Select Committee on International Development First Report



22. The other major concern expressed in the majority of submissions to the Committee was the Globalisation White Paper's treatment of inequality. Save the Children's view was typical. They stated that "inequality within states and the impact of globalisation on the poorest is given inadequate attention [in the White Paper] ... the evidence SC UK encounters in its day to day work strongly supports academic findings which suggest that globalisation is associated with a reduction in welfare expenditures, inequality, social fragmentation, and a widening poverty gap both within and between countries".[47] Christian Aid and CAFOD went further, "The White Paper is at best ambivalent and at worst evasive on inequality and redistribution ... the IDTs will not be achieved unless equality issues are addressed".[48] At the heart of the controversy is the Globalisation White Paper's contention that "There is no systematic relationship between economic growth and inequality. Over recent decades, inequality has risen in some cases and fallen in others".[49] It went on to argue that, after increasing between 1960 and 1990, inequality had recently started to fall.[50]

23. The Secretary of State expanded on this point in oral evidence, "Whether global equity narrows or widens depends on the performance of the poorer countries ... there is not some inevitable consequence of opening up in terms of inequality ... some [countries] have become less unequal, some have become more unequal. It depends on policy choices of governments ... we advocate very strongly measures which invest in the healthcare and education of all people, both as a social good but also to get an efficient modern economy. These are all profoundly redistributive measures or measures of social inclusion which ensure that marginalised and poorer people can participate in the modern economy and get benefits from economic growth".[51]

24. NGOs disputed this analysis. Christian Aid and CAFOD noted that the World Bank's most recent discussion on this issue had concluded that "overall more people have been affected by increases of inequality than by decreases".[52] Oxfam agreed, "The statement that globalisation has been accompanied by increasing inequality has become received wisdom in many quarters".[53] They went on to note that in one quarter of the 143 growth episodes covered in a study by Howard White at the Institute for Development Studies [commissioned by DFID for the Globalisation White Paper], distribution played a stronger role than growth in increasing the incomes of the poor. They also questioned the White Paper's assertion that inequality between the richest fifth of the world's population and the poorest fifth has now started to fall noting that "without access to the detailed data behind this assertion, it is difficult to evaluate. The Secretary of State has offered NGOs a briefing with DFID economists on this issue. We welcome this opportunity and will clearly be better placed to comment in detail on this aspect of the White Paper after this has taken place".[54]

25. There is a startling similarity of analysis on these issues among the memoranda received by the Committee. Many of the memoranda cite UN and World Bank statistics or make reference to different groups' experiences on the ground in developing countries such as those of development NGOs and Trade Unions . The Department has obviously not done enough to disprove the 'received wisdom that globalisation has been accompanied by increasing inequality'. More clearly needs to be done to identify the relationship between trade liberalisation and inequality and to define the necessary components of pro-poor growth.

Movement of people

26. The Globalisation White Paper notes that "a further feature of globalisation has been the intense global competition for people with scarce skills in areas such as information technology and the health sector. Developed countries are responding to shortages of health personnel by actively recruiting skilled staff from low and middle income countries".[55] The White Paper acknowledges both advantages and drawbacks of developed countries recruiting skilled staff from low and middle income countries, "for developing countries, these outflows of skilled people generate significant remittances. Longer-term benefits may include the new skills and contracts brought back by the returning migrants. But these outflows can also be a drain on human resources in critically short supply".[56] The Globalisation White Paper does not reach any conclusions on this issue, however, merely stating that "We are undertaking more research on this issue". We welcome further research from DFID on the movement of skilled people. A cross-departmental approach in Whitehall is urgently called for.

27. The Committee questioned Clare Short on the issue of 'brain drain'. She told the Committee, "Migrants generate over US$70 billion of remittances; it is more than worldwide ODA ... There are also great pressures to migrate and some of it is very worrying ... I have been told that there are more Ghanaian doctors in New York than in Ghana. There are more Ugandan doctors in South Africa than in Uganda ... you cannot say that in no possible circumstances can people migrate. There is no doubt that people working abroad for a number of years and coming home can often bring new skills and knowledge back to their country ... but I agree with your fundamental point that it would be outrageous if countries like the UK just go out unselectively to recruit the skilled people they need regardless of the need of the country concerned".[57]

