Poverty Elimination Proposal For Africa
Executive Summary "The Blind Images of Faith"
The UN's agenda for extreme or absolute poverty elimination needs to be rejuvenated to face current realities. The current indications suggest that UN funding priorities are lagging in the attempts to match funding with policy priorities. Programs such as poverty elimination suffer as a result. The Copenhagen Conference of May 1995 provides a proof. Three linkages to the current funding crisis are problematic. These problems need to be investigated.
A. Instability of revenue sources through political hijacking of UN resources.
B. Facing the realities of civil society's philosophy toward redistribution of global resources.
C. The search for private voluntary finance sources with the least resistance possibilities from civil society.
These linkages must be studied to help model a formula for exercising some form of control over the players whose actions influence the size and the direction of the international finance flow. The control mechanisms adopted to sustain the flow of financing into the poor sectors of the global economy must contain cost efficiency in the allocation of the resources for poverty alleviation.
A poverty alleviation agendum needs to be separately funded. The programs, however, must contribute to the overall success in a nation's industrial development agenda. It is therefore the overall balance sheet components that need to be reviewed. A successful financing will be meaningless unless it is linked with the efficiency of the expenditure priorities.
My proposals to achieve economic security for the poverty alleviation programs are therefore based on the efficient allocation of the poverty elimination resources. The efficiency will result in matching funding priorities to policy priorities that will promote economic activities and encourage national industrialization efforts.
Back to Table of Contents.I think the search for a realistic cost control mechanism should be a priority. The model I envision will therefore eliminate diversion and target the subject under investigation, poverty, so that poverty elimination resources can find the target they are meant to service and the practice of diluting the resources through diversions to service unnecessary activities will no longer exist.
The current revenue structure is grossly destabilized. We must therefore find a way to introduce a revenue structure with an attainable, reliable source of finance.
THE EXPENDITURE
Cost is controlled when the target is isolated and the budgeted figures produce zero or surplus balance after the target is serviced. In order to target the subject, three equations, (1)-(3) below, are employed:
Let G denote the groups of the poor, so that rp will represent n vector of resources owned by an individual poor, p. The total resources of firm f are the sum of the resources owned by the groups of the poor, G.
Therefore 
where Xi is the given total endowment of factor i in
the target economy, i = 1 ... n. The total n factors is given by n vector X = {X1 ... Xn}. Therefore a particular
group, "firm", say firm f, will have resources given by n vector {X1f, X2f, ..., Xnf}.
The function F(r(G), (G) = F(Xp, G) (2) would describe the maximum output of firm f. The maximum output, however, will depend on two conditions: quality versus quantity of the resources. Since UN or other aid resources and technology are available to all firms in the target economy, the quality of resources and technology may be the same for all firms. Therefore, the maximum output for firm f will depend on quantity, the total resources of the owners whose factors constitute the firm. Firms will therefore be forced to compete for owners of the factors. Efficiency in the allocation of resources will emerge as a result..
Using the quantities of the factors shown by the coordinates of X1f firm f can maximize its production of qi units of the commodity through its production function defined as
qf = F(Xf)
(3).The structure of my proposal, including the three equations, is significant in the sense that it will generally control cost and help to achieve the following results.
A. It makes possible the isolation of poverty and its characteristics.
B. The characteristics can be stratified based on the skills of the poor so that the factors they possess can be directed to produce the particular commodity.
C. The factors each stratum lacks to produce the particular commodity can be verified and investigated. As a result, the type of intervention the poverty-stricken households need to redeem themselves out of poverty can be directly linked to the external aid resources from UN and other poverty intervention programs.
D. The total external aid resources required by each targeted economy can be verified, measured and justified.
E. The poverty elimination agenda will help realize the satisfaction of the agenda for national industrial development.
THE REVENUE
To yield the desired revenue structure of the balance sheet, a strategic move toward private voluntary financing is to be emphasized.
The argument that moving toward a private voluntary finance, as compared to the current system of international public finance, will provide a more stable source of revenue to fund the UN is a valid argument. But I doubt that the Tobin tax proposal will generate a voluntary response from the targeted sources. To minimize the risk from this doubt, I am proposing that, in addition to the Tobin tax proposal, three other options of revenue sources be investigated:
1. Equity and bond speculative market investment
2. UN-controlled international lottery betting transactions
3. UN-controlled international game theory markets (casinos).
These options would truly represent a system of voluntary private financing. For example, all three options are based on the system of either investing in the stock and bond markets, buying a lottery ticket, or playing a casino game. All are voluntary participation. In addition to the fact that participation is voluntary, these revenue sources will be more stable. Because participants speculate on the possibility of a personal reward and cash profit. This expectation therefore provides the incentive for the markets' stability.
THE EQUITY AND BOND MARKET OPERATION
The market will involve the creation and promotion of a limited form of a speculative market in the developing countries. Research should determine a target population such as all individuals who have some roots to a developing country. This would include individuals who are citizens of developing countries and non-citizens who have some socioeconomic roots to any developing country but are now living and working in other countries.
The fact is that many of these individuals with large investment capital and a variety of technical knowledge will welcome the opportunity to become involved with the proposed investment possibility. Given the opportunity, and reliable information on current socioeconomic activities, many of these individuals will consider a share in the risk of developing the countries of their roots. From this group, a nucleus of the limited speculative equity market's participants will be formed. These people will be identified and invited to consider investment in selected investment activities. The rationale is that people who have roots in a developing country and are currently living outside that country will be more willing to risk their investments in the developing country of their origin than those who have no roots in that country. The idea is, therefore, to attract investment from this group and use it as economic stimuli to boost economic activities in the particular developing country. Hopefully, the successful development of the proposed internal economic activities will establish the conditions to attract foreign investment.
We must investigate the possibilities of tapping this source of capital, so that the capital can be used to build infant industries. This will stimulate internal economic activities and help reduce the perceived risk associated with doing business in the developing countries. As a result of the risk reduction initiatives, a window of foreign investment opportunities could be created and foreign investors will find the reason to consider investment in the developing countries.
UN-empowered NGOs from various developing countries will play the major role in establishing contacts with the targeted market participants and collaborate with them to form the nucleus of the markets. Let me explain the functionality of building the nucleus of the speculative equity and bond market.
Before the Rwandan genocide, the Swedish government provided aid resources which were used to build a red brick manufacturing business in the Rwandan capitol city. This type of investment, and others of similar nature, could be utilized to promote the speculative equity market proposal. The concept can be implemented as follows: using the denoted capital, UN-sponsored local NGOs will collaborate with the donor of the initial capital to form a corporation. The local NGOs will promote the shares of the corporation among the citizens of the developing country currently living outside that country who are believed to possess some investment capital. This group of new investors will join the original donor to finance the project. Some of these equity investors will possess some technical skills which they may voluntarily share with the corporation's directors. They may also become unofficial international sales representatives in the world marketplace. The expected benefits from this alliance includes:
1. The size of the original foreign capital investment will be increased by the amount of shares acquired through the target group's investment.
2. The technical skills possessed by the target group can be tapped to provide the corporation with a diversified knowledge base, thus contributing to management efficiency.
