NFU Patrick Bond presentation

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Published on February 20, 2008

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Politics, Poverty and Uneven Development in Theory and Practice:  Politics, Poverty and Uneven Development in Theory and Practice The Case of Water in Johannesburg and Rural Africa Presentation to the Norwegian Association for Development Research Conference on Politics and Poverty Oslo, 23 October 2003 by Patrick Bond Professor, University of the Witwatersrand Graduate School of Public and Development Management, Johannesburg Visiting Professor, York University Department of Political Science, Toronto (Illustrations by Jonathan Shapiro; forthcoming book is Sustaining Global Apartheid) Topics covered in the presentation:  Topics covered in the presentation Global context: stagnation, uneven development and African marginalisation Uneven political development: The emergence of five core ideological forces The case of water in Johannesburg and rural Africa Emerging ideology, strategy and tactics for progressive African and Norwegian resistance? The problem of uneven development: ‘Global apartheid’:  The problem of uneven development: ‘Global apartheid’ Thabo Mbeki, ‘Address to the Welcoming Ceremony,’ WSSD, 25/8/02: We have all converged at the Cradle of Humanity to confront the social behaviour that has pity neither for beautiful nature nor for living human beings. This social behaviour has produced and entrenches a global system of apartheid. The suffering of the billions who are the victims of this system calls for the same response that drew the peoples of the world into the struggle for the defeat of apartheid in this country ... Our common and decisive victory against domestic apartheid confirms that you, the peoples of the world, have both the responsibility and the possibility to achieve a decisive victory against global apartheid. Stagnation and declining rates of world GDP growth:  Stagnation and declining rates of world GDP growth Change in annual per capita GDP (constant 1995 $s) Source: Alan Freeman, Greenwich Univ. Uneven world development: Global apartheid between regions:  Uneven world development: Global apartheid between regions Dramatic differences in annual % change of per capita GDP (constant 1995$) Source: Alan Freeman, Greenwich Univ. Uneven world development: Global apartheid between countries:  Uneven world development: Global apartheid between countries Dramatic rise in world Gini coefficient, 1980-present Source: Branco Milanovic, World Bank Uneven development between production and finance:  Uneven development between production and finance US FINANCIAL ASSET PROFITS: INFLATION-ADJUSTED LONG-TERM INTEREST RATES AND AVERAGE ANNUAL RETURNS ON STOCKS AND BONDS Decade Interest rates Stocks Bonds 1940s -3.2 4.9 -1.1 1950s 1.0 14.2 -4.1 1960s 2.2 4.4 -2.7 1970s -0.2 4.2 -7.4 1980s 4.8 10.2 7.4 1990s 4.1 11.0 9.2 Source: Doug Henwood, Wall Street, pp.324-27. Uneven development between people: World income inequality, 1820-2000:  Uneven development between people: World income inequality, 1820-2000 1820 1997 1990 1960 1913 1999 How many times wealthier did the world’s top 20% grow, compared to the bottom 20%? Source: UNDP Uneven development in South Africa: rich grew richer, poor grew much poorer:  Uneven development in South Africa: rich grew richer, poor grew much poorer in real terms, average African household income down 19% from 1995-2000, and white income up 15% (Stats SA report, October 2002); ‘official’ measure of unemployment up from 15% in 1995 to 30% in 2000 (with ‘frustrated job-seekers’, figure is 43%); after liberation, ten million+ people had their water/electricity disconnected (according to two government surveys). Can a ‘New Partnership for Africa’s Development’ (NEPAD) reverse Global Apartheid?:  Can a ‘New Partnership for Africa’s Development’ (NEPAD) reverse Global Apartheid? Based on free trade, debt repayment and privatisation? Applying neoliberalism to crucial sectors such as water? If Africa is ‘marginalised’ by globalisation, does it need more integration?:  If Africa is ‘marginalised’ by globalisation, does it need more integration? NEPAD: ‘52. Africa, impoverished by slavery, corruption and economic mismanagement is taking off in a difficult situation. However, if her enormous natural and human resources are properly harnessed and utilised, it could lead to equitable and sustainable growth of the continent as well as enhance its rapid integration into the world economy.’ Consider, instead, the evidence that ‘equitable and sustainable growth of the continent’ and ‘rapid integration into the world economy’ are mutually exclusive. ‘Rapid integration’ destroyed Africa’s terms of trade:  ‘Rapid integration’ destroyed Africa’s terms of trade Africa’s share of world trade declined during the 1980s-90s, while export volume increased; ‘Marginalisation’ occurred not because of lack of integration: Africa’s trade/GDP ratio is the highest in the world, and rising; Africa’s industrial potential declined, thanks to excessive deregulation and austerity associated with structural adjustment (i.e., excess financial integration). Increased African exports, but decreased African trade share:  Increased African exports, but decreased African trade share Africa’s rapidly-falling terms of trade (1985 = 100):  Africa’s rapidly-falling terms of trade (1985 = 100) Reasons include G8 subsidies and dumping of farm products:  Reasons include G8 subsidies and dumping of farm products But, even were market access to be granted, trade still causes inequality:  But, even were market access to be granted, trade still causes inequality According to World Bank’s Branco Milanovic, ‘at very low average income level, it is the rich who benefit from openness... It seems that openness makes income distribution worse before making it better...’ ‘Can we Discern the Effect of Globalisation on Income Distribution?, Evidence from Household Budget Surveys,’ WB Policy Research Working Paper 2876, April 2002. The other main way economic integration underdevelops Africa::  The other main way economic integration underdevelops Africa: Africa’s debt crisis worsened during the era of globalisation...:  Africa’s debt crisis worsened during the era of globalisation... From 1980-2000, Sub-Saharan Africa’s total foreign debt rose from from $60 bn to $206 bn, and the ratio of debt to GDP rose from 23% to 66%. (Source: World Bank) US$ billion debt/GDP as % …to the extent that Africa now repays more than it receives:  …to the extent that Africa now repays more than it receives From 1980-2000, Sub-Saharan Africa’s annual debt repayments rose substantially, and new loan inflows slowed (Source: World Bank) US$ billion Another key impact of debt: imposition of austerity policies:  Another key impact of debt: imposition of austerity policies In SA, for the sake of achieving macroeconomic ‘stability’ (?)::  In SA, for the sake of achieving macroeconomic ‘stability’ (?): The 1996 Growth, Employment and Redistribution (GEAR) strategy broke from the more Keynesian Reconstruction and Development Programme; Pretoria cut corporate taxes dramatically, maintained the deficit/GDP radio at below 3%, and imposed the highest interest rates in SA history; Financial liberalisation included removing the main exchange controls in 1995, and allowing the financial headquarters of SA’s biggest companies to flee to London in 1998-2001; These factors were responsible for three crashes of the currency of 30% over several weeks (early 1996, mid-1998 and late 2001). Uneven political development: from late 1990s a new array of forces:  Uneven political development: from late 1990s a new array of forces In relation to global apartheid, five ideological currents seem to have firmed over the past years (from left to right): 1) Global justice movements; 2) Third World nationalism; 3) the Post-Washington Consensus; 4) the Washington Consensus; and 5) the Resurgent Rightwing. The global array of forces: categories for the typology:  The global array of forces: categories for the typology The five currents are recognisable by: a) their political-economic agenda; b) internal disputes over strategies/tactics and alliances; c) leading institutions; and d) exemplary proponents. (latter two categories elaborated in handout) 5) Resurgent rightwing :  5) Resurgent rightwing Agenda: unilateral petro-military imperialism; protectionism, tariffs, subsidies, bailouts and other crony deals; reverse globalisation of people via racism and xenophobia; intensified social control Internal disputes: over extent of US imperial reach and over how to protect national sovereignty, cultural traditions and patriarchy 4) Washington consensus :  4) Washington consensus Agenda: Maintain overall pressure to apply neoliberalism (renamed as PRSPs, HIPC and PPPs) but with some provisions for ‘transparency’ and self-regulation; more effective bail-out mechanisms; general support for US-led Empire, including BWI ‘reconstruction’ in Iraq, Afghanistan, Colombia Internal disputes: differing reactions to US empire due to divergent national-capitalist interests and domestic political dynamics WashCon example: pollution’s ‘economic logic’:  WashCon example: pollution’s ‘economic logic’ DATE: December 12, 1991 TO: Distribution FR: Lawrence H. Summers 'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs? I can think of three reasons: 1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. 2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste. 3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable. The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization. 