28. The Department has provided the Committee with a note setting out National Health Service Procedures for recruiting staff from developing countries. It reveals that Guidance issued in November 1999 clearly states, "it is essential that all NHS employers ensure that they do not actively recruit from developing countries who are experiencing shortages of their own".[58] The note continues, "NHS Trusts should not be actively recruiting from developing countries and certainly there is no known recruitment from the Caribbean. This position will be reinforced by the newly appointed Director of International Recruitment ... Furthermore, a section will be specifically included in the Code of Practice which will be published shortly".[59] At the same time, the Secretary of State for Health has also acknowledged that the Department of Health is not responsible for the actions of private recruitment agencies, "Sadly, I do not run the nursing agencies that are responsible for such conduct [recruiting staff in sub-Saharan Africa] ... However, we do not believe that we should rob developing nations of the medical and clinical staff that they desperately need".[60]

29. The Committee was also concerned to read of press reports of a British recruitment agency sending a delegation to South Africa with a view to recruiting teachers for the UK. The move was criticised by South Africa's Minister for Education, Kadar Asmal, who was quoted as saying "such raids on the teaching profession at a critical time in our history are not helpful for the development of education in South Africa".[61] Throughout the NHS, Trusts, desperate to fill vacancies, turn regularly to private agencies to supply.

30. We agree with the Secretary of State and with the Globalisation White Paper that migration can play a significant developmental role through improving skills and the generation of remittances. At the same time, it is vital that any moves by developed countries to recruit public service personnel from developing countries should only take place with the consent of the relevant authorities and should not lead to skill shortages in such countries. We recommend that similar guidelines to those already in place in the NHS are drawn up by all other relevant public authorities. We also recommend that the Government, in its Response, provide the Committee with details of how guidelines can be extended to cover the activities of private recruitment agencies.

Labour standards

31. Chapter 2 of the Globalisation White Paper briefly addresses the issue of labour standards. It notes that "effective governments are needed to build the legal, institutional and regulatory framework without which market reforms can go wrong ... effective regulation remains essential ... to promote and protect human rights, including core labour standards".[62] The White Paper attracted a significant response on the issue of labour standards. Amongst others, the Committee received memoranda from the Commonwealth Trade Union Council (CTUC), the Trades Union Congress and the International Confederation of Free Trade Unions (ICFTU), and the International Centre for Trade Unions Rights (ICTUR). Whilst welcoming some elements of the Globalisation White Paper — including its overall objective to make globalisation work for the poor — the overall tone of these memoranda was critical of the White Paper's treatment of labour standards. The CTUC stated that "unless there is much greater recognition of the need for all governments to enforce basic labour standards the White Paper might well be entitled 'Making the Poor Work for Globalisation'".[63] They continued, "Chapter 2 of the White Paper emphasises the need for effective regulation to promote and protect human rights, including core labour standards, and equality and empowerment for women. The experience of trade unionists throughout the Commonwealth is one of governments responding to globalisation by taking steps which have entirely the opposite effect".[64] Trade unionists were under constant pressure to accept worsening conditions so that their employees remained competitive. A number of case studies were provided where regulations have been relaxed and where monitoring has been reduced which we draw to the attention of DFID.[65]

32. There is obviously disagreement between the Secretary of State and trade unions. ICTUR felt that "the White Paper totally understates the role and potential of trade unionism ... trade unions are qualitatively different to other NGOs and could be at the centre of a development process which sought to end mass poverty and advance democratic and human rights".[66] Clare Short felt that "we urgently need to mature the trade union debate on these questions in that the poorest of the world are not in organised sectors and are not in trade unions ... unionisation of the very poorest in the world is unlikely to be the remedy which will improve the labour standards of the poorest". She rejected calls for the WTO to be used to enforce labour standards, "the logic of that is that any country which has problems of child labour, of bonded labour and of labour which is badly paid or badly treated, would have trade sanctions against it. Every poor country has child labour. If you go down that road you punish countries for being poor".[67] However, the Government makes clear, in the Globalisation White Paper, that it strongly supports the ILO Declaration on Fundamental Principles and Rights at Work and that it is firmly committed to taking action against child labour.[68]