3. The profile of the corporation and its product line becomes highly visible and local investors will find a reason to become involved. Increase in productivity will result as local involvement and consumption increase. This may set the stage for building a competitive cost advantage in the world marketplace.
4. The linkage between the local NGOs and the equity investment target groups can be elaborated into a research channel of communication. The channel will become a forum where the NGOs, the equity investors and others will discuss the potential of the developing county's endowment(s) and financing sources to help transform the endowment(s) into a competitive cost advantage in the world marketplace. In the sense that the local NGOs should be familiar with the developing country's endowment(s), while the equity investors would accept a role to investigate financing sources. A linkage of the activities of theses two prospects should redefine a country's economic outlook to the rest of the world.
5. The impact of this strategy will contribute to the industrial development of the developing nation.
THE BLIND IMAGES OF FAITH
In Search Of The Lost Faith To Redeem Global Poverty
Through UN International Development Agenda
(see Appendix for summary)
The main focus of this paper is to review the universality concept of global resources and to investigate the possibility of changing civil society's attitude towards the rationality of global resources.
The question of what will be the distribution criteria to move resources from the "have" territories to the "have not" territories can then be responsibly addressed and the formula for establishing a sustainable source of UN revenue can be better developed, specifically in terms of the control the UN can exercise over the proportions of public and private financing flowing into the developing countries. This requires a sustainable formula that will not only target the incidence of poverty specifically, but also produce a rate of growth based on the funding allocations for poverty elimination programs (see explanation of the rate of growth possibilities in the Rwanda example, page 15). When the formula is developed, it can be adopted to improve the efficiency in allocating resources such as the one billion dollars to be donated by Ted Turner to service UN programs.
I hope that this paper will set the parameters for a comprehensive study in developing the formula for improving the flow of sustainable resources into the developing countries.
I anticipate soliciting interest groups and individuals for comments on the paper, specifically my proposals for the elimination of extreme poverty. Once I have the opportunity to examine the comments emerging from the reviews, I plan to start work on the comprehensive study to improve the opportunities for the flow of resources into the developing countries.
There are about 5.5 billion people here on earth. About twenty to twenty-five percent, or 1.4 billion, of this figure are believed to be living in poverty.
It is easy to put a human face on poverty. Nevertheless, its dimension - the degree, incidence and the characteristics of poverty must be documented. The World Bank defines extreme or absolute poverty as less than a dollar per day.
Poverty is a problem for human survival. It is the cause of hunger, which breeds disease and eventually results in deaths. It is also a contributing factor to many aspects of violent activities.
In 1994, the United Nations Secretariat released its Agenda for International Development. In it, the Secretary General proclaimed: "First, development must be recognized as the foremost and most far reaching task of our time". He then continued to say that international development must reflect five dimensions: peace, the economy, environmental protection, democracy and social justice. He concluded by noting that the first goal of international development must be to end poverty. Commenting on the Secretary General's recommendation on international development, Mr. Steven Lewis, a former Canadian United Nations Ambassador, noted that the elimination of poverty is what must underwrite any useful discussion of development within the context to reform The United Nations (First Canadian Conference on UN Reform, p.26).
Like Steven Lewis, many observers believe that the status quo of the UN structure cannot succeed in eliminating poverty.
Back to Table of Contents.GLOBAL POVERTY ELIMINATION CONSTRAINTS
Yves Fortier, the former Canadian Ambassador to the UN, noted at the closing Plenary of the First Canadian Conference on UN Reform in May 1995 that: "Were all the recommendations made during the Conference be implemented today, the United Nations of tomorrow would be completely unrecognizable. What is now a virtually bankrupt organization would have sufficient, stable revenue sources".
The status quo primary sources of UN revenue are the contributions of the 185 member states and the 0.7 percent of GNP aid donations by the so-called rich nations to help the poor developing countries. But a significant number of contributors are either in arrears or in default of their payments. The rich donor nations are finding it more and more difficult to deliver on the 0.7 percent of their GNP aid commitment to the developing countries. Notably, Great Britain and Canada have served notices expecting to reduce their shares of aid to the developing countries. There are currently many proposals to reform the structure and the operations of the world organization. The fact, however, suggests that no UN reform can be implemented without first addressing the question of the organization's financial situation.
Obviously, the UN's resource flow constraints will impact on the delivery of its policy priorities, especially the agenda for poverty elimination. I am not sure how much we understand about the sources and complexity of the constraints. We must seek to understand the difficult question about the international community's philosophy regarding the ownership and redistribution rationale of global resources.
In order to do so, we must investigate the complexities in how the international community view the rationale surrounding the ownership and redistribution of global resources. This will include the study of three constraints:
1. Sectorial resource scarcity constraint
2. Global resource redistribution constraint
3. Sectorial resource allocation constraint
Understanding the above constraints will help us focus and address the difficulties associated with the funding of UN poverty and related programs.
In the absence of this study, we have no faith and a measure of success to show in the structure and the policies we have embraced for the past 50 years, suggesting that all our yesterdays were driven by the blind images of faith.
We must understand the above constraints in order to understand the limitations of the status quo, so that the UN reforms being debated now can be modelled to simulate reality. At least, if we have any reason to believe that the reforms will produce the results anticipated by Yves Fortier, these are the type of reforms that are indicative of improved quality of policy priorities with the required matching resources.
The bulk of the UN reforms are proposals to make the organization more accountable to the people and establish a global governance structure and principles. This is about the empowerment of NGOs and other sectors of civil society.
How would this new breed of global decision-making influence the quality of the UN's policy priorities, and how would it influence increased funding to match the new policy priorities? That the empowerment will produce a new breed of thinkers and decision makers whose conducts can be any different from known human behaviours concerns me; particularly the impact of the global governance reform priorities on the agenda for poverty elimination. There is a need for us to study the characteristics of the anticipated reforms and what can be expected as an impact on the UN of tomorrow, particularly the agenda for development and the incidence of global poverty.
Back to Table of Contents.AGENDA FOR DEVELOPMENT AND UN REFORMS
In 1992, the UN Secretariat released its Agenda for Peace. This was followed by the release of the Agenda for development in 1994. However, prior to these releases, the focus of UN reforms has been characterized by the international development issues through international conferences. The international community has realized that central to any reform is the guarantee of sustainable resources required to service the reforms, including the Agenda for Peace.
There are two dimensions to the reforms currently being debated at the UN: the global governance agenda characterized by the empowerment movement, and the reforms to realign the UN's strategy to control and redistribute global resources.
Back to Table of Contents.GLOBAL GOVERNANCE AGENDA REFORMS
This involves reforms to the composition of the Security Council. Over the years, especially during the era of the Cold War, there have been serious concerns about the misuse of the veto rights of the five permanent members of the Security Council. This veto right has, on a number of occasions, paralysed the functionality and the efficiency within the United Nations.
The agenda has also set the platform to empower the various sectors of civil society so that the UN can be seen as a more people-oriented organization. Most agree that reforms are needed to dilute the veto constraints imposed on the organization's policy and funding priorities. Speaking at the First Canadian Conference on UN Reforms, André Ouellet, the current Canadian Minister of External Affairs, noted that "While there is a general consensus that the Security Council should be reformed to more adequately reflect the world of today, making those changes will not be easy". He said Canada remains open to the question of Security Council reform, yet wants to ensure that whatever reform takes place does not diminish the role and place of Canada within that body.
