Meeting point

DR MAHBUB UL HAQ

Special Adviser to the UNDP Administrator

'People are the most precious resource of any nation'

When Dr Mahbub ul Haq of the United Nations Development Programme spoke recently to members of the European Parliament's- Development Committee in Brussels, he set out a number of challenges: how to ensure 'people-participation' in decisions which affect their destiny, how to tackle the problem of jobless economic recovery' and perhaps, most ambitiously, how to create a new institutional framework with the capacity to tackle global economic and environmental issues.

- Dr Haq, who was Finance and Planning Minister in the Pakistan Government from 1982 to 1988, and who previously worked as Director of Policy Planning at the World Bank, also had an uncomfortable message for the industrialised countries regarding their impact on the world environment, and the role of their banks as custodians of cash 'pilfered' by corrupt Third World leaders. In this interview. he elaborates on these and other issues.

- Dr Haq, what would you say are the most important factors m achieving development ?

- In my judgment, the most precious wealth of any nation is its people and it is investment in those people that can turn around the economic destiny of nations. Of course you need natural resources, and some countries, like the oil economies and those with minerals, have done well on that basis. But even among these countries, with their high incomes, you can see that most of them have not been able to institutionalise growth. It is often more like a windfall than a permanent income. That is why I would put investment in people, in human capital, as the most precious resource of any nation.

- I think that the most successful humanbased development models have come from Japan and East Asia. These were the first examples and now we see President Clinton trying very hard to initiate something similar in the United States by investing in people or, as he calls it, 'putting people first'. This will be done by retraining workers, investing in techonology, and providing scholarships for education. His programme is very much aimed at duplicating the Japanese and East Asian successes. This issue of investment in people is, as you know, the central theme of our Human Development Reports and it is not surprising that I single that out as the most important factor of development.

- In your speech to the European Parliament, you spoke of a 'restless urge on the part of the people to participate in the events that shape their lives'. What, specif cally, do you think can he done to satisfy that urge ?

- I think that the possibilities are manifold. First, in order to satisfy the urge of the people to participate in the events and processes that shape their lives, one will have to change the concept of development. In other words, there needs to be more human development and not just simply economic growth.

- Secondly, one has to decentralise government and bring it closer to the people. People are no longer prepared to bow to the dictates of a far-off centre. Nowadays, one is seeing increasing ethnic disruption and political violence and, at the end of it, what people are saying is that they want political and economic power to be shared with them. So effective decentralisation of power, believe, becomes very, very necessary. Unfortunately, from our analysis in many developing countries, only some 10% of the expenditure at the moment is decentralised, compared to 40% in the industrial countries, so there is obviously a long way to go.

- Thirdly, I think it means giving a much greater role to non-governmental organisations which represent community efforts in many cases and which can mobilise the voluntary help and enthusiasm of the people.

But beyond all this, if you genuinely want to accommodate the restless urge of the people to participate, the real answer must be both political and economic democracy. Political democracy revolves around institutions of civil society, the rule of law, accountability, transparency and fair government. It requires a situation where people feel that they can influence events. This is the kind of democracy which is based not just on the counting of votes, but on real participation by people. You see even in industrial societies today that people feel they are unable to influence the processes that affect them. This has led initially to disenchantment, with voters not turning out. Now, at least here in the United States, where we have seen the Ross Perot phenomenon, people have suddenly been galvanised. The political parties had to respond to this during the election by going more directly to the people in talk shows and town meetings. President Clinton is trying to see whether he can involve people who feel they have been marginalised from government. So it is not just a simple matter of arranging multi-party systems. It is a matter of really involving people in all the institutions of civil society. That is something that will be a major theme in our next Human Development Report which is coming out in May.

On the subject of economic democracy, people, of course, want to participate in economic growth, in jobs and in the markets and what we find is that many markets are not people-friendly. They need to be reformed by creating conditions which equalise opportunities for individuals. The latter need education and access to credit to be able to enter the market on a playing field that is even.

We also find that many people are not participating in economic growth because jobs are not being created. This is a common phenomemon in Europe, as you know, and it is something that we will be looking at in the next Report. In Germany and France in particular, there has been a tremendous increase in output since the mid-1970s - I think it has more than doubled during the period 19751990 - and yet there is a fall in employment levels. Of course, on the positive side, that means that human productivity is going up and that is to be applauded. But on the other hand, it is an unfortunate fact that not enough people are sharing these productivity gains. The people who are left out don't want to live off unemployment and social security benefits. They become completely disenchanted. This dilemma of how to address the issue of jobless growth is one that the West will have to get to grips with and resolve.

