How North and South could get along

Press, 23 February 1980, Page 14

How North and South could get along

From the “Economist,” Loudon

In the last few years the advertised “north-south dia.logue” between the rich and poor countries has more closely resembled two stuck records playing in separate, sound-proof rooms. Because the dialogue is about running the world economy more smoothly and improving the material lot of the poor three quarters .of mankind, that is a large and unnecessary failure. A north-south microcosm under the chairmanship of Mr Willy Brandt has just spent two years studying what could have been achieved. Most of the Brandt commission’s 18 members are politicians, some of whom have held the highest office. They were drawn from rich and poor countries and from across the political spectrum. In theory, a recipe for discord. In practice, after discord, they agreed in the end on much.

Their report, North-South (Pan Books) is subtitled, “A programme for survival.” The commission.-vs believe that a continuation of the trends of the last two decades —with the rich-poor gap widening

in absolute terms even though' the poor countries grow more rapidly—is an affront to humanity that should not be contemplated, a risk (real, not just moral) to all peoples that cannot be taken. North and south are inextricably linked.— by the $5OO billion a year of trade between them, the $3OO billion owed by the south (nearly half of it to the north’s commercial banks), the $BO billion north’s multinational companies have invested in the south. Built up in an era of rapid growth and increasingly liberal trade and finance, those links are now strained by stagflation and the illiberalisation it is spawning. How much worse the stagflation will be if the illiberal voices are heeded: that central message is repeated in a hundred different ways by the Brandt report. Do ensure the south gets the (dauntingly large) sums it needs for development/ as that will benefit everyone. Since 1973, the south has borrowed from the north to finance its oil imports—and thus fanned the

fading embers of- growth in northern factories by an. estimated 900,000 jobs a year. No threat to the north from that. Do not stop the north’s traditional industries from migrating south: that is not a permanent threat to northern jobs either. Some goods can now be made more cheaply in the south; they will be joined by others every year. That is a blessing for

inflation-pinched consumers everywhere, a ladder out of poverty for the people who make them, and so means greater world-wide demand for goods and services. The most successful (and most fully - employed) northern countries will be those who spot tomorrow’s businesses; the stagflationists will be those who try to cling on to yesterday’s.

All that has been said before, but it is always worth saying again by a group like the Brandt commissioners: particularly when North-South meetings are breaking down continually, as the Unido 111 conference did at New Delhi recently. The novel feature of the Brandt commissioners’ report, however, is not what needs to be done, but how they think it might be done. Many such reports range from the impractical to the dotty. Mr Brandt and his colleagues are open to this charge. Their defence is a strong one: they are experienced politicians (and an American newspaper baroness), not ivory-tower dreamers. Governments, look.

There are three main planks in the Brandt Weltan-

schauung. First, institutional reform. The world economy is succoured and policed by bodies set up 35 years ago — when most of the south was still colonised, and unlistened to. The International Monetary Fund, the World Bank, G.A.T.T., and the various United Nations agencies have all part-reformed themselves as their tasks and membership have changed. But not enough, according to the report — which therefore suggests, inter alia, more 'creation of liquidity by the I.M.F. to benefit poor countries; more programme lending by the World Bank, and expansion of the regional banks; merging G.A.T.T. and U.N.C.T.A.D. into an international trade organisation; and possibly a new institution — a World Development Fund. Communist countries should be brought in. Second, automatic transfers. The Brandt report is right to say that a major weakness in north-south financial flows is that they are all at the north’s discretion. Long-term development is thereby hampered. The rich countries repeatedly pledged that their

aid would reach 0.7 per cent of G.N.P. by 1970; today they are not halfway there, and further away than they were 10 years ago.

The Brandt solution is to make transfers automatic, through world taxation. The commission wants levies on, e.g., ■ world trade, airline tickets and whatever comes up from the seabed; the money would be raised by every country and then channelled to the poor ones. Fantasy that maj- appear, but plans for national income taxation must have seemed fantastic to our greatgreat - great - great - grandparents. Best response from governments: get some hardheaded accountants and lawyers to look at the practical questions before judging the principle.

Third, disarmament. Military spending is about $450 billion a year, official aid is $2O billion. Imagine what ploughshares could be forged if men would lay down their swords. On this point, the report has suffered cruelly from its timing. Drafted when detente was still alive on many lips, it is a dream which was mauled on the road to Kabul.