Tributes to Cheddi Jagan
"Development: Challenges Ahead for Small States"
(The 2nd Cheddi Jagan Lecture Series was delivered by Winston Dookeran, Governor, Central Bank of Trinidad and Tobago on April 15, 2000)
I am honoured to be invited to deliver this second lecture in the Dr. Cheddi Jagan Memorial Lecture Series. The continuing interest of York University in Caribbean Affairs is a source of comfort to us in the region. I congratulate you for sponsoring this platform and as someone, whose "inner thoughts" were possibly shaped in a Canadian University, I feel a special privilege to be here at York University.
I propose to speak to you on the challenges ahead for small states. Ten years ago or, even five years ago, the subject of small states was barely mentioned in academic circles and was only grudgingly referred to in the international debate of development and the new global economy. It is true, though, that in the 1960's, in the context of the traumatic decolonisation process that saw the emergence of a host of new small states into independence, the issue of small states had generated a measure of debate. But the debate then, centred basically on the issue of political viability. It had largely to do with the capacity of these states to effectively exercise sovereignty and to fulfil the responsibilities associated with sovereign membership of the international community. But that was a short-lived debate.
Today, the situation has changed. A new framework for multi-lateral development policies is being developed. A framework in which the premise of interstate relations and the role of institutions, like the International Monetary Fund and the World Bank, are being re-assessed and re-defined. In this dialogue, small states have suddenly emerged as a special area of focus.
The Commonwealth Secretariat and the World Bank have set up a task force to consider "development problems peculiar to small states". The task force interim report defines the small states geographic space as follows:
"Among the world's sovereign developing states with populations of less than 1.5 million people, 41 are members of the World Bank ……………29 are members of the Commonwealth. The incomes and stages of development of these states vary widely, from very poor African countries such as Guinea-Bissau (with per capita GNP of $160) to wealthy countries such as Brunei, Cyprus,Malta and Qatar (with per capita GNP of more than $9,000). While there is no special significance in the 1.5 million population threshold, if provides a useful starting point."
Most of the Caribbean countries and certainly those in the Commonwealth Caribbean fall into this definition. The Honourable Owen Arthur, Prime Minister of Barbados, at a Conference on Small States in a Changing World held at the Fletcher School of Law and Diplomacy just two weeks ago, in commenting on the theme had this to say:
"We therefore have an unprecedented opportunity to create a new global society which, for the first time, embraces the concerns of the very powerful and the very poor within the same paradigm of development, and which by respecting diversity and special circumstance, can establish that a high quality of human development can take place within the context of social justice."
He went on to refer to President Kennedy's address to the Irish Parliament on June 20,1963, when he spoke about small states in the following words:
"All the world owes much to the little `five feet high' nations. The greatest art of the world was the work of little nations. The most enduring literature of the world came from little nations. The heroic deeds that thrill humanity through generations were the deeds of little nations fighting for their freedom ……………`the humblest nation of all the world, when clad in the armour of a righteous cause is stronger than all."
Today I hope that I am clad in the armour of a righteous cause. I would like to explore some critical challenges for small states in today's world, and to do so noting the growing consensus that is now being developed with regard to human development and the new priorities for a changing architecture in international institutions.
These were some of the major concerns of Dr. Cheddi Jagan, in whose memory this lecture is given. Dr. Jagan dedicated his life to an indefatigable struggle for social justice, the eradication of poverty and marginalistaion, and for democracy. His crusade, on behalf of these transcending human causes was conducted at both a national and an international level. In his last years as President of Guyana, he embarked tirelessly on a concerted campaign for the creation of a New Global Human Order. He argued that what was needed was not merely a new-world order, but rather a "New Global Humanitarian Order - governance with justice and equity -". He was an insistent voice at every international forum for debt relief, including debt forgiveness for developing countries, and he argued that, in terms of the international institutional framework, what was required was a restructured multilateral framework that gave a meaningful place at the negotiating table to developing countries.
In a somewhat similar tone, Prime Minister Arthur, in his address, called for a New Deal for small states based on the precept long ago espoused by Aristotle, `that as between equals, equality; as between unequals proportionality'. Translated into practical terms, this requires a different standard on treatment of small states by the international community.
