PRESIDENT NYERERE IN MELBOURNE

SPEECH BY PRESIDENT NYERERE AT THE COMMONWEALTH CONFERENCE IN MELBOURNE, 2nd. OCT. 1981

None of us here needs any convincing about the seriousness of World Poverty. We are all aware of the reality and seriousness of it. It is true that the statistics about 700 or 800 million people living in conditions of absolute poverty are both dry and imprecise. But in reality they are statistics about human beings. They mean babies dying of malaria because the dispensary has no drugs and the state no money to provide those drugs; they mean peasants and workers weakened by hunger and disease failing to produce with primitive tools enough food for their families next year; they mean an export crop failing to get to the port where it can be sold, because there is no foreign exchange to buy the spare parts for the wagon which should carry it; they mean primary schools and even universities lacking textbooks; they mean millions of unemployed or under-employed men and women without unemployment benefits or any form of social security; and quite often they mean millions of people dying every year because they have nothing to eat.

None of us here suffers personally from absolute poverty. But to those of us whom history has condemned to the management of poverty, poverty is an agony all the same. It is in the context of such realities of poverty that I try to speak.

Each of us here is responsible for dealing with the problems of our own people. Some of us are trying to do that by pursuing monetarist policies, some through Keynesian policies, and some by socialist policies of direct control over the physical movement of goods and money, and others through a hotch-potch of all those. We all make things marginally better or worse for our citizens – and in the process often make things worse for those in other parts of the world. But this endeavour to ‘put our own house in order’ is analogous to householders trying to defend their individual homes against an encroaching sea. It cannot be done. Their only hope is to combine to build a breakwater which would divert the water from that coast.

We live in One World, united as never before. The inability of Third World countries to buy manufactured goods means reduced effective demand in potential markets and therefore increased unemployment in the industrialised countries. Unemployment there means less demand for the primary commodities produced by developing nations, which can then buy still less from the developed countries. The endeavour to protect particular industries of the developed world through tariff or non-tariff measures (including so-called voluntary agreements) means that newly industrialised nations can earn less foreign exchange with which to buy other manufactured goods, and another turn is taken in the world’s downward economic spiral. These are over-simplified but still true examples of the links between developed and developing countries. But from our point of view there is another side to this story, which affects us first – and worst – but also spins back to affect the North because it further impoverishes the South.

The price at which cotton is bought and sold in the world is determined by the workings of the international free market; countries of the South learn what the prices will be by listening to reports from Britain, USA and Europe. The cost of producing that cotton is completely irrelevant; so is the cost of living of the worker or peasant in the cotton fields. On the other hand, the prices of lorries, tractors, railway wagons, fertilisers, etc., are all determined by the producers – the transnational corporations and other firms. And the prices they quote do take account of the increased oil costs, and of ‘cost of living increases’ for their workers. The result is that poor countries almost always buy dear and sell cheap. Mrs. Thatcher yesterday pointed out that relative prices affect income distribution. I agree! But I add that this is not a new thing, which began with OPEC. Nor is it confined to the relative prices of oil and other things. Through changes in relative prices the Third World countries have for many years been paying economic tribute to the industrialised states. Now we are doing so to the oil producers as well. In both cases there is a transfer of income from the poor to the rich – or at least the richer. For example, we have estimated that between 1912 and 1980 Tanzania’s terms of trade deteriorated by 21.5% when oil is left out of account. When oil is included they deteriorated by 35.7%. Putting this in real terms, a country like Tanzania had to sell 38 tons of Sisal, or 7 tons of cotton, to buy a 7 ton truck in 1912. In 1980 that truck required 134 tons of sisal or 28 tons of cotton.

Again I stress: this constant impoverishment of the poor affects everyone. The modern world economy is built upon trade, and a salesman needs prosperous customers. Moreover, the poor do have power to disrupt the world economy even now. When further intensification of poverty causes social, economic and political disorder in Third World countries, supplies of essential raw materials may be interrupted. And such disorders are not without their relevance: to world peace, for they provide fertile ground for foreign interference.

Considerations such as these have led the world to make an official commitment to an attack on world poverty. But there is little agreement about how to carry it out, and the existing international economic institutions seem to be incapable of conducting it. Leaving aside political questions, only a small number of Third World nations have in private hands the kind of wealth which could start modern productive activities, and most of us, especially if we have no valuable minerals, are not very attractive to foreign private investors. Tanzania’s position may be especially bad in this respect, but few developing countries can provide the economic infrastructure a modern enterprise requires for efficiency and profitability. In any case, many of the jobs which need most urgently to be done take decades and billions of dollars of investment before they begin to yield any financial return to the investor.

