Examination of Witnesses (Questions 200-215)
MR ANDREW
SIMMS AND
MR DAVID
WOODWARD
5 MAY 2006
Q200 Chairman: I wonder if there
is any relatively brief report—that is a whole new area
of inquiry which the Committee might want look at in its later
inquiries—on that particular subject that you could send
us or refer us to? We would be very grateful.
Mr Woodward: I will have to think
about that. I am not sure there is anything which brings together
all of those components very effectively.
Q201 Chairman: Can we briefly move
on to Africa and agriculture. In your Africa Report one
of the main conclusions was there needs to be: " . . . dramatically
increased small-scale agriculture and an approach to farming based
on maximum appropriate diversification". How does this fit
in with the greater emphasis being put on agricultural production
for exports which is coming from DFID? I notice in one of their
recent reports on the benefits to the trade they cite an example
of Ethiopia growing roses for export to the European market, I
think, which seems to me slightly incongruous. Those seem to be
the things that they were prepared to laud in their report. Is
that the right and appropriate kind of thing that Ethiopians should
be doing?
Mr Simms: There are a number of
things to say about them, and we may both have something to say
on that. First of all, there are some obvious anomalies around
the rise of luxury horticulture, partly because on a very simple
level, sometimes at the local level, there may be a competition
for natural resources, there may be competition for access to
water, and luxury horticultural products, and flowers in particular,
are enormously thirsty plants. There are other questions about
the balance of benefits from that type of agriculture which filter
back or do not filter back to the local community and what the
balance of benefits there is. In facing a future in which the
resilience and the coping strategies of these subsistence agricultural
based economies are seriously under threat, first and foremost
should be the circumstances in which their own livelihoods can
be secured. There are a number of questions you would want to
ask about the characteristics of an agricultural economy to identify
what is going to be more resilient than something else. Typically,
issues of productivity are going to be very important because
if rainfall drops productivity is threatened. We know for a fact
that more diverse multi-cropping systems are more productive than
mono-cropping systems, and the characteristics of the export market
are usually dominated, because of the kind of technology involved,
by mono-cropping systems. I think a vision of development based
upon secure livelihoods in a subsistence agricultural economy,
that the characteristics of that economy are not those which immediately
leap to mind when you think of luxury horticultural products perhaps
flown to Britain, et cetera, where the benefits going back to
the local economy are themselves questionable. There are some
very serious questions to be asked there about what model of agriculture
is going to give people the most secure foundations for coping
in an increasingly hostile climate.
Mr Woodward: Again, I want to
come back to the global level. In a sense, there are two different
issues, one is what does it make sense for an individual country
to do, given the circumstances that we have at present and the
system that we have at present? and the other is, what is the
collective effect of those individually rational actions? Within
a very trade-focused system the model which is applied is effectively
assuming that the global economy is a bottomless pit into which
one can dump unlimited amounts of a relatively narrow range of
products. Again, if you look at sub-Saharan Africa, there is a
fairly narrow range of products in which they have a potential
comparative advantage, which largely comes down to natural resources,
primary agricultural commodities, and a few labour intensive manufactures,
such as textiles. For the individual country, it makes sense to
export more and more, because that will have a relatively limited
impact on the world price. But if you apply that to an entire
continent, or to the entire of the developing world, the effect
is to flood the world market and depress prices. Looking at, for
example, cocoa producers as a whole, if one country doubles its
output it will very nearly double its export revenues. If they
all double their output they will probably half their export revenues
because the world price will fall faster than the overall production
increases. What we have is a model of competitive development
in terms of exports. It is not enough for a country to export
more, they have to increase their exports by more than everybody
else, and by a large enough margin beyond everybody else to offset
the price fall.
Mr Simms: I will briefly interject
to say what the outcome of those kinds of circumstances is. In
the 1980s, the decline in terms of trade for the least developed
countries in terms of its financial impact was roughly equivalent
to the scale of the least developed country debt which we are
still living with today.
