Fight poverty and inequality to beat terrorism

Aid and trade are needed to reduce poverty and inequality, argues Ross Buckley JOHN HOWARD has announced a major shift in our government’s approach to security. At the Asia-Pacific Economic Cooperation forum in Santiago on the weekend he stressed that reducing poverty and inequality in poor countries was critical in the fight against terrorism as these issues provided a point of advocacy for terrorists. His comments echoed those of George W.Bush who, at the same forum, said, ‘Weak and troubled nations export their ills - problems like economic instability and illegal immigration, crime and terrorism.’ The Australian and US governments have, to date, focused their security efforts on capturing terrorists and toppling the regimes that support them. They have consistently denied a link between poverty and terror. Now they have acknowledged that extreme inequality and poverty fuel the fires of hatred and alienation that underpin terrorism. This shift brings American and Australian views more into line with those of the World Bank and the European nations. Jim Wolfensohn, World Bank president, has been stressing for two years the need to tackle global poverty as part of the fight against terror. Gordon Brown, British Chancellor of the Exchequer, said earlier this month, ‘Poverty is a breeding ground for discontent. There is a sense of injustice. We have got to act.’ However, differences in perspective remain. Howard and Bush separately stressed that trade, not aid, is the key to reducing poverty, and that aid, when given, should be linked to tough anti-corruption initiatives by the recipient countries. Both of these statements are true, to an extent. Freer and fairer trade is critical to reducing global poverty. Aid dollars have more impact when corruption levels in recipient countries are lowered and governance standards are improved. Yet what is needed is more trade, and more aid. Aid can do much that trade cannot; the Europeans understand this. Well-constructed aid programs serve to strengthen local institutions in recipient countries. For instance, Australia has funded a long- term project to support Indonesia in developing local bond markets so that it can keep its savings at home, and not be so dependent on foreign capital. Likewise, we are funding a project to revamp the commercial laws of Vietnam so as to promote the efficiency of its economy and render the country more attractive to foreign investment. We do these projects well; we need to do much more. These critical capacity-building initiatives will never result from trade alone. Most people agree aid could be implemented more effectively. Aid is often tied - restricted to being used to buy goods and services from the donor country. The present model of aid remains beset by the belief that the donors know best. Forty-five of the 47 most recent studies found aid was effective to promote growth and reduce poverty even in the face of high corruption in the recipient nations. We need more aid. At the individual level Australians seem to recognise this. In the past three years, our donations to charities to spend abroad have grown rapidly. Yet as a nation our record is dismal. The global target for foreign aid is 0.7 per cent of gross national income. Denmark, Norway, Sweden, the Netherlands and Luxembourg have reached or surpassed this level. Ireland, Belgium, France, Spain and Britain are all increasing aid rapidly and have pledged to reach the target within between five to ten years. Accordingly, nearly half of the 22 donor countries are at or well on their way to the 0.7 per cent target. We spend 0.26 per cent of gross national income on aid (down from 0.32 per cent when the Howard government came to power). The US gives the least, 0.14 per cent. But putting the aid issue aside, we now have an explicit acknowledgement that a fairer more equal world will be a safer world, and everyone agrees that fairer and freer trade will make for a fairer world. Our record on trade is generally good. But will the US back up its new insight with action? Will it reduce dramatically the $US19 billion ($A24 billion) it paid last year in agricultural subsidies to its farmers so that poor-country farmers can compete with subsidised US ones? It is a major step for the American and Australian governments to have acknowledged that global poverty and inequality must be addressed to make the world safer for all. It will be another thing altogether for the US to give the poorest farmers in the world a level playing field. Ross Buckley is from the Tim Fischer Centre for Global Trade and Finance, Bond University. This article first appeared in theCanberra Times. Photo: Andrew Jeffre