3) Post-Washington consensus :  3) Post-Washington consensus Agenda: Through global state-building, fix ‘imperfect markets’; add ‘sustainable development’ to existing capitalist framework via global state-building; promote global Keynesianism; oppose US unilateralism and militarism Internal disputes: some look leftward (for broader alliances) and others look to the Wash.Con. (for resources and legitimacy) Is the United Nations a reliable Post-Washington ally?:  Is the United Nations a reliable Post-Washington ally? 2) Third World nationalism:  2) Third World nationalism Agenda: increased (but fairer) global integration via reform of interstate system, based on debt relief and expanded market access; democratised global governance; regionalism; anti-imperialism Internal disputes: large v. small; political alignments; degree of militancy vis-à-vis the North; internecine rivalries and egos 1) Global justice movements:  1) Global justice movements Agenda: ‘deglobalisation’ of capital (not people) and ‘globalisation-from-below’; anti-war; anti-racism; indigenous rights; women’s liberation ecology; ‘decommodified’ state services; participatory democracy Internal disputes: role of nation-state; party politics; fix-it v. nix-it strategies for int’l agencies; gender and racial power relations; divergent interests (e.g. Northern labour and environment against Southern sovereignty); and tactics (especially merits of symbolic property destruction) African social movements generally oppose NEPAD and neoliberalism:  African social movements generally oppose NEPAD and neoliberalism African Social Forum: ‘Most participants in the group rejected NEPAD and suggested we should come up with alternatives. [It was] recommended [that we] reject neo-liberal framework in which NEPAD was drafted and discuss alternative models for development.’ -- The African Social Forum Report, Bamako, Mali, 9 January 2002, available in Bond (Ed) (2002), Fanon’s Warning: A Civil Society Reader on NEPAD (http://www.aidc.org.za) Conclusion: in lieu of genuine multilateral or African reforms:  Conclusion: in lieu of genuine multilateral or African reforms global power relations will remain decisive (if fluid); under the circumstances, it is likely that -- as in the 1930s – the RIGHTWING RESURGENCE will continue expanding, and in search of hegemony will fuse with economic interests of the WASHINGTON CONSENSUS (and its corporate/banking backers), notwithstanding the obvious ideological contradictions; and it is likely that POST-WASHINGTON CONSENSUS will seek increasing alignment with more ‘responsible’ THIRD WORLD NATIONALISTS (e.g. Lula) -- but that both will fight against the more principled, radical forces within the MOVEMENTS FOR GLOBAL JUSTICE. Towards the commodification of everything: NEPAD promotes public-private partnerships’ :  Towards the commodification of everything: NEPAD promotes public-private partnerships’ ‘154. ... The next priority is the implementation of a Public-Private sector partnership (PPP) capacity-building programme through the African Development Bank and other regional development institutions, to assist national and sub-national governments in structuring and regulating transactions in the provision of infrastructural and social services.’ If such policies can work anywhere in Africa, they should in South Africa (with large, wealthy markets, competent firms and infrastructure)… … but they don’t work in SA. Contrary PPP pilot project experiences in SA water sector :  Contrary PPP pilot project experiences in SA water sector small town of Nkonkobe sued to cancel long-term contract with Suez (Paris) due to overpricing and underservicing, including ongoing use of ‘bucket system’ of sanitation, with many similar protests in nearby Queenstown and Stutterheim (also Suez); at Dolphin Coast, Saur (Paris) demanded--and won--contract renegotiation to raise tariffs, for profits were insufficient; at Nelspruit, Biwater (London) ready to depart, after not extending services, and disconnecting low-income residents; in Johannesburg, Suez is under attack by communities for installation of pre-paid water meters, substandard sanitation and refusal to disclose basic information about the utility; across SA, 100% cost-recovery dogma (promoted by World Bank) led to cholera outbreak and mass disconnections. Key Johannesburg sites of pricing/privatisation debates:  Key Johannesburg sites of pricing/privatisation debates Alexandra to Sandton contrasts in access to water: low pressure and disconnections versus hedonistic consumption; Redistribution from Sandton to Soweto also opposed by wealthy residents until Constitutional Court judgement. Water commodification: World Bank’s balanced rhetoric:  Water commodification: World Bank’s balanced rhetoric Pleasing philosophy: ‘The strategy developed in this document is based on the principle that water is a scarce good with dimensions of economic efficiency, social equity, and environmental sustainability’ --African Water Resources, Washington, 1996 The World Development Report 2004 on basic services makes serveral concessions (though see critique at http://www.servicesforall.org) World Bank reality: pro-commodification of water:  World Bank reality: pro-commodification of water ideological position: ‘the poor are willing and have the capacity to pay for services that are adapted to their needs… poor performance of a number of public utilities is rooted in a policy of repressed tariffs’… need for ‘demand-responsive model’ --World Bank & African Water Utilities Partnership, Kampala Statement, 2001; ‘Work is still needed with political leaders in some national governments to move away from the concept