Social Democracy in a Changing World

XIX Congress of the Socialist International, Berlin, 15-17 September 1992


A Global Partnership for Sustainable Development

1. At its 1990 Council meeting in New York, the Socialist International emphasised the need for a more equitable, democratic and predictable global order. As borders between East and West have faded, a new, both politically and economically, multipolar world has emerged. Improvement of the global order must take into account this multipolarity, and especially the growing divide between the countries which are benefiting from ongoing economic progress and those which threaten to be increasingly marginalised. Unequal development puts democracy into jeopardy, can lead to political nationalism and xenophobia, and forms the basis of poverty and environmental degradation.

The reforming economies cannot afford a decade with negative growth and investment rates. The recent increased concern of the World Bank to address poverty issues and UNICEF's ambition to assure 'adjustment with a human face' are welcomed. These issues must be brought to the forefront of the development agenda. Sustainable growth and anti-poverty programmes should be implemented for all reforming countries, specifically addressing internal and external financing gaps and the requirement for adequate developent finance through public agencies and private entities.

The tradition of social democracy, based on a mixed economy, a welfare state that provides a basic safety net, and strong international cooperation, can guide the way in tackling these urgent problems.

2. First of all it should be acknowledged that there is an essential role for governments to play in eliminating the disparity between rich and poor and in fostering the human development process. Market forces are in the mainmore efficient in allocating resources, and in the direct production of goods and services. At the same time, there is a limited but crucial role for governments to play - at both national and international levels - to correct market failures, to set up an efficient and equitable system of taxation and regulation, to support public infrastructure, to promote human development, to improve social justice by a system of good and efficient domestic governance and to support worldwide sustainable development through additional finance and other measures.
3. The role of governments should develop according to democratic principles. Human rights, including civil and political rights, as well as economic, social and cultural rights, are universal values for all continents of the world.

4. National democracy is crucial in the fight against the personalisation of power, against the denial of fundamental freedoms and human rights, and against the prevalence of unelected and unaccountable governments which have deleterious consequences for human development and economic efficiency. Maximum support by external agencies and governments should be given to all the emergent democracies in the world.

International democracy is essential to integrate all countries into the world economy on an equal footing, taking credible international decisions on global issues such as trade, sustaining development, replenishing international financial institutions, and increasing the accountability of the more advanced economies in international relations. The task ahead is to obtain growth through sustainable development, measured by the two imperatives of equity and environmental integrity, not only within nations but also among nations. As human development can be seen as the central concern for the 1990s, long-term policies are needed in the field of trade and additional finance.

5. Trade issues are extremely important for global development and for the elimination of negative resource transfers. The SI appeals to the European Community and to the USA to finally set aside their (neo) protectionist policies and conclude a substantial agreement for a successful conclusion of the Uruguay Round. A strengthening of GATT, a more opentrade order and the stabilisation of the prices of primary products require urgent attention. A plan of action is called for. It is necessary touse compensatory finance for solving structural problems in the supply field. Tariffs and quota reductions made under structural adjustment programmes should be recognised in the Uruguay Round. The international community should agree that the design of unified markets should make reasonable provision for preserving, and indeed expanding, the preferential access of developing countries to the markets of the North. Particular attention ought to be given to trade related investment measures considered to have significant trade-distorting effect. Ecological considerations should be linked to the liberal trade order in the interest of sustainable development. Ecological protection measures should be clearly monitored and sanctioned by a strengthened GATT. In addition, UNCTAD can serve as a unique forum to overview North-South relations. The SI supports its member parties in Canada and the United States in their opposition to the Canada-US Free Trade Agreement and calls on member parties to reject any similar neo-conservative multinational corporation-driven trade and economic integration arrangements.

6. In the field of finance, the international community will need to ensure that all countries have sufficient resources and the right conditions to carry out their restructuring and modernisation programmes. A severe shortage of finance could cripple the major thrust of development strategy for the East and the South. The market mechanism will not automatically provide the flows of long-term international investment funds that are required for global efficiency, nor will it necessarily result in an adequate balance in the distribution of these funds.

This situation can be improved through debt relief, enhanced policy coordination, a strengthened role of the IMF/World Bank (in cooperation with regional development banks) in stimulating surplus countries to adjust (i.e. by a tax penalty on surplus accounts), as well as through the creation of multilateral investment trusts to ensure adequate levels of finance for the middle-income and poorest countries. In order to avoid the sequence of inflationary and recessionary tendencies which are especially negative for developing countries, new incentives will be required, as well as institutional mechanisms which provide better security against the risks involved for borrowers and lenders. The way in which aid flows are financed has global implications. Tax-financed increases in aid have less repercussions for world interest rates and therefore less negative consequences for developing countries than finance through increased lending. SDR (Special Drawing Rights) creating should be given a new impetus by limiting it to less credit-worthy countries and in amounts equal to the negative resource transfer of these countries to the industrialised world.

The development agenda requires much greater levels of investment, as it has to cover the requirements of the developing countries, the restructuring of the former communist economies, as well as the reactivation of the industrialised economies and the costs of environmentally-sound sustainable development.

Economic and political reform in developing countries and in the economies in transition can only be successful if public and private investments grow at significantly above present levels.

