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Mr. Deputy Speaker (Mr. Michael Lord): Order. I remind the House that Madam Speaker has put a limit of 15 minutes on Back-Bench speeches between 7 and 9 o'clock.
7.6 pm
Mr. Tom Clarke (Coatbridge and Chryston): Two weeks ago, in his Mansion House speech, my right hon. Friend the Prime Minister spelt out his views on the state of the British economy in the face of the global meltdown. What began last year as a local and regional crisis has spread from Asia to Europe and north and south America, becoming what is now a global crisis that is affecting us all. Against that background is the intention to steer a course of stability. My right hon. Friend then said that he wished to
- "combat social exclusion and create a society of opportunity extended to all."
Over the past few months, we have heard much about the world financial system running out of control. For many this has not been a surprise--financial markets wield enormous influence in a precarious setting. Such is their influence that adjusting to the international economy--above all, to global financial markets--has become a fixed point of orientation in economic policy. Much of the activity of financial markets is speculative. It is often driven by short-term economic considerations and based, above all, on extracting gain from expansion and the velocity of financial turnover in currency, shares, options, futures and the rest. By watching capital look for the highest return, Governments have raised its price and inadvertently caused investment to shrink. There has been a race to the top for the highest short-term return.
It is held that Governments cannot successfully second guess market decisions, and it is implied that they should not try. That view might be defensible if financial market operators had a monopoly of market expertise, but they do not. The consequences of letting the market take the lead without a clearly defined global strategy are very serious.
It is true that there has been huge growth in consumption, but that does not tell us the full story. There is no doubt that current policies on trade and investment have been accompanied by increasing disparities between rich and poor, both between and within countries.
The recent tragedies in Honduras and Nicaragua were natural disasters and no single person was to blame. Nevertheless, we can see how aspects of the global market played a part in the disaster. Many aid agencies say that, economically, it was an accident waiting to happen.
Structural adjustment programmes, sometimes naively enforced by external agencies to develop export industries such as forestry to enable the country to pay off debt, mean that 30 per cent. of Honduras's forest has been lost since 1960.
According to United Nations figures, more than 70 per cent. of the Nicaraguan population was already living in conditions of poverty before Hurricane Mitch--a situation aggravated by the application of structural adjustment policies which dictate, among other things, acute cuts in public spending. Tragically, from the lakeside communities of Managua to the country's rural communities, it is precisely the poorer sectors that have been most affected by the recent disaster. The damage inflicted on a developing country, still struggling to pay off the crippling foreign debt while it emerges from a war and a long economic crisis, could prove to be devastating.
The already insufficient infrastructure has been badly battered, with roads, bridges and basic services terribly damaged. The Nicaraguan President claims that Nicaraguan development has been set back at least 30 years, although even before the hurricane struck the country had fallen 20 or 30 years behind the 1977 growth levels as a result of a war and the economic problems of the 1980s.
Structural adjustment programmes are precarious because they are blanket approaches which ignore the enormous differences between debtor countries, and do not always give priority to social and political contexts. If democracy is to mean anything, it is surely right to permit countries to shape their economies and societies, rather than to abandon the process to the dictates of the market alone.
The claim is often advanced that Governments can do little to alter the twists and turns of world markets, but that is wrong. Globalisation is not like the weather; it is not a natural phenomenon that we are unable to change. It is a systematic framework, which we have created and which can and should now be changed. We have global problems that will require global solutions. In short, we need greater change to harness extremes.
We must examine the volatility of international financial markets and their speculative pursuit of short-term gain and profit, over and above the welfare of some of the world's poorest regions. Some have suggested that a global tax on currency speculation, such as that proposed by the economist James Tobin, may be an example of the regulation that could render world markets more stable and productive. There may be huge difficulties, but the idea at least deserves discussion--I put it no higher.
New forms of economic co-ordination are crucial and worthy of debate. Organisations such as the International Monetary Fund, the World bank and the G7 often operate with separate agendas. Policy making is fragmented. That is not as fanciful as it may seem; we need only to think of the establishment of new multilateral bodies such as the World Trade Organisation.
By linking such bodies to measures aimed at alleviating avoidable economic suffering--by radically reducing the debt of many developing countries, and by generating new economic facilities at organisations such as the IMF and the World bank for development purposes--we would
create the basis for entrenching global economics in a set of humanitarian and democratic mechanisms and procedures. The fundamental challenge is to improve the flows of high-quality investment that make a positive contribution to the host country's development path. That must include long-term commitment to the communities most affected by that investment.
The less-developed world needs more buying power, more aid transfers on generous terms and more intelligent support in its efforts to alleviate chronic poverty. Jubilee 2000 asserts that
Until the poor are brought into the international system with real influence, the global economy cannot be stable for long. The G7 countries plus the rest of the European Union represent a mere 14 per cent. of the world's population, yet those countries have 56 per cent. of the votes on the IMF executive board.
Change will not be easy, but come it must. Kofi Annan, the Secretary-General of the United Nations, has already called for a UN role in financial reform. I believe passionately that that is possible and that we must make speedy progress. For the good of the world, we need a dialogue of rich and poor, working in partnership.
My right hon. Friend the Prime Minister was right when he told us of the new role for Government in economic management, which I applaud, and measures that combat social exclusion and create a society of opportunity extended to all. We should employ the potential of all our people because we cannot tolerate a society that writes off its potential work force through poor education or social exclusion. There still remains an economic case for tackling poverty and unemployment at home and abroad.
Mr. Ian Taylor (Esher and Walton):
The right hon. Member for Coatbridge and Chryston (Mr. Clarke) has obviously worked hard on his speech and thought the issues through. In respect of the Gracious Speech, he was clearly referring to the privatisation of the Commonwealth Development Corporation as one of the measures that he welcomes.
"for every one dollar in aid given to developing countries, eight dollars comes back in debt service."
According to the 1997 United Nations Development Programme human development report,
"relieved of their annual debt repayments, the severely indebted countries could use the funds for investment that in Africa alone would save the lives of about 21 million children by 2000 and provide 90 million girls and women with access to basic services."
That is a powerful challenge to us all. Thus far, the global economy has excluded far too many. This year's UNDP human development report tells us that the poorest 20 per cent. of the world's people have been left out of the consumption explosion. Globally, the 20 per cent. of the world's people in the highest income countries account for a massive 86 per cent. of total private consumption expenditure. The poorest 20 per cent. account for a minuscule 1.3 per cent. Moreover, the least-developed countries account for about only 0.5 per cent. of world trade and investment. If that is not global exclusion, I do not know what it is.
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