'The debate is going back to the issue of jobs'

- Can I go a little further with you on this point. Given the cost of labour and the importance of competition in the liberal economic philosophy which currently predominates, do you really think it is realistic to expect policy changes that will give priority to job creation ?

- Yes, I think so. There was a period in the 1930s, after the Great Depression and the Keynesian revolution, when jobs and full employment moved to the top of the policy agenda, particularly in the industrial world. That, after all, was what was at the heart of President Roosevelt's 'New Deal'. And then we saw a period after the Second World War when there was almost full employment. Somehow, attention moved away to focus on growth, new technologies and markets but I think that now, the debate that is going on in Europe - particularly in Britain, Germany and France - is moving back to the issue of jobs. Certainly, if one looks at the debate in the United States, one sees that they are worried about jobless economic recovery. They see that recovery is coming but jobs are not being created in sufficient numbers and that is why President Clinton is talking about a 'stimulus package' - investments in people, which cover worker training, skills and the technologies of tomorrow. And I think it can be successful. After all, look at the contrasting experiences of Japan and of most of the other OECD nations. Japan, since 1975, has had less than 2% unemployment. The rate in Europe has been 7-10%

- Why has this happened? The reason is because Japan has been very careful to invest in people and training. They have prepared workers for the next generation of industries, carefully retraining them for structural change so that they can move into new industries in a systematic fashion. The situation has been very different in the USA and Europe, where there has often been tremendous resistance to change, because people in older industries are fearful of losing their jobs.

- You spoke about the nation state being 'too big for the small things and too small for the big things'. You have already covered the former in talking about the need for decentralisation, but what about the latter? Could you elaborate on that?

- Let me say why I think the nation state is too small for the big things. Look at interest rates. They are not set by nations any more. Every day, more than one trillion dollars crosses international frontiers at the push of computer buttons. No government can set its interest rates independent of global trends, because capital is moveable. Look at wage rates. Even in the developing countries, they now have to set minimum wages, working conditions and so. As such, growth policies in many developing countries are having to become capital-intensive at a time when there is plenty of labour. So they do get affected a lot by global trends. And look at issues like environmental pollution. No nation can handle this problem single-handedly; it needs all countries to cooperate. Look at issues such as drugs, or migration, or terrorism. Many of the problems are so globalised that unless there is effective cooperation between nation states, it will no longer be possible to handle them. In short, the problems of increased poverty and reduced prosperity are global ones; they travel across international frontiers without a passport.

- On a related point, you also raised in your speech to the European Parliament's Development Committee, the suggestion that there should be some sort of economic or development 'Security Council' under the auspices of the United Nations. Do you have any concrete ideas about what form such an institution might take?

- Yes, this is something which I spoke about and which we also raise in our Human Development Report. The suggestion we are making is based on the fact that most of the issues relating to human security in the new world situation are in areas like employment, education, health care and the environment. These are not issues for the political Security Council. They are emergencies, but not ones that need to be handled by soldiers in uniform. They need socio-economic professionals. So who is to handle them? Of course, nation states themselves, but what about the global level? Within the United Nations system at the moment, it is the responsibility of the Economic and Social Council (ECOSOC). But it has 54 members and is too unwieldy. Now there are a variety of ways in which an Economic or Development Security Council can be set up. One way, without disrupting the Charter or requiring it to be changed, would be to take the existing ECOSOC and set up a small bureau; an executive board of 15 to 20 members with good representation from both developing and developed countries, and from transition economies, but without the possibility of veto. Because you can't veto human needs. You may be able to use the veto in certain issues relating to the balance of power but to think of vetoing critical needs such as environmental safeguards, or the provision of food security for people, is not on.

- Would you envisage such a committee having a simple majority system for taking decisions?

- What we are suggesting for the Development Security Council is that there should be some checks and balances. Developed countries are not going to agree to UN decision-making unless they are certain that there are safeguards which allow their interests to be protected. Otherwise, developing countries may all get together and decide tomorrow on a cancellation of debts, for example. But that is something that can be built in, without necessarily having an individual veto. You can always have a system whereby any decision, in order to be ratified, may require a simple majority of both developing countries and industrial countries as separate groups, so that no issue will go through without at least a consensus being reached. There are many ways in which it can be done without giving an individual veto to nations.