What then is the Premise of this New Deal?
The changing role of the state
We are living today in an environment that is continuously being transformed. A new worldwide system of economic relations is emerging where virtually every nation-state is being incorporated into the global economic system. Hence, nation-states must increasingly share their decision making space with global corporate interest and civil society. For this reason, the states' role in development must be redesigned, and not necessarily reduced. The world that we now inhabit will likely call for constant economic adjustment, if the foundations of social life are not to be further eroded, this process must be countered with high energy politics, involving intensified public participation and democracy.
The information and knowledge gap
A central part of the transformation that has begun is the dramatic impact that information and communication technology is having in today's world. It has served not only to collapse geographical boundaries but also to facilitate virtually real-time transactions in an array of sectors. It has been the driving force in dramatic transformations in the national and global production of goods and services, together with radical liberalisation, it has facilitated financial flows globally.
The Prime Minister of Malaysia, Dr. Mahathir Mohamad, reminded us in a very recent speech at the World Knowledge Conference that the first globalisation revolution started more than one hundred years ago and culminated with the first World War. The globalisation revolution took six decades to make a comeback. But the comeback has been made. The second globalisation revolution, which we are witnessing, came into force by the end of the eighties.
Dr. Mohamad went on to urge that:
"we must be prepared to examine every sacred cow, to give up every preconceived notion. In the pursuit of information, knowledge, and wisdom, we must be prepared to face reality. We must embrace change, pursue novelty, crave innovation. We must learn. Even harder still, we must learn. We must remember to forget old ways. We must force ourselves into new habits. We must build the new processes, institutions and organisations that are necessary for the Information Age."
A new multilateralism
The collapse of the cold war at the end of the 1980's has ushered in a new multilateralism, which today expresses itself in the call for a new architecture for our world institutions. The existing multilateral framework, it is recognised, cannot rise to the task ahead of us.
Thus, we must welcome the belated acceptance of various international economic organisations that their central contributions involve a human component. The former Managing Director of the IMF speaks of a "humanising globalisation" and the imperative of a poverty objective in Fund programming. In the Cologne Summit Communique in June 1999 the G-8 countries saw the need to take steps that can give globalisation a "human face", and so increasingly work for a prosperity that is more widely shared..
World Bank President Wolfensohn was far blunter in his contention that the conventional consensus - the so-called Washington Consensus - was critically flawed in that, even as growth and macro economic objectives were indispensable elements of any credible strategy, "as we go forward, the larger concerns are for equity and social justice. That is, how can we ensure that market-led economic growth benefit all members of society? And, how can we deal with poverty in a framework that promotes environmental sustainability and popular participation that would generate significant results?"
The most recent (1999) Human Development Report of UNDP, graphically summed up the dilemma when it spoke of "Globalisation with a Human Face" in these words: "When the market goes too far in dominating social and political outcomes, the opportunities and rewards of globalisation spread unequally and inequitably - concentrating power and wealth in a select group of people, nations and corporations, marginalizing the others."
The UNDP report argues decisively for a globalisation that "works for people - not just for profits."
Challenges Facing Small States
It is against this premise that I would like to focus on some of the challenges facing small states in today's world. The joint Commonwealth Secretariat/World Bank Task Force on small states, identified three broad challenging areas:
1. Tackling volatility, vulnerability and natural disasters.
2. Building transitions to the changing global trade regime.
3. Strengthening capacities within small states.
The Challenge of Volatility and Vulnerability
Small states are indeed more vulnerable to external events including also natural disasters, which has happened from time to time. This vulnerability implies also a risk to income, as income streams become very volatile.
On this issue, there is need to design mechanisms to give practical and meaningful effect to the differing conditions since strong and weak states pose threats to global economic security. It is true that private capital flows across borders have grown substantially in the 1990's. Small economies, however, even with what are considered to be right policies, are viewed as riskier investments by private capital than larger developing economies.