This tone of reaction from a G-7 nation signals that a rough ride should be expected from the ensuing debate that will dominate the discussions on the UN reform proposals such as the global governance composition and the composition of the Economic Security Council.
At the same Conference on UN Reform, Sir Shridath Ramphal, the Co-Chair of the Commission on Global Governance, outlined a number of the Commission's specific proposals that will make the UN more accountable to the people. Two of the reform proposals will improve the incidence of participatory democracy linking all sectors of civil society with UN operations. "The first is the creation of a forum of civil society, composed of representatives of NGOs, the business sector, the labour movement, and the academic community, which would meet annually before each session of the General Assembly and provide its views to the GA". "The idea", said Ramphal, "is to offer people through civil society formal opportunities to provide an input into, and therefore an opportunity to exercise some influence over, the intergovernmental deliberations of the UN on key global issues".
The Commission's second people-centred UN reform proposal is the creation of a council made up of respectable individuals who will hear petitions from the various sectors of civil society and make sure that petitions receive the attention of the highest level on UN adjudication mechanism.
There are some problems with the Commission's proposals that need to be noted. The first is the lack of a proposal to address the expected increase in the bureaucratic red tape problems that could paralyse the functionality and efficiency within the UN, not to mention the marginal cost of the extension to the decision-making process. There is also the risk of diluting the power of the current major players, who may also be the major contributors to UN resources. There are two cases of reference: the Canadian Minister of External Affairs, André Ouellet, commented that Canada remains "very open" to the question of Security Council reform, yet wants to ensure that whatever reform takes place does not diminish the role and place of Canada within that body. The other case is the default of the United States government to honour its commitment of about 2 billion US dollars, citing the incidence of inefficiency within the UN as the reason for the default. There is a fear that these types of positions adopted by Canada and the United States may provide some opposition to the global governance movement.
Nevertheless, the people-oriented governance principle that calls for the empowerment of the other sectors of civil society to participate in global policy initiatives is without doubt an act of fairness and victory for participatory democracy. But what is the cost/benefit impact of implementing this proposed initiative? Will this reform help governments to better tackle the challenges of poverty, unemployment and social marginalization? Participatory democracy will, indeed, produce public legislative instruments that may appear to have the support of many, if not all.
The problem is, history has taught us that fundamental human philosophy and emotion have no respect for legislative instruments. In short, one cannot legislate emotion.
The fact is, there appears to be this human philosophy that does not believe that resources within the borders of one's territory are necessarily global resources subject to redistribution in any form through public legislative instruments. Many people hate paying taxes even though the resources from taxation directly or indirectly benefit them. The idea of redistributing resources that they consider to be their own is unappealing to many. Secondly, human conduct, actions and beliefs appear to be rather elastic. They change in conformity to one's position of power and ownership of resources.
By the same rationality, the elasticity of foreign aid as a budgetary variable is more pronounced than items that provide satisfaction to the maintenance of a country's internal economic security. These realities must be accounted for when we tackle the task of formulating policies to move resources from the have territories to the have-not territories.
To what extent could the global governance programs change these attitudes? The ideological belief is that universal ownership of global resources is a luxury that we can do without as an item of budgetary necessity. The rationality to redistribute individually "claimed" resources is therefore viewed with a number of reservations. Of course, one may argue that the global governance reform movement is about the improvement of the quality of the UN policy priorities and not necessarily intended to improve the organization's financial position. But no UN reform can sustain improvement without an improvement in the organization's financial position. The fact is, the UN's resource constraints are not the result of a scarcity of global resources; the problem is that of human territorial protectionism factor.
Our natural thirst for protecting our immediate territorial economic security, even at the expense of others, including the poor, is problematic. This is a human factor that we must be willing to reconsider. Dealing with this constraint must therefore be the organization's priority in the list of the reforms aimed at improving the finances of the organization. As pointed out, there are two dimensions to the reforms currently being debated in the UN.
The reforms to improve the people-oriented image of the organization has been the subject of my preceding discussion. The other reforms relate to the financial security of the organization, which I describe as the reforms to realign the organization's strategy to control and redistribute global resources. I will discuss these reforms in the context of their impact on the human factor constraint. Subsequently, I will suggest my own position on how to deal with this constraint to improve the finances of the organization.
Back to Table of Contents.CONTROL AND REDISTRIBUTION OF GLOBAL RESOURCES
What is the definition of global resources? I will try to address this question from three dimensions: the household resources, the national resources and the international resources. This will let us view the impact of the human factor constraint on UN finances from within the context of the defined parameters. We can then probe the universal ownership of global resources rationality through links with the three parameters. The frame of reference to these parameters are:
a. The size of a household income and the amount of money the household spends to help immediate or remote relatives who are poor.
b. The size of a political party's shadow government's transfer payment budget for poverty alleviation: (1) prior to an election and the party's national expenditure on poverty alleviation when the party forms the government and (2) the government's national expenditure on poverty alleviation under good and bad economic conditions.
c. The size of a political party's budget for foreign aid: (1) prior to an election and the party's international expenditure on global poverty alleviation when the party forms the government and (2) the government's international expenditure on global poverty alleviation under good and bad economic conditions.
Ultimately, this investigation will lead to a measure of the international community's belief in the concept of global resources and the resources that qualify for global ownership.
The question of what will be the redistribution criteria to move resources from the "have" territories to the "have not" territories can then be responsibly addressed and the formula for establishing a sustainable source of UN revenue can be better developed, specifically in terms of the control the UN can exercise over the proportions of public and private financing flowing into the developing countries.
In a civil society, ownership must be established in order to exercise a legitimate control. We must, therefore, justify the rationality for a global ownership of resources, so that the civil society's response to the universal ownership of resources can be tested. Control can then be exercised over the human factor constraint, a key source of the uncertainties surrounding the UN's fund-raising efforts. In this way, the UN can be guided in the employment of the fund-raising techniques most likely to elicit favourable response, enabling the UN to establish control over the proportions of private and public financing flowing into the developing countries.
It is not necessarily true that justifying the rationality for global ownership of resources will in itself solve the UN's fund-raising problems. People know that paying taxes will eventually benefit them directly or indirectly, but most people resent paying taxes. The global resource rationality debate will test tolerance and register civil society's response to that rationality. The response will then play a role in dealing with the human factor constraint in the selection of the UN's fund-raising techniques. In fact, justifying global ownership of resources should not be difficult.
DEFINITION OF GLOBAL OWNERSHIP OF RESOURCES
Let us consider the factors of production that go into the production of a typical product found in the marketplace: land or raw materials, innovation technology, labour, soft capital and the market. One can count the contributions from several countries and several people from different countries, some poor, others rich. Nevertheless, it is the sum of these contributions that define the identity of a finished product ready for consumption. All these, I suggest, have a legitimate claim to a share of the ownership of the resources found in the factors of production. It is in these terms that the rationality for global ownership of resources can be defined.