of free water for all… Ensure 100% recovery of operation and maintenance costs ’ --Sourcebook on Community Driven Development in the Africa Region, 2000. World Bank results: pro-corporate water agenda:  World Bank results: pro-corporate water agenda mega-dams continue -- in spite of ’98-’01 World Commission on Dams (sabotaged by Bank staff), corruption, displacement, overspending, ecological damage; promotion of ‘02-’03 Camdessus infrastructure financing report, especially ‘risk insurance’ for privatisers; privatisation conditionality continues in HIPC/PRSPs; dogmatic focus on pricing water according to market. Pricing water, according to The Economist:  Pricing water, according to The Economist The Economist magazine July 2003 survey on water declares the central dilemma: ‘Throughout history, and especially over the past century, it has been ill-governed and, above all, collossally underpriced.’ Identifying this problem, naturally begets this solution: ‘The best way to deal with water is to price it more sensibly,’ for ‘although water is special, both its provision and its use will respond to market signals.’ The Economist advises on how to commodify water:  The Economist advises on how to commodify water ‘Charges should be set, as far as possible, to cover full costs, including environmental ones.’ In rural areas where there is competition among farmers for irrigation water, ‘The best solution is water trading.’ As for the problem of delivering water to the poor, ‘The best way of solving it is to treat water pretty much as a business like any other.’ Commodification or de commodification? The cost and price of water:  Commodification or de commodification? The cost and price of water Curve A shows a typical ‘short-run marginal cost’ for a state utility to supply water; Curve B shows a typical ‘cost-plus-markup’ tariff which aims to ‘get the prices right’ (avoid distorting the market) so as to attract privatisers to invest; Line C is an ‘eco-social justice tariff’ with rising blocks -- the point: decommodify using a subsidised (free) lifeline, then rising blocks to redistribute surplus from high- to low-volume users, and hence an incentive to conserve. Commodification: World Bank advice on water pricing and privatisation:  Commodification: World Bank advice on water pricing and privatisation Free lifeline water to be avoided because it ‘may limit options with respect to tertiary providers -- in particular private concessions much harder to establish’… instead, SA should price according to cost, and establish a’credible threat of cutting service’ -- ‘Water Pricing and Management: World Bank Presentation to the SA Water Conservation Conference’, 2 October 1995 Was the Bank’s advice taken seriously? :  Was the Bank’s advice taken seriously? Bank’s promotion of ‘market-related pricing’ was ‘instrumental in facilitating a radical revision in SA’s approach’… -- World Bank, ‘South Africa Country Assistance Strategy’, 1999; Finally, after more than ten million disconnections, growing protests (1997-present) , and Africa’s worst-ever cholera epidemic (2000-present), Pretoria finally changed policy… but Johannesburg retained pro-corporate pricing. Why? ‘The World Bank’s local economic development methodology developed for Johannesburg in 1999… sought to conceptualize an optimal role for a fiscally decentralized City of Johannesburg in the form of a regulator that would seek to alleviate poverty... through job creation by creating an enabling business environment for private sector investment and economic growth in Johannesburg.’ -- World Bank, ‘Monitoring Service Delivery in Johannesburg’, 2002. With downward-sloping curve, how to commodify water?:  With downward-sloping curve, how to commodify water? highlight its role mainly as an ‘economic good’; attempt to reduce cross-subsidisation that distorts the end-user price of water (tariff); promote 100% cost recovery on operating and maintenance costs (even if capital investments are subsidised); promote a severely limited form of means-tested subsidisation; establish shadow prices for water as an environmental good; highlight problems associated with state control of water (inefficiencies, excessive administrative centralisation, lack of competition, unaccounted-for-water, weak billing and political interference); and in the process, foster the conditions for water privatisation. But in pushing commodification, World Bank fails to incorporate::  But in pushing commodification, World Bank fails to incorporate: positive externalities of publicly provided water: public health (mitigation of water-borne diseases, then AIDS), gender equity, environmental protection, and positive economic multipliers; only state/society have an interest in such public and merit goods, not private supplier; natural monopoly and lumpiness of investments make private sector less suitable; difficulty of regulation given weakness of state, and long history of water-sector corruption; and crises in state water sector due mainly to 1980s-90s structural adjustment, corrupt state bureaucrats, weak trade unions and disempowered consumers/communities. Movement