see Pursuit of Sustainable Poverty Reduction by IDA or Poverty Reduction and the World Bank by IBRD].

Get multilateral organizations to support governments in getting the world to understand this.... As yet, there is no consensus among economists about how to create growth.

Poverty can’t be eradicated merely by boosting income. It’ll also take a broad expansion of basic human capabilities and the productive uses of those capabilities.

We need to acknowledge this problem and go beyond discussing data.

Discuss macro policies as well as micro policies.

Increase competition and liberalize trade regulations.

Since it is not possible for all to have the living standards of the rich, we have to create a new approach to this problem - a new view of evolution, including new definitions of wealth.

Increase local participation in development decisions, as Shrouk is doing in Egypt.

Give more attention to solving problems locally, with local strategies, tactics, and resources, rather than just seeing international actions as the solution to problems.

The focus of development strategy should be reducing debt and promoting trade.

Poor countries have to sort out their own problems; the role of international agencies should be that of enablers. The techniques of fast growth are now well established, based on the Southeast Asian experience, which is now being followed in South America. As a result, the problems of these countries are declining, even in Africa. The persisting problems are cleptocrats, rulers who plunder their countries’ treasuries; Nigeria does not really have the foreign debt it is supposed to, but the balancing entry is in the form of Swiss bank accounts and real estate in London.

Encourage juridical thinking that can be transformed into pertinent legislative formulation within existing international instruments that work on the protection of human rights.

Although the perceived gap in living standards is exacerbated by improving global communications, these same telecommunications capabilities can play a role in addressing this issue. For example, telemedicine and tele-education can significantly help reduce the actual gap in living standards.

China’s growing economic success came from 1) preferential tax policies and movement of talented persons to more productive locations; 2) capital investment with some preferential policies for the poorer areas; 3) integration and communication of experiences; and 4) organization of resources and techniques into enterprise groups.

Eliminating the gap between rich and poor countries cannot be done by redistribution of resources, but by completing the organization of their economies and educational systems, which is now underway.

Structure and quality of growth demand more attention. A World Bank study of 192 countries concluded that only 16% of growth is explained by physical capital, while 20% comes from natural capital. But no less than 64% can be attributed to human and social capital.

Set government policies in Latin America and the Caribbean to achieve 6% annual economic growth; spend more on education, health, and women.

There need be no conflict between growth and equity. Japan and Sweden have combined both.

However, focusing on equity alone would reduce incentive to improve growth.

Increased income, taxed from the market, should pay social expenses to protect fundamental social and economic rights in order to protect human dignity.... Study how to deal with tax evasion in developing countries.

Develop new concepts of redistribution.

To prevent further international financial crises, a task force of the UN Executive Committee on Economic and Social Affairs recommended: a) improved consistency of macroeconomic policies at the global level; b) reforms of the IMF aimed at providing adequate international liquidity in times of crisis; c) the adoption of codes of conduct, improved information, and financial supervision and regulation at both national and international levels; d) the preservation of autonomy for developing and transitional economies with regard to capital account matters; e) the incorporation of internationally sanctioned standstill provisions into international lending; and f) the design of a network of regional and sub regional organizations to support monetary and financial management.

Base currencies on assets and issue them only through non-profit institutions.

Establish an international code of ethics and national certification programs for professional bankers.

Using face-to-face networking, Internet banks could be set up to lend to ethical/sustainable projects as a kind of competition with existing banks.

Microcredit and ethical capitalism can extend beyond community to positively impact a nation’s economy.

There should be linkage between traditional knowledge and technology to the mainstream or world state of knowledge and technology.

Clarify ethical issues linked to traditional system.

In the global economy of e-commerce, small and medium-size businesses in developing countries are able to compete more effectively.

To prevent investors’ panic such as the one that occurred in the Asian financial crisis in 1998, governments have to provide more information about the economic circumstances and banking systems.

Former UNDP Administrator, Gus Speth believes the new Global Coding System with its global product code standards offers a democratic access to the global economy.

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