33. We agree with the Secretary of State that the World Trade Organisation should not be used to enforce labour standards, as suggested by some of the memoranda received by the Committee. To do so would simply be to punish countries for being poor and to provide a further excuse for rich countries to erect trade barriers. At the same time, we agree with the ICFTU which argued that the ILO Declaration on Fundamental Principles and Rights at Work needs an effective implementation mechanism in the ILO.[69] Core labour standards are, after all, defined as 'core' precisely because they are fundamental human rights that can be respected by any country, regardless of its level of poverty. At present, it is often left to trade unions to monitor and implement basic rights, a point made by the Commonwealth Trade Union Council in their memorandum, "precious union resources are used to secure justice when it is the responsibility of the government to enforce the legislation".[70] This is clearly not acceptable. We call for the Government to set out how core labour standards can best be implemented, monitored and enforced.

International capital flows

34. War on Want stated that "One specific aspect of globalisation which has caused poverty is the growth and instability of capital flows. $2 trillion is now exchanged every day on world currency markets. As a direct result of the East Asian crisis, the ILO has estimated that 10 million people were thrown out of work and poverty levels rose dramatically".[71] The Globalisation White Paper has an entire chapter dedicated to the topic of 'harnessing private finance'. It notes that foreign direct investment to developing countries has more than quadrupled from US$36 billion in 1992 to US$155 billion in 1999 — three times the level of development assistance. It states that "The UK Government favours a more country-specific approach to capital controls, and a gradual approach to the opening up of capital accounts. An important part of this is to work with countries and international institutions to design 'road maps' for the opening up of capital accounts".[72]

35. The Globalisation White Paper's commitment that "in countries which have weak financial sectors and are at the earlier stages of liberalisation, there may sometimes be a case for specific measures to help discourage excessive short-term capital inflows" was welcomed in submissions to the inquiry.[73] Clare Short elaborated on this in oral evidence, "famous examples have been used, like in Chile, which required the depositing for no interest of sums of money to try to restrict the inflow of hot money ... it was a mechanism which was used which is reasonable ... we think it is a good idea for countries to look for taxing mechanisms and so on to make short term flows in and out have some taxation and cost on them so that there is a restriction on hot money that can cause a destabilising effect".[74] We welcome the Government's pragmatic approach to capital account liberalisation and to attracting foreign direct investment to developing countries. We would welcome further details on the Globalisation White Paper's proposal for 'road maps' for the opening up of capital accounts and on proposals to discourage excessive short-term capital inflows.

36. A number of submissions also focussed on the potential for a capital transactions tax (also known as 'the Tobin tax') to impede financial speculation and provide increased tax revenue. Clare Short, whilst attracted to the idea, was not optimistic about it being implemented in the near future, "On the Tobin tax, the idea that there should be a very tiny charge on hot money moving around the world which would go into a big global development pool is a very attractive idea. The problem is that we have to get all countries in the world to agree for it to be able to work ... Let us look at it with interest but do not hold your breath. It might be our grandchildren who inherit that".[75] We look forward to receiving the note on the Government's policy on the Tobin Tax promised by the Secretary of State in evidence.[76]

47   Evidence, p.38 Back

48   Evidence, p.83 Back

49   Globalisation White Paper, para. 32 Back

50   Ibid., para.28 Back

51   Qq. 6-7 Back

52   Evidence, p.83 Back

53   Evidence, p.70 Back

54   Evidence, p.70 Back

55   Globalisation White Paper, para.132 Back

56   Ibid., para.133 Back

57   Q.19 Back

58   Evidence, p.14 Back

59   Evidence, p.14 Back

60   HC Deb, 14 November 200, Col. 816 Back

61   'Raid' on South African Teachers, The Guardian, 16 February 2001 Back

62   Globalisation White Paper, para.56 Back

63   Evidence, p.21 Back

64   Evidence, p.21 Back

65   Evidence, p.21 Back

66   Evidence, p.88 Back

67   Q.25 Back

68   Globalisation White Paper, p.29 Back

69   Evidence, p.64 Back

70   Evidence, p.21 Back

71   Evidence, p.17 Back

72   Globalisation White Paper, para.162 Back

73   See for example, Evidence, p.17; p.65 Back

74   Q.26 Back

75   Qq. 26-30 Back

76   Q.30 Back

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