Co-operation and Economic Development in the Commonwealth

Part of Opposition Day – in the House of Commons at 7:27 pm on 21st November 1983.

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Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall 7:27 pm, 21st November 1983

The hon. Gentleman should address his comments to the Prime Minister. It is clear why the Government have been so unwilling to exert economic pressure on Argentina, even during the Falklands crisis. If they had done so and Argentina had defaulted, British banking interests would have been threatened.

What are the alternatives? What alternative strategies are recommended by the Labour party and by members of the Commonwealth conference which begins in New Delhi today? Is there a global international alternative? Clearly, there are several. First, there are the recommendations of the Brandt "North-South" report and its successor, "Common Crisis". Another is the package of recommendations made by Commonwealth Finance Ministers at their annual meeting in Port of Spain, Trinidad, two months ago. We understand that those proposals are also on the table for the Commonwealth conference in New Delhi.

There are key recommendations shared by the Brandt report and the Commonwealth Finance Ministers' package. They include preparations for a new international financial conference to discuss reform, increased funds for the IMF and the World Bank, easier conditions attached to assistance by the IMF, some amalgamation of the functions of the IMF and the World Bank, and an increased voice for Third world countries in the running of international financial institutions. Britain, however, according to reports of reactions to the conference in Port of Spain, believes that present tight conditions governing IMF assistance should be maintained and argues that there is no realistic possibility of increasing the flow of aid to the underdeveloped world.

The Financial Times of 22 September reported: A sharp split emerged yesterday between Britain and most of the members of the Commonwealth after Mr. Nigel Lawson, the Chancellor, made it clear he could not accept most of the proposals for a new 'Bretton Woods' reform of the world's financial system. If the Government will not accept those proposals and the ones that are now being tabled at the Commonwealth conference, what will they accept? At Cancun the Government, who represent the senior member of the Commonwealth, showed no readiness to bring pressure to bear on the American Administration to realise the recommendations of the Brandt report. At the Williamsburg summit, they appeared to have turned down flatly President Mitterrand's call for a new Bretton Woods and a fundamental reform of the IMF. Why? Because essentially the Government do not believe that there is an alternative. At home they do not believe that there is an alternative, and abroad, therefore, they believe that there is no alternative for global development.

Even on their aid record, the Government's performance has been derisory. Not only have they cut aid as a percentage of gross domestic product, but at 0·44 per cent. we rank with the Japanese at 0·28 per cent. and with the United States at 0·2 per cent. as among the lowest aid contributors of any developed country towards global development. When Conservative Members criticise the performance of the French economy, they should remember that France gives 0·73 per cent. of GDP in aid. Scandinavian countries, such as Norway and Sweden, provide 0·8 per cent. of GDP or more.

The links between the alternatives for the South and the alternatives for the North have rightly been stressed by the authors of the Brandt report and its successor. It is time that that argument registered with the Government. In the North, against a post-war quarter century of full employment, there are now 15 million people unemployed and 35 million people are out of work in the OECD countries. Because the brakes were slammed on after the OPEC oil price increases, real incomes have fallen and total income and economic welfare are as much as one quarter lower than they would have been if expansion had been maintained in the North.

The unemployment figures are only the official ones. We all know that behind them are millions more people who do not register as unemployed because they are not entitled to benefit. Millions of people suffer from reduced income because there is now only one person in the family working full time. Others who have been made unemployed from Britain's industries have no foreseeable prospect of employment.

The Government argue that there is no alternative here, or presumably abroad, because we have to give priority to inflation. I shall be interested to hear the Minister's comments on the latter. In fact, there is no problem of hyper-inflation in western European economies. Most have rates of inflation of less than 10 per cent. As to the priority of reducing inflation, one might argue that, just as we should not congratulate a doctor on reducing a patient's temperature if the result was rigor mortis, so the Government should give priority to recovery rather than the reduction of inflation if they are to fulfil their responsibility to the British people and those who live in the Third world.

There is no risk of hyper-inflation in the world's leading economies. Gripped by monetarism, the Government appear to believe that if the world cuts its budget deficits it will, by some miracle of the invisible hand, recover tomorrow from today's crisis. They have no recovery programme and appear to be offering none in New Delhi.

The world is now gripped by militarism as well as monetarism. There is an arms race in the West, which even the CIA now recognises is unnecessary, based on allegedly false estimates of Warsaw pact and Soviet Union arms spending. The Commonwealth is calling for co-operation, development and disarmament.