Back to Table of Contents.UN MANDATE AND THE REDISTRIBUTION RATIONALITY
What is the rationality for the UN's mandate to collect money from the 185 states and other sources according to their ability to pay, and redistribute the sum proportionally to benefit the sectors most affected by the incidence of poverty? There can be only three explanations. Either the mandate is the product of a compassionate gesture, a redressing of the inequities in the allocation of rent payments to the contributors of the finished product, or both.
The fact that there is unanimous agreement among the 185 member states in support of the redistribution rationality suggests that there is also a unanimous agreement that at least one of the explanations is a good reason for member states to honour their commitments. Why then, is the UN on the verge of bankruptcy? Is it because there is a scarcity of global resources?
Back to Table of Contents.The United States debt to the UN, to the tune of about 2 billion US dollars, is not because that nation does not have the resources to honour its commitment. The US Congress cites UN inefficiency as the culprit.
Inge Kaul, director of the UNDP's Human Development Report Office, noted that the current per capita income, world wide, is some $400 (US). "As a whole, the world is not poor and we could afford to tackle serious global issues if we wanted to. The money is there," she said. "That there is scarcity of resources in my view is a myth," she concluded. (First Canadian Conference on UN Reforms, p. 24) Inge Kaul is not a lone voice in the wilderness. These concerns were amplified by the former Canadian Ambassador to the UN, Mr. Steven Lewis, when he talked about the ineffectiveness of UN organs such as the World Bank, IMF, the ECOSOC (Economic and Social Council) and the failure of the 118 heads of state to set any time-bound goal for the elimination of extreme poverty at the Copenhagen Conference in 1995. (First Canadian Conference on UN Reforms, p. 26)
In all these, the bottom line is that God has delivered on His promise. He filled the earth with abundances of resources. But we humans fail to deliver on our commitment to God--our inability to agree to share the earth's resources equitably.
I do not think there is a mind out there that will seriously propose that global resource scarcity is a fundamental function of global poverty elimination. What is, however, true is that we fail to compromise on the ideological belief that the universal ownership of global resources cannot be viewed as a luxury that we can do without as an item of budgetary necessity. Unfortunately, it appears that this is the view of many of the UN member state countries.
As a result, the 0.7 percent GNP contribution and the member states' ability-to-pay rate of contribution are being literally treated by some countries as a budgetary item conditional to the status of their country's economy. Thus, an economic downturn in the UN member states' economies increases UN funding uncertainties so that instead of the 0.7 percent GNP contribution during economic hard times, some countries will use a lower rate below the 0.7 percent.
The conclusion that I have come to is that the intervening policies to eliminate extreme poverty are not made difficult due to a global resource scarcity. It is made difficult by a human territorial protectionism factor, which is the result of humans' natural thirst for protecting territorial economic security as a priority over the protections of the fundamental rights of the poor to live. The legitimacy of this philosophy is confirmed by Article 6, Section 3 of the IMF Articles of Agreements that permits member states to control capital flows in the course of their own domestic macro-economic stability. Yet, this constraint is the main culprit depriving the UN from its ability to experience a sufficient, stable revenue source. We must rethink our position on this issue and find the way to be more sympathetic to the rights of the poor to live compared to our rights to protect our internal economic security.
An ideal solution would be for the UN to intervene through persuasion, and change the international community's philosophy to support the universal ownership of resources, not only in words, but also in deeds, in order to help control the uncertainties surrounding the UN's sources of revenue. But how would the UN use persuasion to organize its economic organs to deal with these human factor concerns?
The current UN reform to restructure and reposition the organization's economic organs cannot, therefore, be debated without a close examination of the human factor allegation.
Back to Table of Contents.Conditional to success in any of the UN proposed reforms, is the success in the reforms to realign the organization's strategy to control and redistribute global resources. Two schools of thought are the focus of these reforms currently being debated.
One school of thought believes that the constraints in funding global economic crises can be addressed by restructuring the current UN economic organs such as the World Bank, the IMF and ECOSOC (Economic and Social Council). Others favour outright abolition of ECOSOC, replacing it with a more powerful organ such as an Economic Security Council. The supporters of this reform argue that the role and the power possessed by governments and the current UN economic organs to move resources when financing developments in the developing countries is a minor one. The real power, they suggest, lies with the private international financial institutions. Consequently, they argue, a body such as the proposed Economic Security Council is needed to exercise some form of control over the international financial institutions.
Dr. Roy Culpepper, North-South Institute Vice President, noted that in 1993, over one trillion dollars in capital moved over borders in international private markets with over 200 billion of that moving to developing countries. He contrasted this with 54 billion in official finance that flowed to developing countries that same year. The international bond issues across borders amounted to 481 billion dollars--some 43 billion was issued by the developing countries. The net international equity trading amounted to 159 billion. Fifty-two billion went to develop emerging countries' markets. The aggregate cross-border bank lending amounted to 257 billion. The aggregate foreign direct investment amounted to 194 billion, and 80 billion went to the developing countries.
"The real action in terms of what is happening to developing countries", he said, "is not even the 20 billion gross a year that the World Bank is lending to the developing countries. It's really the international capital markets of which we obviously have less control." (First Canadian Conference on UN Reforms, p. 27)
If the current regional distribution of private capital flowing to the developing countries is any indication, the future for the 600,000,000 Sub Saharan Africans is indeed disastrous. This is the message Steven Lewis brought to the closing session of the First Canadian Conference on UN Reforms. He noted that in 1990-92, 50 percent of the private capital flowing to the developing countries went to East Asia, 25 percent to Latin America, 25 percent to Europe and Central Asia, a tiny percentage to South Asia, Middle East and North Africa, and in brackets, Sub Saharan Africa 0%.
Back to Table of Contents.EMPOWERMENT OF UN ECONOMIC ORGANS
These disparities in the cross-border capital flow statistics is one reason why some UN observers are arguing that the ultimate solution to the funding crisis is to exercise some control over the movement of capital in the private international financial markets.
As a result of the current UN reform initiatives, the Commission on Global Reform has proposed the establishment of a much talked about Economic Security Council as a substitute for the current ECOSOC.
Roy Culpepper suggested that such a body could act as an international economic authority to which international markets would be subject. Culpepper argued that this will open a window of opportunity for the UN to move toward a system of national voluntary finance as a substitute for the current international public finance. He cited measures such as the much discussed Tobin tax on international currency transactions and levies on international retail currency exchanges that could be enforced through the proposed Economic Security Council.
Back to Table of Contents.RATIONALITY FOR THE REFORMS AND THE NEW ECONOMIC ORGAN
What will be the measure for the success possibilities of the reforms, and what will be the cost of that success? One must first understand the expectations envisioned from the reforms in order to estimate the value of the expectations. Obviously, the responses from the reforms must produce solutions that the current UN economic organs failed to provide. Otherwise, the test to justify the rationality and the success of the reforms cannot be legitimized.
It should not be difficult for one to understand the arguments condemning the imperfections in the status quo. Questions about revenue-generating successes and the methods and manner of handling the expenditure side of the organization's balance sheet need to be reviewed. There are, indeed, serious problems with both the credit and debit sides of the organization's balance sheet.
