Source: SEATINI BULLETIN

Reject financing for development that simply increases monetary wealth without eradicating poverty
World Council of Churches

The ecumenical community approaches the issues of financing for development with a particular understanding of that elusive term "development" -- an understanding that has evolved and deepened over several decades. For the ecumenical community, justice is the heart of the matter. Any discussion of financing for development must take seriously the need to redress the “mal-distribution” of wealth and the ecological degradation perpetuated by the current inequitable and unsustainable economic system. Financing for development should foster greater social justice for the poor and the excluded, and restore the right relationship between humans and between humanity and creation.

By asserting justice, ecological sustainability and the creation of viable communities as our goals, the ecumenical community's emphasis differs from the dominant approach, which focuses on fostering economic growth. We maintain that sustainable communities cannot be built through economic growth alone, least of all jobless growth that exacerbates inequalities and exclusion. The trickle-down theory of development advanced by the World Bank and the International Monetary Fund is a failure. The well-being of the majority has not resulted from economic growth which has benefited a minority. The ecumenical community expressly rejects the neo-liberal economic policies promoted by the World Bank and the International Monetary Fund (IMF). Rooted in the belief that unfettered free markets will promote economic growth resulting in “development”, the IMF and World Bank have required developing countries to adopt what are known collectively as the “Washington Consensus” policies. These include free trade, deregulation of capital markets, privatisation of public enterprises and treating foreign investors the same as national investors.

Experience over the past two decades shows that these policies have failed to meet even their own goals of attracting investment to developing countries and fostering growth. Far from reducing poverty or enhancing ecological sustainability, these policies have widened the gap between the wealthy and the poor, and have resulted in greater social exclusion and greater exploitation of the earth's resources.

Authentic human development can never be achieved when the ultimate goal is the amassing of wealth and material goods, creating an unquenchable thirst for more power, profits and possessions. An alternative approach is required that allows us to express “development” and “economy” in relation to our common vocation to live in right relationships with our neighbours. Such an approach includes these key affirmations:

· A recognition that real value cannot be expressed in monetary terms and that life – and that which is essential to sustain it cannot be commodified.
· A belief in the inherent dignity of every person and a priority on creating the conditions for a dignified life.
· A commitment to an economy whose role is to serve the well being of people and the health of the earth.
· A focus on the ultimate aim of economic life to nurture sustainable, just and participatory communities.
· A vision of a global community whose interdependence is not reduced to trade and markets.
· An acknowledgement of a common destiny as co-inhabitants of the one earth for which we all share responsibility and from which we should all equally benefit. A responsibility to uphold the right of all people-particularly the diverse communities of the poor and excluded to participate in the economic, social and political decisions which affect them.

From these affirmations flow alternative development models and alternative policies. What we ultimately wish to support is the implementation of new development models that reject the destructive path of Northern industrial development and recognise the imperatives of social equity and ecological sustainability. When alternative models concentrate on providing access to food, work, education, health care and cultural opportunities to those who are now excluded, economic growth will result but the benefits will be widely shared.

We should reject models of financing for development that simply increase monetary wealth without eradicating poverty, and have no regard for how that wealth is generated or distributed. Models that focus on poverty reduction, long-term employment and environmental restoration contribute to growth as a by product, not as an end in itself. In proposing alternative models, it is important to clarify that no single development model is applicable to every country or every region. Imposing the same set of Washington Consensus, neo-liberal policies as conditions for receiving financial assistance has denied the truth that, while the need for community is universal, communities are far from identical in their definitions of the common good or in their needs or wishes pertaining to development. National governments must retain the autonomy to determine the best path for development for their particular situation. A diversity of approaches is essential.

Financing for development should adhere to the principle of subsidiarity which holds that decision-making should always be as decentralised as possible. Where development can be financed at the local community level, without dependence on external funds, it should be. What can be financed nationally should be funded nationally. Over-reliance on external financing leads to dependence and to types of "mal-development". Mal-development is characterized by ecologically destructive overconsumption by the wealthy minority and the concentration of power in the hands of private transnational corporations and international financial institutions which exclude the majority of people.

Financial institutions must facilitate the reinvestment of savings in local communities rather than appropriate them into centralised funds for investment elsewhere. Similarly, national savings must be retained, as far as possible, within each developing country for domestic reinvestment, without interference by international financial institutions. Capital controls may be needed to ensure that wealthy individuals and companies do not siphon their assets out of the country into offshore tax havens.

Washington Consensus policies have weakened democratic states, and thereby weakened citizens' rights. International financial institutions must be transformed so that bodies like the IMF and the World Bank cannot impose neo-liberal policies of financial liberalisation on sovereign states. For nation states to retain control over financing for national development, it will be necessary, in many cases, to strengthen democratic institutions so that governments can be held accountable. Financing for viable communities involves matching the appropriate kind of financing to appropriate purposes. In fact, developing countries' domestic savings rates are, on the whole, superior to those of the member countries of the Organisation for Economic Cooperation and Development (OECD). According to the United Nations Development Programme (2000:206-209) the ratio of gross domestic savings to Gross Domestic Product (GDP) for all developing countries was 25.6% in 1998 as opposed to 21.5 for OECD members that same year. The development country rate of savings was one and a half times larger than that of the US which saved just 17.1 % of it's GDP in 1997. Within the South, there are considerable variations in savings rate. The highest savers are the East Asian countries which collectively saved 39.3% of the value of goods and services they produced in 1998. Latin American and the Caribbean countries saved 19% of their output. Sub-Saharan Africa saved 14.8% of it's GDP.

The challenge for financing development is to retain this extracted wealth for reinvestment at home. To achieve this goal, a number of measures described elsewhere in this paper are necessary: cancellation of debts; use of capital controls to stop capital flight to tax havens; reorientation of Official Development Assistance from loans to grants; genuine transfer of technology rather than protectionism for corporate intellectual property rights; judicious use of foreign financing for essential imports but not for luxury goods, armaments or inappropriate megaprojects; regulation of foreign investment including restrictions on the free inflow and outflow of speculative investments.

* This is an abridged version of the document: An Ecumenical Approach to Financing for Development prepared for the World Council of Churches by the Ecumenical Coalition of Economic Justice a project of Canadian churches.

Produced by the International South Group Network (ISGN) Director and Editor: Y. Tandon; Advisor on SEATINI: B. L. Das Editorial Assistance: Helene Bank, Rosalina Muroyi, Percy F. Makombe and Raj Patel For more information and subscriptions, contact SEATINI, Takura House, 67-69 Union Avenue, Harare, Zimbabwe, Tel: +263 4 792681, Ext. 255 & 341, Tel/Fax: +263 4 251648, Fax: +263 4 788078, email: [email protected],Website: www.seatini.org Material from this bulletin may be freely cited, subject to proper attribution.