THE TIMES (UK): Only the rich west can save the poor: “Multinational businesses, from McDonald’s to Shell, are seen primarily as exploiters.”: Friday 8 July 2005

By Graham Searjeant, Financial Editor

AHEAD of the G8 meeting in Scotland, campaigners against poverty in Africa conducted a great populist moral campaign to make poverty history. They aimed to push issues that are usually peripheral for voters in developed countries up near the top of their agenda. They have succeeded, at least for the G8 meeting and the Doha trade talks later in the year. Less clear, as this week’s debate in The Times has shown, are the long-term solutions that will command popular support.

In Scotland, wreckers from anti-capitalist and anti-globalisation groups have painted the leaders who were being lobbied as the villains, not as the power brokers who could help to raise incomes, create economic infrastructure and fight disease in poor countries. For the terrorists who struck in London yesterday, progress, peace and order are themselves the enemy, wherever they are to be found.

All these groups have essentially negative motives. Unlike, say Bob Geldof, they see profitable business, trade, financial intermediaries and markets as causes of poverty or disruption.

Some fellow-travellers in non-governmental organisations are not much better. They suggest that the poor should be helped by redistributing income and wealth, taking from rich countries’ workers and taxpayers to give to the poor.

More disturbing than these small groups, however, is the army of well-meaning, intelligent people who want peace, progress and prosperity but see Western business as the problem rather than the solution. For them, the unfairness of trade and its revolutionary nature matter more than its beneficial effects. Financial markets are parasitical. Multinational businesses, from McDonald’s to Shell, are seen primarily as exploiters. To some extent, it is assumed, our standard of living is built at the expense of Africa and the poorer parts of Asia and of Latin America.

They could hardly be more wrong. Debt cancellation can help, but only in the same way as bankruptcy, by accepting failure. It permits a new start at the cost of a loss of ability to raise new capital.

Aid too can help, if it is used to free people from the need to spend their day searching for food, or coping with curable disease: if it is used for education and community health, for helping to build financial infrastructure, such as savings and banking facilities, as well as physical infrastructure, such as telecommunications, roads, railways, port facilities and power networks. These can, however, only facilitate economic development. Only business can create jobs that pay regular cash incomes or contracts on which farmers and manufacturers can build secure operations. Only international trade can allow poor countries to exploit their resources and comparative advantages, such as ingenuity and cheap labour in China, mass intellectual skills in India and productive land in much of sub-Saharan Africa.

The keys to creating good jobs and raising incomes are demand from Western companies and consumers and investment and contracts from multinational companies. These are the most effective drivers of economic growth and growth is the driver for creating levels of prosperity that make development a better option than war and employment a better way to feed a family than theft or corruption.

Prosperity in the main industrial countries is the essential prerequisite for growth in poorer countries. Anti-growth policies preserve poverty. Just because trade terms are sometimes unfair to poorer countries and their economies are more fragile, recession in the West creates more misery in the South. Trade rules need reforming to stop the West damaging poor countries, for instance by subsidising farm exports. But trade systems that create Western unemployment will slow development in poor countries too.

Policies to combat the causes of global warming should be developed in that context. Plans to limit and reduce carbon dioxide emissions need to be developed, as America now accepts, in ways that recognise that economies and consumers need more energy to grow and by developing alternative low-cost sources of energy so as not to reduce growth or damage Western industry. Much of Africa has the capacity to benefit from cheap solar energy and bio fuels if these are made top research priorities.

Multinationals provide the readiest supply of permanent new capital and expertise to poor countries that lack their own. Through natural selection, they have become the most potent agents for investment and technology transfer. After the Second World War World War US multinationals provided jobs with above-average wages in Britain. We learnt much from them. The same now applies in Africa and other poor zones.

Local governments fear that multinationals are out of their control. But multinationals are much more accountable in the West. Groups that are found to be buying goods from sweatshops in Asia where employees are badly treated or inflict or condone environmental degradation to extract oil, will suffer at the hands of Western consumers until they mend their ways. Informed consumers can enforce decent standards.

The poor can win only if the West and business win too.

graham.searjeant@thetimes.co.uk 

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