F. The 0.7 percent of GNP contributions by the industrialized nations and the ability to pay formula used to allocate the shares of member states' contributions have failed to achieve funding targets, because many member states are in arrears. The US alone owes about 2 billion dollars. Many of the industrialized nations are also cutting back on the 0.7 percent of their GNP contributions.
G. On the expenditure side of the balance sheet, the problems are threefold.
i The Economic and Social Council (ECOSOC) does not have the power to commit funds in servicing the Council's priorities.
ii The structural adjustment conditionality policies adopted by the World Bank and IMF have marginalised more people in the developing countries and can be held responsible for an increase in the incidence of poverty, at least in the short run.
iii Lack of agreement on how the governments of developing countries should spend aid resources, such as the 20/20 proposal originating from the Human Development Report of 1992. It suggests that 20 percent of foreign aid to developing countries and 20 percent of the developing country's budget should be spent on social services priorities.
If we establish that the failure of the current economic organ's ability to address the above issues is the product of the empowerment rationality, then we must show that the proposed reforms can address the problems which the status quo has failed to address. This will be a difficult proposition. For example:
A: GLOBAL GOVERNANCE REFORM
To implement the terms of the global governance reforms, one can expect enormous cost from the huge bureaucracy. What reaction can one expect from the economically powerful states that contribute the most to fund the UN?
One notes that the United States is withholding its share of contributions to the tune of about 2 billion dollars, citing the inefficiency of UN operations resulting from the organization's present huge bureaucracy. How about the possibility that the global governance reforms may dilute the status quo powers of the member states which contribute the most to fund the organization? A case in point is the warning from Canada's current foreign minister, André Ouellet, that the Security Council reform is welcome as long as it does not diminish the role and place of Canada.
Back to Table of Contents.How would the proposed Economic Security Council be modelled to operate within the human factor constraints and be expected to achieve the results that have eluded the current ECOSOC? Indeed, what difference would any changes in the structure or in the representation to the Economic Council make when it has to operate under the threat of the five veto rights or perhaps in addition to more veto rights by Japan and Germany? The much criticized policies of the World Bank, which lends about 50 billion dollars a year to the poor countries, are US dominated and the US has a veto right. How can a new Economic Security Council, for example, without US domination, control the World Bank if the US objects?
Back to Table of Contents.C: WORLD BANK AND THE IMF REFORM
If the empowerment of the proposed Economic Security Council succeeds, how would it deal with the much criticized structural adjustment conditionality policies it will inherit from the World Bank and the IMF?
The conditionality policies can be dropped, but to be replaced with what types of conditions? Theoretically, capital formation is the product of sacrificing present consumption. If a desired capital is to be accumulated, then a decision must be made on the proportionality of MPS and MPC, the marginal propensity to save and the marginal propensity to consume. Capital formation cannot therefore be achieved without some type of sacrifice. In order to achieve a sustainable source of capital for developments in the developing countries, the imposition of some criteria on the use of capital is necessary, because there is a limit to debt capital. Even equity capital has its limitations.
The reform agenda must also come to grips with another type of conditionality issue: the lack of agreement on how the governments of the developing countries should spend aid resources.
Currently, there is an impasse between aid donors and consumers as the UN attempts to suggest how much of aid resources should be spent on social programs such as poverty alleviation. The developing countries prefer conditionality-free resources while the donors favour some type of control, such as the 20/20 formula.
Back to Table of Contents.D: UN REVENUE SOURCES REFORM AGENDA - THE TOBIN TAX
A minor cost cutting measure was recently announced by the newly appointed Secretary General, Mr. Kofi Annan. The measures that call for the elimination of 1000 UN positions through attrition is described as the legacy of the former Secretary General, Dr. Boutras Boutras-Ghali. A spokesperson for the United States Congress, which is critical of UN operations, dismissed the measure as ineffective, citing the fact that the positions affected in the cost cutting measure have already been vacant for some time. However, the centrepiece of the revenue-generating reform is the Tobin tax proposal, but indications are that the proposal is in for a rough ride.
During a discussion on the Tobin tax proposal at the First Canadian Conference of UN Reforms, Dr. Ed Broadbent, President of the International Centre for Human Rights and Democratic Development, asked the panel to comment on how the industrialized nations were receiving the Tobin tax proposal. Mr. Steven Lewis responded that he heard of "whispers in the corridors of futility." In order for the Tobin tax proposal to become the UN's stable revenue source, big business and its influence on governments' legislatures will be the task to face. Governments will always likely put up a defence against the risk of having any reduction in their corporate tax revenues. An equivalent rate of Tobin tax reduction in corporate earnings will reduce the reportable corporate tax earnings when the equivalent tax rate is treated as a cost of doing business, in which case, governments will no longer enjoy the right of using discretionary revenue to service their financial obligations to the UN.
Supporters of the Tobin tax proposal argue that it is an opportunity for the UN to move toward a system of national voluntary finance as a substitute for the current international public finance. I will argue that the Tobin tax proposal is anything but voluntary. Any activity, such as paying tax that does not provide for a choice, can hardly be considered a voluntary act.
While the Tobin tax proposal will emphasize private sources of revenue, both systems nevertheless employ taxation as the tool of extraction. I cannot, therefore, envision more willingness on the part of governments, businesses and the other sectors of civil society making voluntary contributions through a system of private finance, enforced by a UN legislative instrument under the Tobin tax formula as compared to the current international public finance system.
One notes that the bulk of the UN reforms are characterized by international conferences. These conferences have become the forum for discussing UN reform proposals from the early part of the 1990s to the present. They have become an observatory that gives one the sense of what to expect from the international community in terms of its capacity to accommodate the terms of the reform proposals.
Back to Table of Contents.INTERNATIONAL CONFERENCES AND REFORM EXPECTATIONS
THE WORLD SUMMIT FOR CHILDREN, 1990
This conference introduced for the first time the notion of time-bound goals for development.
THE EARTH SUMMIT IN RIO, JUNE 1992
This conference established for the first time a clear link between the environment and development. One hundred million dollars a year was proposed as an estimated cost of the link. The other significant issue emerging from this conference was the discussion on the empowerment of NGOs and other sectors of civil society.
THE VIENNA CONFERENCE, JUNE 1993
This was an international conference on human rights. Women's rights as a human right became the centrepiece of this conference.
INTERNATIONAL CONFERENCE ON POPULATION AND DEVELOPMENT, CAIRO, SEPTEMBER 1994
The emphasis at this conference was the empowerment of women. It practically set the stage for the priorities that would emerge at the Fourth World Conference on Women in Beijing in the Fall of 1995.
FIFTH: THE COPENHAGEN CONFERENCE, MAY 1995
The theme of this conference pivoted around three issues: poverty, employment and social harmony. The aim at this conference was to debate those three issues for eliminating extreme poverty. This conference was particularly unique in the sense that it was attended by 118 heads of state. Its agenda also reflected on the priorities that emerged from the four preceding conferences. Given this scenario, UN observers anticipated a positive response from the participants by making some form of commitment to eliminate extreme poverty. Many were therefore disappointed when the conference ended without any time-bound goal to eliminate poverty. This disappointment was best echoed by Steven Lewis when he noted: "If one feels that elimination of poverty must be at the heart of the international development agenda, and if one has just had a conference this month where poverty was the singular theme, then, by God, the world has a long way to go, because the countries there gathered refused to set any time-bound goals for the elimination of poverty. They weren't even willing to accept the proposition that over the next decade, by the year 2005, you would attempt to eliminate extreme or absolute poverty ... the debate on poverty was heartbreaking." (First Canadian Conference on UN Reforms, p. 26)
Back to Table of Contents.I wonder how much honesty is put into our conduct that reflects the seriousness of our intentions when we put forth proposals that we expect to reform a system that apparently is not producing the desired results?