slogan: Another Africa is possible! Decommodification and deglobalisation :  Movement slogan: Another Africa is possible! Decommodification and deglobalisation SA activists are at cutting edge of several ongoing struggles to turn basic needs into human rights: free water (50 liters/person/day); free electricity (1 kiloWatt hour/person/day); anti-retroviral medicines to fight AIDS; free basic education; thorough-going land reform; prohibition on services disconnections and evictions; and even a ‘Basic Income Grant’ . All such services should be universal, and financed partly by penalizing luxury consumption. Another world is possible!: Decommodification and deglobalisation :  Another world is possible!: Decommodification and deglobalisation Walden Bello: ‘I am not talking about withdrawing from the international economy. I am speaking about reorienting our economies from production for export to production for the local market.’-- Deglobalization, Zed Press, 2002. Samir Amin: ‘Delinking is not synonymous with autarky, but rather with the subordination of external relations to the logic of internal development... Delinking implies a 'popular' content, anti-capitalist in the sense of being in conflict with the dominant capitalism, but permeated with the multiplicity of divergent interests.’-- Delinking, Zed Press, 1985. A ‘reasonable’, inward-oriented economic alternative:  A ‘reasonable’, inward-oriented economic alternative ‘I sympathise with those who would minimise, rather than with those who would maximise, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel--these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible and, above all, let finance be primarily national.’--J.M.Keynes, (1933) ‘National Self-Sufficiency,’ Yale Review, 22, 4, p.769. Similar to GLOBAL JUSTICE MOVEMENTS’ campaign for globalisation of people, not capital An example of deglobalisation: African civil society v. the World Bank:  An example of deglobalisation: African civil society v. the World Bank Is there merit to focusing on an institution...: with the reputation as global neoliberalism’s ‘brain’; active across the continent, in nearly every country; reliant upon unreformed neoliberal logic, ranging from macroeconomics to micro development policy; responsible for even project-level conditionality; capable of commodifying even the most vital good, water; and already subject to periodic IMF Riots and other activism, and suffering a severe legitimacy crisis? If so, what can be done? Southern Africans v. global apartheid:  If so, what can be done? Southern Africans v. global apartheid African networks to force Bank/IMF/WTO/donors/corporations to stop commodifying water and so many other services; in SA, ongoing campaigns by communities/labour for free lifeline services, against Bank commodification advice; Global Justice Movements and Anti-Privatisation Forums exist in many Southern African cities; Southern African People’s Solidarity Network (http://www.aidc.org.za) links progressive activists; Jubilee movements fighting for debt repudiation; African Social Forum developing tough positions; most Southern African progressive movements demand that IMF & World Bank quit their countries; and lawsuits underway against financiers which profited from apartheid and dictatorships, demanding reparations. What can be done, in solidarity? Should the North invest in the World Bank?:  What can be done, in solidarity? Should the North invest in the World Bank? During South African apartheid, people wondered: who reaps economic benefits of systemic oppression?; Thanks to Jubilee SA, Brazil’s MST, Haiti’s PAPDA and others, socially responsible investors now ask the same question: at a time of worsening global apartheid, is it morally acceptable to earn profits from World Bank bonds? many are joining the ‘World Bank Bonds Boycott’ and sending a clear signal (by threatening 80% of WB funding): End anti-social, environmentally-destructive activities, and cancel the debt!; when enough investors endorse the campaign, the Bank will bond rating will decline, so it will be fiduciarily irresponsible to invest in Bank bonds -- a real threat... WBBB: Churches, foundations, unions, cities and social responsibility funds:  WBBB: Churches, foundations, unions, cities and social responsibility funds PARTIAL LIST (http://www.worldbankboycott.org): Univ. of New Mexico endowment Unitarian Church Global Greengrants Fund Ben and Jerry’s Foundation Calvert Group Progressive Assets Management Trillium Assets Management PLUS many US cities (e.g., San Francisco, Milwaukee, Oakland, Cambridge); and Major trade union pension/investment funds (e.g., Teamsters, Postal Workers, Service Employees Int’l, American Federation of Government Employees) European World Bank Boycott advocates: ASEED (Amsterdam) Is Europe (especially Norway) ready to join African civil society in this fight?:  Is Europe (especially Norway) ready to join African civil society in this fight? Or should Europe remain on the other team…?:  Or should Europe remain on the other team…?

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