The Guardian view on the WTO talks: poor countries can’t be kept poor | Editorial
Putting off the crunch meeting of the ministerial World Trade Organization won’t defer the chronic malfunctions of the world economy. The currency and debt crises experienced by developing nations, the eurozone’s turn to austerity and the great financial crash are symptoms of a broken trading system built on the global role of the dollar. Deeply embedded within the world’s trade and capital regime is a hierarchy where cheap labour goods from developing nations keep rich world wages down. Meanwhile, elites in the developing world run their nations in order to be able to consume in the manner of the developed world. Greed sees income hoovered away from most of the population by a wealthy layer.
The extensive trade liberalisation of the 1990s did not lead to higher economic growth rates. This should raise serious concerns for backers of globalisation. Are wealthier nations interested in raising the living standards in poorer countries? Or are they only really bothered about ensuring that debtor nations pay back their loans and open their economies to international trade and finance? The evidence suggests the latter: since the 1950s the evidence is that poor countries are financing rich ones through net resources transfers, rather than the other way round.
What is needed is international transfer of real resources in support of economic development and the elimination of poverty. This means not just cash but technology transfer in both climate and vaccine intellectual property. As the economist Ndongo Samba Sylla writes, without innovations being shared with the developing world “the Green New Deal in the global north might translate into a ‘Grey New Deal’ in the global south: a further outsourcing of ecological damage and economic costs from the global north to the global south.” No wonder there are growing calls for the developing world to give up on the WTO if it won’t budge on Covid vaccine patents.
Without access to technology, the thinking goes, developing countries cannot ascend the value chain, obtain industrial knowhow and ultimately become wealthier. To gain such insights they are forced, however, into throwing open their doors to foreign investment and embracing the damaging macroeconomic orthodoxy of western-backed institutions. In choosing this path, the developing world becomes locked into a global economic system that deepens inequality. Surely there must be an alternative to this? The global middle class shrank by 54 million people in 2020 – mainly in Asia – from the number projected before the pandemic.
Perhaps it would be better for developing countries to eschew imports and use state power to stimulate local production instead – thus obviating the need for external finance. Social spending on health and education could be encouraged, as well as strong support for the agricultural sector, combined with restraints on export of raw materials. India and China grew by opening up their economies gradually, not with shock therapy. So-called free-market economies hide the fact that states have a long history of economic intervention to direct economic growth. But wealthy nations should not be able to keep poor countries poor with theories that deny the very factors that made them rich.