Q202 Chairman: You have called for
Africa to be free from this one-size-fits-all approach to development,
how do you see that change coming about? Will it be from Africa
internally or does it have to come from outside?
Mr Woodward: To a great extent
I think it is about policy space. Again, over the last 25 years
the extent of discretion which countries have over their own policies
has been substantially reduced through IMF and World Bank programmes,
in conditionality, through the dependency that has been created
by the debt crisis and by its continuing effects, by WTO agreements
and by pressure on countries to negotiate bilateral trade and
investment agreements. The scope for an individual country to
break with the model—unless you happen to be Venezuela and
you have large quantities of oil, that makes a big difference—each
individual country has an incentive to play along with the system,
and that undermines the potential for solidarity among countries.
One could dream about that and move towards solidarity among sub-Saharan
African countries to develop collectively an alternative approach,
but as long as the system as a whole is skewing their incentives
and limiting their policy scope, that is going to be relatively
limited. One could look towards a regional move in that direction,
but we need to create the conditions in which that can happen,
because those conditions do not exist at present.
Q203 Chairman: You have also called
for assistance for Africa to leapfrog dirty developments, which
I assume is all the fossil fuels that are causing so much of the
climate change problem. How can they do that and still develop
because they do not seem, from my own personal perspective, to
be getting very much assistance at all? The clean development
mechanism is not delivering very much for them, for example.
Mr Simms: That is right. I should
put it into context by saying that even if it was the case that
on a per capita basis emissions in Africa, and especially sub-Saharan
Africa, increased dramatically they would still be light years
away from the level of per capita emissions that you see in middle
income countries or the advanced industrialised economies. Emissions
from continents like Africa are not a problem in the global picture
at the moment, however there are countless other benefits from
looking at providing the energy for development in a different
pattern, in a more decentralised pattern, in a way in which communities
have greater control over their own power supplies. There are
countless reports of large-scale grid failures and of the access
to energy being restricted to elite and relatively small minorities
in developing countries. Part of the call for the leapfrogging
dirty development is also a positive call for a better model in
which the people who need it can get access to energy. Africa
is rich in natural energy resources, and the scope for renewables
there is enormous. Perhaps only very slightly tongue in cheek
we pointed out that the scale of subsidies going to the fossil
fuel industries just within the OECD countries at the moment was
substantially greater than the entire OECD's contribution to bilateral
aid, and that one step might be to make the resources available
for developing countries to develop in a climate friendly and
climate proof fashion at least equal to the scale of subsidies
going to our own domestic fossil fuel industries. There is a question
of resources, there is a question of roll-out and there is a question
which is quite similar to the one in terms of making resources
available through the agricultural extension services to small
scale farmers in Africa. It is not that the technology is not
there, in fact, the scale of innovation—I am part of a judging
panel of something called the Ashden Sustainable Energy Awards—we
are seeing at the local level in many African countries is incredibly
impressive. What they lack are the resources for roll-out. I feel
energy has been the poor relation of development policies. Development
policy agendas tend to be dominated by the traditional concerns
of health and education. It is sometimes missed that you need
energy to run all these things. I think we can benefit a lot from
pushing energy up the Development Agenda.
Q204 Chairman: Did the World Bank's
extractive industries review make any difference or is it yet
to deliver?
Mr Simms: The review itself came
up with some quite profound recommendations which would have seriously
changed the nature of the Bank's energy lending portfolio. It
was a great disappointment that the Bank hierarchy rejected its
more ambitious proposals for phasing-out money going to dirty
energy industries. I think the review itself has been a missed
opportunity. It was a very good and quite comprehensive review
and it is a great shame that its more important recommendations
were quietly shelved.
Q205 David Howarth: Turning to DFID's
approach, which you have been very critical of in print and in
your submission to us. You have been talking about their outward
oriented neo-liberal approach and presumably that is the story
you told about cocoa, that would be the meaning of that. Can you
say a bit more about that because the cocoa example must be quite
an unusual one? The conditions under which it is true that income
falls when capacity expands are quite specific, are they not,
the elasticity and so on? Can you talk about other sectors of
the economy and why that approach does not work?