- You have suggested that, if it is possible to have systems for taxing the rich within countries, there is no reason why it should not be possib1e to do the same at the global level. Could you expand a little on the thinking behind this ?

- I did suggest having a global system of taxation, the idea being that, since poverty and prosperity have become globalised, the solution must be found at that level. My feeling is that the first form of global taxation is going to come in the environmental field. The environment, or to put it more bluntly, the search for survival, is something which unifies us all. It is possible today - and we have been suggesting it - to place an energy tax right at the source. We have suggested a figure of at least one dollar per barrel of oil, which in itself would raise extra resources of about 50 billion dollars. One dollar a barrel may not be very decisive in curtailing consumption but it could be raised over time in order to ensure both energy conservation and a large source of revenue which would enable the developing countries to accelerate their growth, in an environmentally safe way, of course.

Another idea is to have traceable permits. Today, nations are polluting environments without having to pay the price. The principle that the polluter should pay has already been accepted within nations. The next step is to accept the principle that, within the global community, the polluting nations should pay. With what right do the rich nations emit 80% of the world's pollution when they only have 20% of the population?

And if they have to start paying for it, there will be an automatic transfer of resources to the poorer countries which have not yet reached that stage, who, in turn, will be able to adopt the necessary safeguards to avoid the adoption of polluting technologies. The idea of traceable permits, which would be allocated on the basis of population and GNP, and which nations would be able to buy and sell, basically involves applying the market to the environment. A country which wanted to increase its emissions would have to buy extra permits and there would be a market - a kind of international stock exchange which would set the price. So there needs to be some penalty for pollution and some reward for good behaviour, otherwise all the talk about protecting the environment will not get anywhere.

'How can you make profits from money deposited by corrupt rulers and then lecture the developing countries about corruption?'

- There is obviously a lot of imaginative thinking going on in the UNDP at the moment. Could I ask if that thinking extends to another issue which you raised in Brussels, namely the deposit of funds by corrupt officials or politicians from developing countries. You rightly pointed out that billions of dollars are deposited in western banks. Do you think that there is anything practical that can be done to restore the money to the people that deserve it?

- Yes, I think so. I think if we are serious about the human rights of developing countries, and if this isn't just rhetoric, then one way to protect those human rights is to make it impossible for corrupt rulers to deposit the money in western banks and to return the money which has already been deposited - which runs to billions of dollars - to the countries in question. That would be a unique transfer of resources which could then go into human development. It could perhaps be done through NGOs so that one doesn't have it being hijacked again by corrupt governments. But there are many ways one can do it. Certainly, there should be more transparency as regards the deposits which the ruling cliques of developing countries make in western banks. Surely, when they deposit more than a certain amount - a few thousand dollars - it is clear that this is not their own salaries and, by extension, these are not private accounts. This is the money of the poor people that is being pilfered. Surely, when some of these rulers are depositing millions, if not billions, of dollars, nobody in their right minds in the western banks can believe that these are their own personal funds. So why can't there be a requirement for such accounts to be divulged? It is as simple as that. Surely, when you are interested in the western world that the drug money should not be laundered, and are prepared to have checks and balances to prevent this, there ought to be a similar concern about capital flight from developing countries? How can you make profits from money deposited by corrupt rulers and then lecture the developing countries about corruption?

I should say, incidentally, that a body called 'Transparency International' is being set up. This appears to be in response to our proposal in the last Human Development Report for an NGO which we suggested might be called 'Honesty International' and which would operate along similar lines to the existing 'Amnesty International'. We gather that some groups have got together and I hope that this initiative may be successful in shaking up governments by revealing more and more information about the movements of the money from corrupt rulers to western banks.

- How hopeful are you for the future of human development, given the widely-held view that selfishness is gaining ground and the poor and needy have become marginalised ?

- I remain very optimistic about the human spirit. I think that ultimately, the human spirit has triumphed in every era and in every age. It seems a long time ago now, but there used to be a lot of pessimism that we might end up committing suicide through nuclear warfare. I have always believed, however, that humanity, when confronted with a challenge, has enough ingenuity to surmount it. And that is why I think it our duty as professionals, as idealists and as thinkers, to keep identifying the opportunities of the future, to keep raising human sights and to keep focusing on the positive. My own feeling is that pessimism is a luxury that we simply cannot afford. And that is why I continue to be very optimistic about the future of humanity.

Interview by Simon HORNER