The reality is that the conduct of the 118 heads of state at the Copenhagen Conference concludes that elimination of extreme poverty is not a priority, yet the world organization they are the nucleus of has determined otherwise. The Agenda for Development proclamation released by the UN in 1994 states that: "First, development must be recognized as the foremost and most far reaching task of our time." The release concluded by noting that "the first goal of development must be to end poverty."
I think we must find a way to eliminate the obvious inconsistencies in the organization's policy priorities and its funding priorities. That "way" must reflect what is known of our beliefs and conducts so that we can adopt the most reliable form of funding that will yield the desired response from the targeted sources. The characteristics of the current reform proposals must therefore justify, and be consistent with, our observed rationalities. For example, it is known that most people agree that taxation is necessary. But it also known that, given the choice,
people would rather not pay taxes, especially if the tax appears to be taxation without representation such as an international tax compared to a national tax.
Given this human rationality, I would not necessarily rely on the Tobin tax proposal as the most risk-free stable source of funding the UN, even though estimates suggest about 150 billion dollars a year can be raised on international retail currency transactions based on 0.05 percent tax rate on the 200 billion daily transactions around the world (First Canadian Conference on UN Reforms, pp.25-26). The reality is that it is unlikely that the G-7 and the OECD would voluntarily come on board to support the Tobin tax reform proposal, and without the support from these groups, the proposal may go nowhere.
Back to Table of Contents.ALTERNATIVE TO THE TOBIN TAX PROPOSAL
It is a valid argument that moving toward a system of private voluntary finance as compared to the current system of international public finance will provide a more stable source of revenue to fund the UN, but I doubt that the Tobin tax proposal will generate a voluntary response from the targeted sources. To minimize the risk of this doubt, I am proposing that, in addition to the Tobin tax proposal, three other options of revenue sources be investigated:
1. Equity and bond speculative market investment revenue
2. UN-controlled international lottery betting transactions
3. UN-controlled international game theory markets (casino).
These options would truly represent a system of voluntary private finance. For example, all the three option are based on the system of either investing in the stock and bond markets, buying a lottery ticket, or playing a casino game, which are all voluntary participation. In addition to the fact that participation is voluntary, these revenue sources will be more stable than the current practices. No doubt there will be many questions raised on the morality of these suggestions, but that will simply be a hypocrisy and will be ignoring the realities of our practices and conducts as human beings. After all, the majority of the 185 UN member states promote casino and lottery activities as legitimate business practices.
Back to Table of Contents.EQUITY AND BOND SPECULATIVE MARKET INVESTMENT REVENUE
The market will involve the creation and promotion of a limited form of a speculative market in the developing countries. Research should determine a target population such as all individuals who have some roots to a developing country. This would include individuals who are citizens of developing countries and non-citizens who have some socioeconomic roots to any developing country but are now living and working in other countries.
The fact is that many of these individuals with large investment capital and a variety of technical knowledge will welcome the opportunity to become involved with the proposed investment possibility. Given the opportunity, and reliable information on current socioeconomic activities, many of these individuals will consider a share in the risk of developing the countries of their roots. From this group, a nucleus of the limited speculative equity market's participants will be formed. These people will be identified and invited to consider investment in selected investment activities. The rationale is that people who have roots in a developing country and are currently living outside that country will be more willing to risk their investments in the developing country of their origin than those who have no roots in that country. The idea is, therefore, to attract investment from this group and use it as economic stimuli to boost economic activities in the particular developing country. Hopefully, the successful development of the proposed internal economic activities will establish the conditions to attract foreign investment.
We must investigate the possibilities of tapping this source of capital, so that the capital can be used to build infant industries. This will stimulate internal economic activities and help reduce the perceived risk associated with doing business in that developing country. As a result of the risk reduction initiatives, a window of foreign investment opportunities could be created and foreign investors will find the reason to consider investment in the developing country.
UN-empowered NGOs from various developing countries will play the major role in establishing contacts with the targeted market participants and collaborate with them to form the nucleus of the markets. Let me explain the functionality of building the nucleus of the speculative equity and bond market.
Back to Table of Contents.Before the Rwandan genocide, the Swedish government provided aid resources which were used to build a red brick manufacturing business in that country. This type of investment, and others of similar nature, could be used to promote the speculative equity market proposal. The concept can be implemented as follows:
1. Using the denoted capital, UN-sponsored local non-governmental organizations
(NGO) collaborate with the donor of the initial capital to form a corporation.
2. The local NGOs promote the shares of the corporation among the citizens of the developing country currently living outside that country who are believed to possess some investment capital.
3. This group of new investors join the original donor to finance the project. Some of these equity investors will possess technical skills which they may voluntarily share with the corporation's directors. They may also become unofficial international sales representatives in the world marketplace.
The expected benefits from this alliance include:
1. The size of the original foreign capital investment will be increased by the amount of shares acquired through the target group's investment.
2. The technical skills possessed by the target group can be tapped to provide the
corporation with a diversified knowledge base, thus contributing to management efficiency.
3. The profile of the corporation and its product line becomes highly visible and local investors will find a reason to become involved. Increase in productivity will result as local involvement and consumption increase. This may set the stage for building a competitive cost advantage in the world marketplace.
4. The linkage between the local NGOs and the equity investment target groups can be elaborated into a research channel of communication. The channel will become a forum where the NGOs, equity investors and others will discuss the potential of the developing county's endowment(s) and financing sources to help transform the endowment(s) into a competitive cost advantage in the world marketplace. The local NGOs would be familiar with the developing county's endowment(s), while the equity investors would accept a role to investigate financing sources. A link of the activities of theses two prospects should redefine a country's economic outlook to the rest of the world.
5. The impact of this strategy will contribute to the industrial development of the developing nation.
It is believed that once a developing country is positioned to promote a few projects to satisfy the above example, the window of foreign opportunities will be opened. Subsequently, speculations to suggest the potential for economic growth in that country will start to surface. Nonetheless, I admit that the mechanics of implementing my marriage proposal between the local NGOs and the equity investor target groups can be a complicated and sensitive issue. Resistance and the political dimensions to the issue can complicate it even further. One should, however, carefully review the issue in the light of practical realities.
In a sense, the two groups, the local NGOs and the targeted equity investors, can be described as part of the elite, or the most fortunate citizens of developing countries. If they are not in a position or willing to assume the risk of making the sacrifice to build their countries, then who else will want to?
As noted, the above revenue source option identifies with the equity investment ideology. The other two options remaining are the international lottery betting transactions and the international game theory markets identify with the lottery and casino ideologies.