Mr Woodward: They are quite specific
but they are specific to most primary commodities and, most particularly,
tropical agricultural commodities and also some mineral commodities
like copper, for example, which Africa has. If you have price
inelastic demand then that will be the case. That applies across
a large proportion of Africa's exports at present.
Q206 David Howarth: You are saying
that this approach of prioritising export-led growth does not
work for the type of commodities that developing countries are
going to specialise in?
Mr Woodward: Exactly so. As I
say, it might make sense for one individual country, but not to
do it as a blanket approach, which is essentially what the IMF
and the World Bank have been doing since the structural adjustment
came in in the early 1980s. They were in a position to exert some
kind of co-ordinating role, so as to encourage developing countries
to act in their collective interest rather than in their individual
interest, instead of which they pursued exactly the opposite approach.
To a great extent they are still doing it 25 years on.
Q207 David Howarth: You have also
pointed to some extraordinary distribution problems with the growth-led
approach. The figures you quoted, I think, in your report of Growth
Isn't Working was that only 60 cents of each $100 per capita
growth went to the poor in the 1990s, that is 0.6%, which is extraordinarily
low, and that was way down from the 73% in the 1980s. These are
extraordinary figures. Can I ask you how they were arrived at
and how robust they are?
Mr Woodward: In terms of robustness,
the first thing to say is that poverty data are less than perfect—more
so than most economic data. There is always a danger in the tendency
to think, "Here is a number, therefore we will believe it".
There is a degree approximation. The data which we used is from
the World Bank's own data set, so it is the generally accepted
and used data. Essentially, what we did was combine two sets of
data both from the World Bank, one set of data on the gross national
income of the world as a whole, and we looked at how much that
increased over 1981-90 and then 1990-2001, then we looked at their
POVCAL data set to see how much the incomes of the poor, below
the $1-a-day line and below the $2-a-day line, increased over
the same period. Then we took the increase in the incomes of the
poor households as a percentage of the overall income in gross
national income globally.
Q208 David Howarth: Is there any
indication that is continuing into the present decade?
Mr Woodward: It is very difficult
to tell. Unfortunately there is also a very long time lag, because
of the nature of the data in the poverty data. I think there is
a good chance it is continuing.
Q209 David Howarth: What hypotheses
do you have to explain that trend if it is the trend?
Mr Woodward: Again, to a great
extent, it comes back to development paradigm that we have been
developing over the last 25 years. In effect, what we have done
is to step away from policies which are directly aimed at reducing
poverty or providing free health and education services and social
provision and social protection, in order to increase economic
growth. We have sacrificed those distributional concerns in order
to promote growth, but at the global level we have not seen any
increase in growth. The result is, firstly, we do not have any
more growth and, secondly, we have a sharp reduction in the share
of that growth which is going to poor households.
Q210 David Howarth: How does your
solution then work? You looked upon a regionalisation solution,
which must be a reversal of what one might call the crude globalisation
policies followed by the WTO, the World Bank and IMF. How does
that help?
Mr Woodward: In terms of what
we are proposing, a great deal of it is about changing mentality.
A lot of the problem is about this fixation we have developed
with economic growth as the be all and end all. The idea is "If
you have more growth, you have more resources with which you can
do what you like", but the way you get that growth is by
limiting what you can do with those resources. You are always
prioritising next year's growth over current redistribution. For
me, a lot of it is about getting away from that fixation about
growth, because economic growth is not in itself good. It is good
if it contributes to improving people's lives and remaining within
our environmental means. If we want to achieve poverty eradication,
then we need to prioritise poverty eradication and not go for
economic growth on the assumption that poverty eradication will
somehow come about as a by-product of that. On the current trends,
if we continue with the present rate of economic growth, the present
distribution of the benefits of growth and the present rate of
reduction of the carbon intensity production and we go on like
that until 2050, on the one hand, we will be at four times the
sustainable level of carbon emissions in 2050. Instead of falling
by 60% they will have increased by 60%. And, at the same time,
we will still have 550 million people, including a quarter of
the population of sub-Saharan Africa, below the $1-a-day poverty
line. The way we are going is simply not going to eradicate poverty
or come anywhere near it in the next 45 years, neither is it compatible
with what we need to do in terms of climate change. Even if we
reduce the carbon intensity production, it is still not going
to be enough. If you look at the effects of the oil price shocks
of the 1970s and compare the rate of change for carbon intensity
production between the 1960s and the 1980s, over two decades,
it was a fall of 1% per decade. If we were to double that rate
of improvement, so we do that every decade from now on, and to
continue that indefinitely, we would still be 50% above the sustainable
rate of carbon emissions in 2050 and we would still have the problem
of 550 million people in poverty. This technological optimism
is not a solution.