It is interesting that tonight's reports show that Mahrajkrishna Rasgotra, speaking for India before the opening of the summit, chose to highlight an appeal to the Soviet Union and the United States to stop the nuclear arms race. The Commonwealth Secretary General, Shridath Ramphal, urged the 48 nations, which are now meeting in New Delhi, to plead for an end to obscene military spending. Meanwhile, what will the Government do about their contribution or their European contribution to any form of recovery programme? They fail to recognise that, if the North recovers and lends on a proper public long-term basis to the South, the North and the South will benefit. That public lending is increasingly necessary for precisely the reasons that I have stressed. Private banks can no longer continue the recycling operation. Indeed, they are now draining resources out of the South.

It has been estimated for OECD countries—Britain has a major responsibility here as the senior member of the Commonwealth—that if the OECD were to achieve the aid target of 0·7 per cent. of GDP and accepting that some OECD countries have already exceeded that target, the result would be the creation of nearly 2 million jobs in OECD countries. Moreover, if the target were achieved, the public budget balance would still be positive at 0·12 per cent. The balance of goods and services on trade would deteriorate by only 0·02 per cent. Recovery is mutual. That is the Brandt reports' message. Many Conservative Members are open to that point.

What about the recovery in Europe? Can anything be done? Are we to consider only the Commonwealth conference, or will the Government respond to other proposals for recovery which might be made at the Athens summit? What will the United States do in the world economy? Is there really a recovery there? What is the nature of the so-called pick-up in the United Kingdom economy?

Despite present evidence that the United States is recovering at a GDP rate of about 5 per cent. a year, the balance of payments deficit that is emerging is colossal. The OECD forecasts that the United States will have a deficit of $35 billion to $45 billion within six months.

At the beginning of his statement last week, the Chancellor stressed the importance of any recovery being made by Europe as well as the United States. That is important. If we are to avoid mass unemployment in western Europe as well as in the South, western European countries should be spending about $100 billion a year for 10 years to cope with the problem of unemployment. That might appear to be a large sum, but it is less than one tenth per year of the outstanding debts of North and South countries which cannot feasibly be repaid if there is not a recovery.

However, if there were a European recovery of that magnitude, it would add between 3 per cent. and 5 per cent. to the visible exports of the United States and the South because Europe is such a major trading partner. If that were to be fulfilled, despite the astronomic level of the debt crisis now facing North and South, we could, within five years—not 10 or 15 years—put the Third world debt crisis behind us. Will the Government welcome any such initiatives or will they continue their opposition to arguments for recovery?

The millions who watched television this week will have noted that the Queen was visibly moved by the poverty and deprivation of India and its children. I am sure that the House will approve and applaud her award of the Order of Merit to Mother Theresa.

What will the Prime Minister's message be to Mother Theresa? Will it be that the Indian poor are the undeserving poor; that they should take up their beds and walk—if they do so in Calcutta, they will give their places to others who have nowhere to lay their heads—and that there is no alternative for Britain, Europe, the OECD, the North and, therefore, the South?

What steps will the Government take to follow up the Cancun summit on the Brandt report and to answer President Mitterrand's call at the Williamsburg summit for reform of the IMF? What steps will they take to answer the same call from the Commonwealth Finance Ministers' meeting in Port of Spain? How will they prepare themselves for recovery arguments at the European summit which will shortly be held in Athens? Will they amortise the debt of the Third world countries for 20 to 25 years—for that is what they need and what is now demanded by many countries—to permit real development into the 21st century? What steps will they take to shift resources from the arms race into global development?

While I have been speaking, several hundred children have died in the Third world for want of food or inexpensive vaccines. At the same time, £25 million, which could have saved them, nourished their families and promoted employment for their parents, has been spent on the arms race. Those are the figures of the Rockefeller foundation. It is a mad, inhumane world in which militarism and monetarism exclude development and disarmament.

Were this House the Assembly of Chad, Mali, Upper Volta, Tanzania or Bangladesh, we might abandon hope for those we represent, or call on one of the super- powers to stave off famine for a few further moments. But this is not the least developed country in the world. It is one of the richest and still most influential on the globe. It is the only developed country with energy self-sufficiency, financial institutions second to none, any technology within our reach and partners so powerful that they control two thirds of the world's trade and account for most of the world's financial resources.

If the Government will not take a lead in New Delhi, they should admit that they are leading not a Commonwealth but common poverty, and that this will be a disaster decade rather than a development decade for the world's economy. I commend the motion to the House and call on Conservative Members as well as my hon. Friends who are concerned about North or South to support it in the Lobby.