Obviously, these two options do not require any explanation since their operations are commonplace knowledge. The problem however is the perception that this system of revenue generation is infested with "criminal" activities. Unfortunately, the criminal infestation argument is not necessarily unique to this system alone, because the practices of many financial institutions cannot be morally defended as being different from the casino and lottery ideologies. For example, many financial institutions set their rates as high as 30 percent, then make it easy for the poor to borrow from them, often with harsh consequences if they default. Many untold sufferings resulting from the seizures of the poor's humble properties are real. How about the derivative market practices exposed by the like conduct of Nick Leesons? If these practices are the realities of our conduct, then we cannot find the reason to condemn similar activities such as lotteries and casinos.
We should therefore consider investigating these options as legitimate sources of funding UN operations. These options are free of political agenda, contrary to current practices, and therefore cannot be highjacked by governments. They represent a true system of voluntary private financing.
THE BALANCE SHEET
A solution to the UN finance problems cannot be defined within the limits of its agenda for meeting revenue targets alone. It must be defined within the context of its efficiency at spending the revenue as well.
My reform proposals and the others that have been discussed so far put forth suggestions to reform the credit side of the balance sheet. We must take issue with the debit side as well, although only within the context of the agenda for poverty alleviation resource allocation.
Until recently, foreign funds to aid developing countries have been entirely controlled by the governments of the developing countries. The decision to allocate these funds to help solve some of the country's economic problems is often based on the priorities set by governments and/or the conditionality clauses set by the World Bank and the IMF, often with disastrous consequences such as increasing the incidence of poverty in some developing countries. This proves that there is a need to reform the current allocation priorities. The 20/20 reform proposal originating from the Human Development Report of 1992 is not enough and, in fact, has been rejected by the governments of the developing countries. The agenda for poverty elimination must be dealt with in specific terms.
Back to Table of Contents.The state of poverty is achieved either by default or when an economy experiences surplus or obsolete labour skills. The marginal human capital, a factor of production, would then have been rendered idle. One is poor by default when disease, unfair competition or lack of enthusiasm to become economically active deprives a person from using or acquiring the skills that are in demand. Others become poor when an economy ceases to demand the skills they possess.
There is the need to solve a developing country's skill development problems as a prerequisite to achieving a state of sustainable growth. But we cannot continue to do so with only programs to industrialize a nation without the consideration for the human suffering resulting from the choice of programs. I think there must be some distinction between programs to eliminate poverty and programs to industrialize a nation.
Resources for development must be sub-divided so that a direct link can be established between the resources or programs for poverty elimination and the characteristics of poverty. This can be achieved through the empowerment of local economic units, such as individuals, to guide them to redeem themselves out of poverty. The current practice of absolute reliance on a government's overall industrial development programs to eventually eliminate poverty has proved to be counterproductive in many developing countries. An example is the strategy based on the economic theory of sacrificing current consumption for the purposes of capital formation. This strategy often results in an increase in the incidence of poverty, at least in the short run. I think the characteristics of the poor must first be investigated and isolated so that the intervening programs can be tailored to target the elimination of the incidence.
I offer the following proposal as a model for the appropriation of UN resources allocated for poverty elimination programs:
Let us assume that an economy is endowed with given total amounts of N factors of production. Our target economy, the poor households, possess the ownership of given total amounts of N factor of production. Given that the N factors of production are used to produce one commodity, the poor households can pool together their resources to produce the commodity more efficiently for several reasons. Since one can expect other groups, other than the poor groups, competing between themselves to produce the same commodity, this competition will set a market price for the factors above the price that the poor firms will experience. The poor groups will not be subject to this competition since they will be selling the factors to themselves and benefit also from UN poverty elimination programs. However, if the economy has more than one poor firm, the firms will also compete among themselves for the members who own the N factors of production. This competition will establish a standard for efficiency and the firm that is more efficient will get more members, therefore getting most of the factors also.
The whole idea here is to come up with a formal model to determine the characteristics of poverty in a given economy, so that we can truly target the incidence of the stratified characteristics at which the UN poverty elimination budget can be unmistakenly focussed.
Back to Table of Contents.THE MODEL FOR POVERTY ELIMINATION
Let X1 represent the given total endowment of factor i in the target economy, i = 1...n. The total n factors is given by n vector X = {X1...Xn}. Therefore, a particular group "firm", say firm f, will have resources given by n vector Xf={X1f, X2f...XnF}. Each coordinate of Xf must satisfy the inequalities 0 Xif Xi. This means that a firm's ownership of factor i cannot be more than what is available to the whole target economy. It also means that the sum of factor i available to all the firms cannot be greater than what is available in the target economy.
Access to the knowledge, i.e., the technology required to produce the product using the factors will be available to all firms, because at least the technology that will come from UN and other aid resources will be available to all firms in the target economy.
Let us designate a group of the poor that owns the resources the firm uses in production as G, so that rp will represent n vector of resources owned by an individual poor, p. The total resources of firm f are the sum of the resources owned by the groups of the poor, G.
Therefore 
The function F(r(G), G) = F(Xp, G) (2) would describe the maximum output of firm f. The maximum output, however, will depend on two conditions: quality versus quantity of the resources. Since UN resources and technology are available to all firms in the target economy, the quality of resources will be the same for all firms. Therefore, the maximum output for firm f will depend on quantity, the total resources of the owners whose factors constitute the firm. Firms will therefore be forced to compete for owners of the factors. Efficiency in the allocation of resources will, as a result, emerge.
Using the quantities of the factors shown by the coordinates of X1f firm f can maximize its production of qi units of the commodity through its production function defined as
qf = F(Xf)
(3).The structure of the model including the three equations is significant for the following reasons.
a. It makes possible the isolation of poverty and its characteristics.
b. The characteristics can be stratified based on the skills of the poor so that the factors they possess can be directed to produce the particular commodity.
c. The factors each stratum lacks to produce the particular commodity can be verified and investigated so that the type of intervention the poverty-stricken households need to redeem themselves out of poverty can be directly linked to the external aid resources from UN poverty intervention programs.
d. The total external aid resources required by each targeted economy can be verified, measured and justified.
e. The poverty elimination agenda will help realize the satisfaction of the agenda for national industrial development.
To make the intentions expressed in a model become a reality, we must be willing to support our intentions with deeds, because models can only simulate the reality of our intentions. But the resources that transform models into reality can only be supplied by humans. If the current UN revenue models were to satisfy our intentions and expectations, the current state of UN finances would probably be different. How could the current models capture the fact that some G-7 countries would fail to meet their 0.7 percent GNP contribution targets? Neither could the models account for the revenue from the member states who fail to meet their contribution targets.
All these suggest that there is something fundamentally misleading about our expectations. The distorted facts about our belief that lead us to expect the unexpected--the blind images of faith in our expectations. We must be convinced that we are the only human occupants of this earth. We cannot, therefore, deny that we are the source of any human-made problems. If we are unwilling to supply the resources to help solve the problems, we cannot expect the problems to be solved.
Our philosophy about poverty needs to be challenged so that we can re-examine our belief that poverty is their problem and not our problem. We must find the way to convince civil society in the belief that global poverty is a product of human global economic activities and not global scarcity of resources.