Mr Simms: I would underline that
by saying that every single scenario looking at the likely trajectories
of climate change shows that we will be moving in the direction
of triggering irreversible feedback mechanisms in the environment
which will basically move the problem of global warming beyond
the wit of our political masters to do anything about it. Every
single economic scenario that I have seen at any rate of growth
in the global economy pushes us beyond that point.
Q211 David Howarth: That raises a
number of different points and I will take them in order. There
still needs to be change in the global economic structures and
is that not really difficult to achieve? You talk about the reform
of global economic structures as a necessary element of what you
are talking about, but the way these things work there are all
sorts of vetoes that will stop that even if it is unrealistic
to expect that sort of change and we would find some way of adapting
what we have got rather than just calling for a radical solution
which is not likely to happen.
Mr Simms: Again, we will probably
both say something about that. Suffice to say, obviously where
you have got the major institutions involved—David has seen
this at first hand—you have got to get the turkeys to vote
for Christmas in terms of getting that change and there are, no
doubt, major institutional blocks. In terms of whether it is realistic
to hope for that or not, I suppose I would fall back on the notion
that is it realistic to not plan for the necessity of that happening
because the other reality that you are left with is an entirely
unacceptable, unsupportable and environmentally unsustainable
one, so we have to try every strategy in the book to get it to
come about. There is often a belief in my sector very much that
change is a rational policy process and I feel that we have been
let down on that on a number of occasions. The challenge I accept
to us is that we are going to have to get far more creative in
making our point and trying to get the message across because
it is not really working at the moment.
Mr Woodward: I would agree. As
you say, it is profoundly difficult. It is the constant dilemma
of political reform that you have to get the changes to an undemocratic
system through that system and that is a slow and painful process.
Having said that, it is a process that we have achieved at the
national level, that is why we are sitting here today. But there
are quite fundamental problems in the whole system of global economic
governance, that the IMF and the World Bank have a majority of
votes coming from the developed countries, even though the developed
countries are only one-sixth of the world's population and the
IMF and World Bank policies hardly impact on us at all. They have
far greater impact on those five-sixths of the world's population
who are under-represented. In the WTO, the formal rules, are much
more democratic but the process by which things happen effectively
ignores the rules completely, and most of the decisions are taken
behind closed doors in secret meetings with arm twisting and inducements,
in a process which would be regarded as scandalous at the national
level. In terms of achieving change, I think we need to highlight
the double standards. It is going to be a slow process, but I
think by drawing the contrast between the way in which the international
institutions operate and the basic minimum standards that we expect
at the country level, we can create a pressure for real change.
We would not think about operating a national government system
as we operate the voting structures of the IMF and the World Bank
where people's votes are weighted according to their income. As
a result, Mozambique, whose economy has been virtually run by
the IMF and the World Bank for the last 15 or 20 years, has a
population of about 19 million, but they have fewer votes in the
IMF and the World Bank than Iceland, with a population of 300,000
who are virtually unaffected. That is clearly undemocratic, and
scandalously undemocratic. Yes, it is a slow process, but I think
if we can highlight those double standards then there is the potential
for change. I think not changing is not an option. As long as
we go on in the way we are, we are in deep, deep trouble.