Yet, the recent Report of the International Financial Institutions' Advisory Commission, set up by the US Congress, has called for narrow financial mandates for the IMF and the World Bank - the IMF should be restricted to lending to a small group of emerging economies in crisis context. The World Bank should concentrate its lending on poverty eradication in the world's poorest countries.
Critically, the proposals in the Report make no provisions for a key group of developing countries. The excluded category - those countries that enjoy capital market access or that had a per capita income in excess of $4000 - would include small, vulnerable economies. These countries are also ineligible for multilateral concessional financing, although their access to private capital access is not necessarily assured. It is partly for this reason that many of these countries have found it necessary to access multilateral lending, particularly for infrastructural and social sector capital expenditures, which are not accessible in the markets at attractive rates.
The Challenge of Adapting to a New Global Environment
I would like to say a few words on the issue of adapting to a new global environment. International trading regimes are essentially a device of the political economy: they are in place at least as much to protect nations from their own interest groups as well as to protect nations from each other.
In this sense, the process of change and adaptation can best be analysed in a framework of political economy. In such a framework, we must identify the 'winners' and the 'losers'. Since the change process is normally associated with the altering of national expenditure, from one set of expenditure that emerges out of the current structure and behaviour of the economy, to another set of expenditure that will usher in a new matrix of investment and consumption - the critical issue is how do we effect that shift. 'Losers' are easily identified for they represent the participants in the current structure of the economy and normally are represented in the political system. They are organised to make appropriate noises.
On the other hand, the `winners' perhaps belong to the next generation or to opportunities not yet realised and therefore cannot be easily identified or mobilised. In such a framework, the process of change is challenged by finding a workable compensation mechanism that would allow the `losers' to become part of the constituency of the `winners'. Adaptation by small states to the new trading environment before us can best take place if the framework for the political economy of change can be designed and an appropriate strategy spelt out.
Even at the international level, where nations protect each other from other nations, strategic policies have become part of that framework. We are well aware of strategic policies implied in the `social clause' on environmental and labour issues which have been viewed as being against exporters from developing countries. So too is the `super 301' Clause in the US Trade Act which from time-to-time has been used. The strategic approach, therefore, in the context of adaptation to the new trading environment by small countries must become part of a deliberate strategy. Such strategic policies will tend to alter the pace, the time and the scope envisaged in the change process.
The third aspect of the political economy of change deals with the core-periphery dynamics of the new economic geography. Market forces must work together with new economic geographical arrangements. In this sense, there are two distinct and related processes that seem to be taking place:
the relocation of industries and services in regions that are favoured with an attractive and richly endowed environment; and
the specialisation of economies which favour regions with a head start in production and attract industries away from those with lesser initial conditions.
New knowledge and insight of these three aspects of the political economy of change - winners and losers, strategic policies, economic geography dynamics - can form part of a scholarship agenda as small states adapt to the new trading environment.
The Challenge of Building Capacity
The forces transforming the global environment are propelling the international system in two seemingly contradictory directions. On the one hand, the world is moving towards multilateralism and global integration, with a strong commitment to open markets and international institutions; on the other hand, it is entering a new era of regionalism, as nations seek to guarantee their markets.
Strategies, policies, and institutions that are not in harmony with international regimes and regional common interests are dangerously short-sighted and increasingly untenable. It is not simply that national interests have now inseparably merged with foreign policy; rather, the parameters of the nation-state and sovereignty, of internal and external, domestic and international, must now be understood in terms of a complicated "two-level framework". At one level, domestic policy drives foreign policy, at the other level, the premises of inter-state foreign relations are changing in response to the new political geography. These developments not only challenge our understanding, but also raise fundamental questions as to the economic and political philosophy.
We in small states sometimes believe that our smallness hinders development, but in fact, size is not in itself an issue. The city-states of Hong Kong and Singapore have achieved high levels of prosperity and growth without significant natural resources, preferential trade accords, or proximity to the U.S. and European markets. They did so by linking their economies with the world economy and by achieving external economies of scale, rather than relying on internal forces. They determined their cultural strengths and built on them, they developed policies and strategies that unleashed the microeconomic forces for growth, and complemented these with a suitable macroeconomic framework.