Back to Table of Contents.COMPETITION: A FUNCTION OF POVERTY
Poverty is a product of the competition to acquire resources for the production of goods and services. But competition in itself is good and necessary in order to achieve efficiency. Efficiency leads to the creation of wealth. Ironically, competition also contributes to the incidence of poverty. Wealth and poverty are therefore the indivisible product of competition.
Pure competition produces losers and winners. We cannot therefore entirely eliminate poverty and create wealth at the same time. In a democracy, the ownership of resources dominates the process of decision-making. As a result, those without resources lack the representation to participate in an equitable distribution of the factors of production. This state of an unfair competition gives the rise to the incidence of poverty.
The reality is that capitalism, with its democratic tendencies, creates a biased market system under which the poor is disadvantaged in participating fully in his or her fundamental democratic rights because, often, resources determine the right to be heard.
There are others who may enjoy the choice of experiencing the state of poverty without hunger. That choice should be respected. We must, therefore, learn to cope with the lesser evil of poverty, poverty without hunger, so that we can convince civil society to accept the rationality for a model that will help to eliminate absolute or extreme poverty. The reason to commit resources to sustain poverty without hunger can then be better defended.
Back to Table of Contents.IN DEFENCE OF POVERTY WITHOUT HUNGER THEORY
If all global resources, the factors of production, are divisible equally and everyone has an equal share, this will not necessarily result in an equal ownership of investment capital or wealth. This is because not everyone will exercise his or her rights to transform their shares of the factors of production into the demand for goods and services to gain the opportunity for capital formation. These people will become economically inactive and their economic sector will inherit an inventory of idle factors of production. Goods and services will become scarce and the sector may experience the incidence of poverty. The opportunity for capital formation will be lacking because idle factors of production will not result in sustainable capital or wealth.
The consequences of an inefficient use of the factors of production has an opportunity cost. Scarcity of goods and services will produce poverty-induced hunger. Consequently, the need to sell the idle resources at a relatively cheap price to the sector capable of transforming them into the demand for goods and services will become necessary. This will stimulate economic activities and wealth will be created at the expense of the sector with the idle resources. Under fair competition the setback for this sector will only be temporal.
In a market economy, the system of allocating the factors of production is driven by the wheels of competition. Assuming that the system is operating under fair competition, the transfer of the factors from one sector to the other will benefit all sectors.
Under fair competition there will be free movement of resources and thus freedom of movement will encourage more interaction between the sectors. As a result, the opportunity for learning and trading among the sectors will become more pronounced.
Through the interaction with the more advanced sectors, the sector with the idle factors will learn to transform what is left of its share of the factor into the demand for goods and services. This sector will now be in a position to redeem itself from the economic state of poverty-induced hunger and improve its status to at least a sustainable state of poverty without hunger. All sectors in the global economy will now operate within two mutually exclusive economic states, either in a wealth state economy or in a poverty without hunger state economy. All these can only happen under fair competition.
The problem, however, is the fact that in many sectors the systems do not operate under fair competition. As a result, the global economy is operating in three mutually exclusive economic states: wealth, poverty without hunger and poverty-induced hunger.
An intervening mechanism is necessary to restore fair competition from the pure competition practices so that the three mutually exclusive economic states can be reduced to the states of wealth and poverty without hunger, eliminating poverty-induced hunger, the extreme poverty which is typical of many developing economies.
The intervention mechanism will provide the opportunity for all sectors in the global economy to have a fair chance of trading places in the two economic states. Within a typical economic cycle, some economic sectors will experience the economic state of wealth and others will experience the economic state of poverty without hunger.
A sector's state of economic status at any point will be relative to how efficient its economic policy utilizes the sector's endowment to gain a competitive advantage in response to the global market forces. A sector's economic policy must be efficient in order to transform its endowment to gain a competitive advantage.
As long as all sectors follow the practice of a fair competition to achieve efficiency, the cycle of trading places from one economic state to the other will continue indefinitely. In relative terms, over time every sector will, at one point or the other, experience some level of the economic state of wealth or the economic state of poverty without hunger. As long as the forces of fair competition are operative, the cycle of trading places in the two economic states will continue, depriving the re-occurrence of the economic state of poverty-induced hunger.
We must therefore learn to cope with the lesser evil of poverty, poverty without hunger, so that we can convince civil society to accept the rationality for a realistic model that will help to eliminate absolute or extreme poverty.
Back to Table of Contents.ELIMINATING POVERTY INDUCED HUNGER
The poverty-induced hunger elimination theory that I have put forth depends on the assumption that an intervention mechanism will restore fair competition in the market, for example, by the empowerment of the economically disadvantaged through a formula to redistribute global resources. The problem is how to make this assumption work. There are many who question this redistribution rationale, even those who believe in democracy.
The fact is that the market system, with its democratic tendencies, empowers the rich to take away from the poor the resources that legitimately belong to the poor without payment of fair compensation.
The rich can influence the quantity of demand in the market so that the "laissez faire" operations of the law of demand and supply unfairly favours the rich. As a result, the rich decide what price to pay for the share of the global resources that legitimately belong to the poor and leave the poor with no power or representation to be heard in the market.
Sidney Verba, the Carl H. Pforz Leimer University professor and director, Harvard University Library, made an excellent point in his paper, "The Citizen As Respondent" to support my argument on the rationality for redistribution of global resources. Writing in the American Political Science Review, Professor Verba summarizes his observation, noting that "the citizen participation is the main way in which the public communicates its needs and preferences to the government and induces the government to be responsive. Since participation depends on resources and resources are unequally distributed, the resulting communication is a biased representation of the public. Thus, the democratic ideal of equal consideration is violated. Sample surveys provide the closest approximation to an unbiased representation of the public because participation in a survey requires no resources and because surveys eliminate the selection bias inherent in the fact that participants in politics are self-selected. The contrast between the participatory process and the sample survey is used to highlight the nature of the bias in the former. Surveys, however, are not seen as a practical way of providing more equal representation." (American Political Science Review, March 1996, Volume 90, Number 1)
If we are convinced that our conducts violate the democratic ideal of equal consideration for all, then the rationality to restore equal participation through an intervention formula such as redistribution of global resources must be upheld. Otherwise we cannot earn the right to enjoy the democratic rights that protect our shares of global resources. Even those who agree that there is a need to redistribute global resources are finding it difficult to honour their commitments to fund UN. Our attention needs to be focussed on the search for a more reliable voluntary private sources of finance to bring stability in servicing UN obligations.
Bibliography
1. Agenda for Change Series: Canadian Committee for the Fiftieth Anniversary of the United Nations.
a. Human Development Report 1994, UN Development Program.
b. UN's Agenda for Development: Some Leading Issues, by Maxwell Brem.
c. An Agenda for Development, by UN Secretary-General Boutros-Boutros Ghali, 1994.
d. An Agenda for Peace, by UN Secretary-General, 1992.
2. First Canadian Conference on UN Reform, 1995.
3. American Political Science Review, volume 90, number 1, March 1996: The Citizen Respondent: Sample Surveys and American Democracy by Sidney Verma
4. Journal of Political Economy, number 1, volume 104, February 1996: Competition and the Core, by Lester G. Telser
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