Mr Simms: It is almost as if we
are prepared to accept at the international level a form of governance
which is perhaps more akin to pre-civil war England than we are
here. On a more positive note- it sounds terribly negative—perhaps
there is a lot more to be made which is capable of shaming some
of the industrialised economies into better performance by looking
at some of the best practice in developing countries. For example,
there are substantial areas, whole islands in the Sunderbans in
southern India, where they are committed to shifting to 100% renewable
energy and are well on the way. Some of the greatest innovations
in terms of running your economy on clean energy lines are happening
in the developing world. There are good new stories out there
but there are these huge blocks at the macro-level.
Q212 David Howarth: On the one hand,
you are optimistic in a way about the changing institutions but
the other thing you said was you were very pessimistic about technical
change being able to solve the problem of the relationship between
economic growth and climate change. Can you say a bit more about
that because it sounds to me as if the conclusion you want to
draw from that is that convergence and contraction is not going
to work just applied to carbon, what you are calling for is something
almost impossible to sell, which is convergence and contraction
in terms of economic welfare, or at least as a first contention
it would be fine.
Mr Simms: I would answer that
by saying I think we have got a very easy sell because what we
are selling is a planet fit for sustaining human life. We produced
another report recently called the UK Interdependence Report in
which we showed how Britain's dependence for its lifestyle relied
upon importing increasingly large amounts of very real resources
from the rest of the world, obviously leaving less for other people,
and this idea of living within ones means, which on a financial
level we might take for granted, we seem to not consider in the
same way environmentally. There is no doubt at the moment that
on the best available information we are overstretching our bio-capacity
certainly and the only way to solve that is at the global level.
The problem is we run up against the laws of physics when we trust
to technological solutions to our problems, that against a backcloth
of an ever-growing global economy any increases in technological
efficiency or energy efficiency are simply overwhelmed by our
total rising levels of consumption. There are basic laws of physics
that you run up against when you are doing that.
Q213 David Howarth: You could have
economic growth in the exchange of services which produce no further
burden on the physical environment at all?
Mr Simms: That is theoretically
possible, but it reminds me of the myth of the paper-free office
that we thought IT was going to deliver to us, and our consumption
of paper has gone ever up and up and up. There was some research
done in the Netherlands which showed that the rise of internet
shopping, for example, had increased the burden of traffic on
our roads. In theory these things are possible but in practice
they do not seem to happen. We need to measure what matters, I
suppose. The problem is, as we all know, it is a very long debate,
GNP/GDP are incredibly crude indicators, they really do not tell
you very much. They tell you that when it rains you get wet, they
do not tell you whether you are going to drown in a flood or whether
you are getting enough water for the plants to grow in your garden.
I think we need far more intelligent indicators that give us a
clearer picture of where we are going wrong and where we are going
right. Again, no data streams are perfect and there is an awful
lot to be done to improve the quality of statistics at the international
level, whether it is coming through the UN institutions or the
Bank and the Fund, but on the best available information we know
that we are already overreaching our bio-capacity in a range of
areas, whether it is in fisheries or in soil lost through particular
forms of agriculture, and we need to do something about that.
If we mean what we say about meeting the Millennium Development
Goals and the new deal that is promised to poor countries in the
global economy at every single G8 Summit that I have been to going
back more than a decade, then I see economies like the UK's like
a car badly parked in a supermarket car park taking up more than
just one parking space. If there is going to be room for people
from sub-Saharan Africa to draw in and go shopping we have got
to tidy up our act and release some space, release some environmental
space, in order that they do have the environmental space to develop.
It is also quite right to say that is an issue which is not restricted
to our use of fossil fuels, it is an issue which touches many
other areas of life as well.
Q214 Mr Vaizey: I was going to ask
what you thought of Hilary Benn and Richard Laing's rejoinder
to your Guardian article?
Mr Woodward: I have to say, I
was not terribly convinced, which is perhaps not terribly surprising
in the circumstances. I do not think they have fully addressed
the issue. The issue primarily is around global economic growth.