The Bretton Woods system of international financial institutions was established at the end of the last World War. Naturally it ignored the needs and interests of Third World countries, most of which did not then exist as separate political entities. Even within its intended framework, however, its effectiveness in promoting stability and growth had begun to crumble before the problem of oil surpluses surfaced in 1974. The modifications of practice, and the introduction of the International Development Association in 1960 and the Special Drawing Rights in 1969, have been grossly insufficient to meet changing needs. The IMF and the World Bank have not been able to prevent the present world recession, nor to deal with the problem of Third World poverty and its impact upon the world economy. Indeed, these institutions are, even now, not regarded by the nations which control them as being instruments of development. Yet we cling to the status quo.

The World Bank capital/loans ratio remains at 1:1, so its lending at normal rate remains severely limited; IDA virtually ran out of money last year, and still cannot consider additional projects ‘in the near future’. Allocations of SDR’s have been so modest as to make little impact upon world liquidity, and a link with development has been denied. Ordinary IMF credit is so tied up with conditions (most of them highly political), bearing little or no relations to the circumstances of poor countries, that Third world country drawings from it are usually only a small proportion of the credits agreed after months, sometimes years, of bargaining. In fact there are many years in which Third World countries make a net payment to the IMF!

In short, the International Financial Institutions as at present constituted do not reflect the realities of financial power or financial needs in the world. Further, there are indications that they will be allowed in the near future to do even less than they have been doing until now, – that IMF and World Bank conditionality may be tightened, and that no new S.D.R.s will be issued on any basis. For we cling to the Old Order.

There have, of course, been many discussions about the economic crisis, and particular crises within the total framework, and many helpful organisations exist on a functional or geographic basis. But unfortunately, to the extent that we try, in isolation, to deal on a regional or specific basis with problems of international indebtedness, inflation, energy, unemployment, or poverty generally, we are doomed to lurch from one problem to another, and the world economy to remain depressed or at least unstable. For each of these, and of our individual national problems, are but symptoms.

At the same time as we try individually and in groups to alleviate them, we need to tackle the basic causes of them all. That means re-examining, and where necessary, changing the international economic framework which shapes (and to some extent controls) our interaction with one another. This overall re-examination can only be done when all states work together through Global Negotiations under the auspices of the United Nations.

Global Negotiations are not in themselves a magic formula and they will get no-where unless they have an agreed purpose. That purpose must be to introduce greater stability and greater justice into the world economy. Those two things – stability and justice – are linked. In the long run neither is possible without the other, and both require ordered and orderly change in present practices and present institutions. But obviously these are difficult and complicated matters. Underneath the framework of those objectives, and in the light of them, we have to specify key and priority areas of attention – and give it to them. I think there is general agreement here at least about the areas of emphasis.

First, it seems obvious that the world’s existing financial institutions and arrangements are inadequate and – I would say – ill-designed to cope with the existing financial and economic problems. Certainly they are no longer able to cope with the huge oil surpluses on the one hand and terrifying and intractable deficits on the other hand. Nor do they help us, nationally or internationally, to deal with the problems of rapid inflation alongside widespread unemployment. We all have our own ideas about how the machinery needs to be altered; what is probably required is a new Bretton Woods Conference to examine the many proposals already made, and to design a new financial order on the ruins – and where possible with the building bricks – of that which was created to deal with the problems of the 1940s and 50s.

Secondly, we need to look again at the whole question of international trade, including problems related to access to markets, prices and pricing methods, and so on. It was originally proposed in 1945 that an International Trade Organisation should be created. Instead we have GATT, UNCTAD, and the endeavours to regulate trade in particular commodities in isolation. It is true that we also have STABEX and the I.M.F. Stabilisation Fund etc., but these are too limited in their scope. Also they deal with fluctuations in money prices and not with those changes in real values which affect international trade in the long run and the health of individual economies in the short run. Another look should be given at this whole question, and at the institutions which are necessary to ensure the kind of essential ‘stability and justice’ which is at the heart of a healthy world economy.

Thirdly, there is need to do something about the present levels of food production and food consumption. Increased production of food is essential; it is absurd that while millions go hungry the per capita production should be decreasing in many countries. But increased output of food in the Third World requires investment – in research, in the production and spread of improved tools, in education, in water conservation, and in power. Yet already we have experience of food rotting in one place while people starve in another country or even a hundred miles away. For unfortunately assured food consumption also involves investment. It requires storage capacity, and transport, – and workers who have the purchasing power to make their demand for food effective in the market place.