On the other hand, it has taken China many years to begin to modernize its economy despite having substantial resources and many other large nations, including India, Indonesia, Brazil, Russia, Pakistan, Bangladesh, and Nigeria are facing that challenge, even though many of these have an excellent resource base. The point, then, is that the political and sociological legitimacy of the nation-state are not threatened by changes in operational sovereignty per se; rather, today's world requires that the nation-state cede more of its operational sovereignty, in order to uphold its legitimacy and viability.
Put another way, operational sovereignty implies the pursuit of a strategy of regionalism, where common interests, joint problem-solving and appropriate governance mechanisms come into play. It entails the coming together through the pooling of discrete aspects of individual sovereignties to more effectively deal with common problems that are not best handed on an individual country basis. In fact, it is a strategy that could result in the enhancement of a nation's viability, without compromising the core principles of sovereignty.
The Challenge of Equitable Development
This is an issue for which Dr. Cheddi Jagan energetically campaigned. Addressing the Forty-Eighth Session of the United Nations General Assembly in October 1993, he insistently urged that "debt relief in the form of debt cancellation, grants, soft loans and rescheduling is urgent if the developing countries are to eradicate poverty, protect the environment, and play their meaningful role in expanding world trade. Debt relief must be seen as an investment, not only in the development of poor countries, but also in the security of the rich nations". It was a campaign in which Dr. Jagan was at the centre of, and which he advocated with a profound passion and conviction.
His campaign for debt relief for the poor developing countries has at last begun to bear fruit. General debt forgiveness, including multilateral debt, has now been sanctioned by the donor community for the highly indebted poor countries as a result of the Heavily Indebted Poor Countries or HIPC Initiative. This represents a significant change in the attitude of these countries and Bretton Woods Institutions.
His campaign for equitable development is also beginning to take off.' Indeed on March 30, 2000, two weeks ago, US Treasury Secretary, Lawrence H. Summers, in his remarks to the Council of Foreign Relations in New York ended his remarks this way:
"but if there is one further message of my remarks today, it is that it also means working to ensure that all countries and peoples have a chance to be included. The greatest source of squalor and inequality in the global economy today is not integration but exclusion: a failure to grow and integrate that keeps large populations trapped on the bottom rung. If we are serious about preventing a global race to the bottom, we must be serious about helping those at the bottom to rise up. And US support for strong and effective international development institutions can and must play a crucial role in our efforts to achieve this':
These comments do indeed tell us, with some pride, that Dr. Jagan's campaign was not in vain. But, there is another vital dimension to the achievement of equitable development. While the emergent consensus on the ethos or principle of equitable development is to be welcomed, we must remember that it is always in the operationalisation that the real and meaningful achievements will ultimately be measured. And it is here that another key aspect of a new multilateral architecture comes into play. Outcomes are contingent on the participatory process of the global institutional framework. To put it another way, small countries have to be active participants in the decision-making process if they are to be assured of equitable outcomes from a reconstructed multilateral architecture.
Concluding Thought
I conclude my lecture today, with a postscript of the Caribbean Nation in the future. The Caribbean Nation, including Cuba, the Dominican Republic and Haiti, has a population today of 34 million people; projected to be 42 million in the year 2020. In defining the Caribbean this way I have excluded Bermuda and Florida as perhaps part of the geographic Caribbean. We are part of a complex, even enigmatic region, characterised by great disparities in size, population, geography, history, language, religion, race and politics.
This is a region in which harmony and discord work together, and where the overriding challenge now is for economic logic and political logic to work together to reinforce a new synergism. The challenges before us are enormous, but we must neither succumb to the forces of history nor surrender to the new vulnerabilities that would surface ahead. Our development resilience will in the final analysis, be founded in our own sense of Caribbean identity and - as the life of Dr. Cheddi Jagan, built on integrity, compassion and endurance - so too, must our future be built. As Dr. Jagan stated so eloquently "a logic of an integrated international economy demands that the Caribbean cease its hesitant pushing and prodding of the ball of economic integration and strike out firmly".