If we were to adopt policies which seriously and directly addressed
poverty, that would almost inevitably produce growth in any case
in sub-Saharan Africa. I do not have a problem with sub-Saharan
African economies growing, the main problem is with the model
that we have, which relies on global economic growth for poverty
reduction, because the links are too tenuous. Effectively, what
we have is a situation where poverty reduction is seen as depending
on growth in developing countries and developing countries' growth
has been made increasingly dependent on growth in developed countries.
We have created a need for developed countries to go on growing
more and more and more, whereas—and this comes back to something
Mr Howarth was saying—the increase in income within developed
countries is not really contributing to an increase in well-being.
So we are not calling for contraction and convergence in terms
of well-being, because for the bulk of the population—something
like 80-85% of the population of the developed countries who account
for maybe half of the world's income—further increases in
absolute income do not contribute to an increase in well-being.
We want to increase our incomes much more for our relative income
than for absolute income; it is more about status. If nobody had
a car, having a car would be a great thing, it is only because
everybody has got cars that we want three Porsches. We are on
what is called a "hedonic treadmill". We are all trying
to increase our relative income but by doing so we all increase
overall income, which does not leave any of us better off. It
is getting away from that need for ever faster growth in developed
country economies. In order to do that, we have to first break
that dependency. If we just switch the global economy into reverse
gear now, without doing anything else, that would be disastrous,
because we have spent 25 years creating a dependency on growth
in the developing countries. We have to create the conditions
in which that can happen.
Q215 Mr Vaizey: When the White Paper
is published would you like to see Hilary Benn do a spectacular
u-turn and say, "I am wrong"?
Mr Woodward: I would love to,
but I am not holding my breath. There is a need to recognise that
we are facing a fundamental problem here: that the way we are
going we are not going to eradicate poverty and we are not going
to deal with climate change. Eradicating poverty is a moral imperative.
The level and depth of poverty in the world today is absolutely
scandalous. Nearly half the world's population live below the
$2-a-day line. The $2-a-day line is equivalent to, in the UK,
19 people living on a single minimum wage with no access to free
health or education, or benefits, or borrowing, or access to savings,
or anything else. Nearly half of the world's population is living
below that level. A sixth of the world's population is living
below half of that level of income. That is scandalous. That is
a moral imperative. But, at the same time, dealing with climate
change is a practical necessity. If we do not deal with climate
change we are in serious trouble and we are very quickly going
to get into the situation where it becomes an irreversible process
with catastrophic consequences. Part of the reason why technology
does not look like being enough is that we have left it too long.
If we had started taking serious measures ten or 20 years ago,
we might have been able to do something about it. Now, the longer
we leave it, the more drastic the measures will be that we will
need to take in order to tackle the problem effectively. Again,
part of the problem comes back to the global economic governance
system, that we do not have effective mechanisms at the global
level which allow countries to take collective decisions in their
genuine collective interest from a long-term perspective. If we
had, then we would not have got into this mess.
Mr Simms: I would summarise by
saying that climate change in the context of development is a
different order of concern to questions of health and education
which are, of course, incredibly important, but one can argue
whether a health budget should be increased by £10 million
or £20 million or £30 million. When we are talking about
climate change, we are talking about averting a point at which
the problem moves beyond our wit to control it. If you look back
over the last 25 years, some of the poorest countries in the world
have been expected to go through profound re-engineering of their
economies in the face of financial debts, many of which we would
argue were dubious and as much the fault of the lending institutions
as they were of the countries that took the loans. Now we are
faced with a different kind of debt, we are faced with an ecological
debt, and it is up to us to hold a mirror up to ourselves and
ask in our far more comfortable and protected societies, "Are
we prepared to face the level of re-engineering of our own economies
to deal with our ecological debt that we have expected some of
the poorest countries in the world to do in the face of far more
questionable financial debt?"
Chairman: Thank you very much for that
very enlightening session. We may have a couple more questions,
if we can send them in writing to you, that would be great. Thank
you very much.
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