And finally, Energy. At present we leave its development, and access to it, to the chance of political events and of economic or military power – the location of which change from time to time. We need some kind of ordered plan and system for the development, exploitation, and distribution of both renewable and non-renewable energy resources . And we also need, very urgently, help to the oil importing Third World countries so that they can develop their own energy supplies. Both of these things can be worked out, once the whole world has recognised that all of us have a direct interest in doing so.

None of the problems under these headings can be dealt with except by the combined efforts of the developed and the developing nations working together – if not on terms of equality since we are so obviously unequal, at least on terms of mutual respect. All of the problems will demand the deliberate application of existing world resources of men and money, and the creation of new resources directed towards their solution. And all of them will take a long time, both in the preparation and in the implementation of the plans which are worked out.

However, the desperate economic situation of poor countries cannot wait while we work out and develop new international finance and trading patterns and new international economic relationships. These long term solutions will require a change from the present pattern of charity for poor nations, to a pattern in which the world’s resources automatically flow more evenly between the rich and the poor countries. Instead of the uncertainties of ‘Aid’ we need a large element of automaticity in the transfer of resources from the weal thy to the poor, whether this is done through a system of international taxation, through an S.D.R. link, through the exploitation of the Global Commons for the benefit of the disadvantaged, through a reduction of armaments expenditure and its use for development, or by a combination of all these things.

But in the meantime, an increase in international credit and in Aid is essential for both the poor and the rich countries. I am speaking quite deliberately when I say “for both the poor and the rich countries”, because such credits, and Aid itself, are mostly spent on goods and services from the developed countries, and thus reduce their present problems of unemployment and social unrest. For the kind of Aid and Credit we are talking about is not a redistribution of wealth in the social services sense. It is an application of resources to investment – and investment which will enable the poor nations to increase their own wealth-production.

I have heard the arguments about international credit fuelling inflation, and the necessity to reduce Government expenditures etc. But I confess that to countries like Tanzania these arguments seem to miss the point. For in poor countries like mine, with a chronic balance of payments deficit, inflation is primarily derived from increased costs – either of imports, or from the higher unit costs of our own production caused by lack of those essential imports for which we cannot pay.

There is also the fact that all members of the United Nations are committed to allocating 0.7% of their G.N.P. to Official Development Assistance. Yet we hear instead of plans for cuts in budgetary allocations for Aid, even by countries which were already very much below that target. There is also talk of Using Aid even more deliberately as a political weapon in the East/West conflict!

It is in this political environment that we meet today, and we prepare for the meeting of North and South leaders at Cancun in Mexico. Some people are very sceptical about that Meeting. They point out that when it was first proposed there was at least the prospect of an early Law of the Sea Treaty, that Interest Rates and Unemployment in the Developed World were lower, and so on. Yet despite the importance of the political set-back, the very intensity of the present problems makes clearer the need for all of us to face up to the present economic disorder and to begin to deal with it. To waste this unique opportunity would be to say that only after the catastrophe of a world war are the leaders of the Globe capable of an imaginative reorganisation of our affairs – and another war might not leave that possibility open to us. Of course, the Cancun Meeting is not structured for negotiations. But it can and it must create the opportunity for constructive Global Negotiations with clear and stated objectives, with priorities of action laid ,down, and with a stated time-frame which is oonsonant with the urgency of the problems.

Neither the depressing statements made recently on these subjects by representatives of the United States of America, nor the refusal of the U.S.S.R. even to attend Cancun, should be allowed to turn us from working to make Cancun a success. The Superpowers have great importance; but they are not the world, and they are not uninfluenced by other voices. Seven leaders from the Commonwealth will be present at Cancun. We shall have no authority to speak for anyone except ourselves, but I for one hope to learn from my colleagues at this Meeting. And I firmly believe that a clear and united call from this Commonwealth Conference, setting out what we expect Cancun to achieve, could even now help to make a success of that North-South gathering.

But the Commonwealth should not rest content with that. As a group of countries we can work together in ways which will alleviate immediate problems and make some contribution to the long-term advance. For example – and I stress that it is only one example – we could (and I believe we should) expand Commonwealth Technical Cooperation arrangements through which we can learn from each other’s experience; we should strengthen the Technical Assistance Group of the Secretariat. Tanzania at least, has found both of these to be of very great assistance, and they are very cost-effective. I hope that we shall give proper consideration to all positive suggestions for increased Commonwealth activity in these and other fields.

Mr. Chairman: my basic purpose has been to suggest that we in this Commonwealth meeting are not helpless in the face of world economic problems. By acting together, and speaking together, we can help ourselves to deal with urgent economic problems. Also, we have the ability to nudge the world some degrees towards the evolution of a stable and just economic order, to the ultimate – and indeed the immediate – benefit of us all.

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