In making decisions on exchange and interest rates, the decision-making governments should take into account the interests of the developing countries. The fiscal deficits in the US and other countries, raising overall interest rate levels and causing erratic exchange rate movements all over the world, require a stronger disciplinary role for the Bretton Woods institutions with regard to the Western economies in order to create a more stable, predictable and equitable international monetary order.

7. Major and rapid reductions in military expenditure, taking into account both legitimate expenditure for peace-keeping and peace-making operations in the framework of the UN, and in agricultural subsidies, constitute the two most important ways to re-allocate significant resources to activities more productive for development. As a first priority, the SI calls for a steady reduction in defence expenditure by all countries. These and additional funds should be used in part for a substantial increase in the replenishment of the

World Bank's International Development Agency (IDA-10), which provides virtually interest-free loans to low income countries to fight poverty and promote human development. Furthermore, the IMF Quota Increase should be fully accorded by all member countries, and we call on donor countries to pledge an increase to a minimum of 0.7% of GNP in Overseas Development Aid, excluding the ecological increment. By the year 2000, 1% of GNP of the developed world should be spent on ODA, with a special focus on efficient and effective human development policies. Additional finance is a vital prerequisite for the successful implementation of the sustainable development agenda.

8. The SI is especially concerned that the outcome of the United Nations Conference on the Environment and Development, held in Rio de Janeiro in June 1992, should not be jeopardised by the lack of will to supply 'new and additional' resources to implement Agenda 21 and to fight poverty, and calls on all industrialised nations to accept the need for increased resources beyond existing foreign aid budgets.

9. In many countries, the debt crisis has receded from the forefront of public attention. Although the situation has improved in many countries, debt itself is still an integral element in intensifying the vicious circle of decreasing performance and marginalisation in many nations around the world.

As a first priority, decision-makers should adopt a coherent debt strategy which would provide substantial relief commensurate with their level of economic distress and include all types of debt - owed to bilateral, multilateral and private creditors. Prompt action on providing debt relief for Poland and Egypt well beyond the Toronto Terms demonstrates that large and rapid state debt reduction for low income countries, especially Africa, must be equally possible if the same political will is exercised.

New SDR allocations should be agreed upon in order to assist developing countries facing particularly serious negative resource transfers.

As a further priority, industrialised countries should agree to fully implement the Trinidad Terms as a next important step to reduce bilateral debt levels and as an expression of clear political will to substantially reduce African debt levels.

Debt relief is a necessary precondition for political and economic reform around the world.

10. Most countries in the world have embarked on varyingly difficult economic reform and recovery programmes, making better use of the strengths of the market to achieve national goals. This is true of many stagnant economies in Western Europe, of many crisis-ridden countries in Latin America and Africa and elsewhere in the Third World, and also, for the last few years, of the economies of Central and Eastern Europe which are in a process of extreme transition.

What appears as a general lesson from the initial period of this process is very clear. In order for economic transformation to succeed, there is need for a more developed international partnership, a framework of global or regional character as a foundation from which to work through the difficult aspects of reform. This is both a matter of a political commitment, of solidarity and of specific contributions such as the provision of financial resources and the introduction of liberalised trade and labour market policies to accommodate the reforming economies.

But more important still than outside assistance is the need to ensure that the crucial decentralisation of economic power is carried out by a state strong enough to fulfil two central tasks: firstly, to guarantee the degree of redistribution which is necessary to ensure social cohesion; and secondly, to accelerate the human development (manpower development/training) which is necessary to increase productivity. Should the state, and society as whole, fail in this, there will be an increasing risk that economic decentralisation will be followed by a deterioration of the social fabric, leading to acute suffering and endangering the reform process itself. That process could become a serious threat to security.

The parties of the Socialist International therefore view with great concern the difficulties in achieving such a broad partnership of nations. Even though the responsibility of reform rests on the reforming countries, the community of nations must not shrink from its responsibility. The belated and generally inadequate response to the international debt crisis has been detrimental to the development of many nations, unnecessarily prolonging the suffering of already hard pressed populations. It is appalling that the creative initiatives in many international fora, including the World Bank, were repeatedly held up by conservative governments in the North.

11. Democratic socialists have a long tradition of supporting social justice, internationalism and the United Nations.

International economic decision-making should be confined to the UN and the Bretton Woods institutions. Global economic governance should be based on a set of rules and procedures that all nations accept, as well as on a fair and effective system for enforcing such rules among nation states. The UN system should include strengthened international organisations - especially in the field of finance and trade - to maintain price and exchange stability, to channel global surpluses and deficits, to provide adequate development finance to the poorest and to ensure free and equal access to all forms of global trade. Reform policies should focus on poverty alleviation and sustainable development. The Bretton Woods system will need to focus its work on these issues if it is to make a constructive contribution in the 1990s.

In these ways we can move to a world in which, by the year 2000, poverty and misery will have been greatly reduced, economic degradation radically diminished, and the security of all peoples substantially increased.

12. In the tradition of the Brandt and Manley reports, the SI will prepare a report and a political strategy for the integration of the former second and the third world into such a reformed Bretton Woods system, based on predictability, equity and efficiency. Adequate levels of development-financing, combined with structural transformation policies focused on poverty alleviation and sustainable development, are a prerequisite for the success of reforms in the former communist bloc, as well as in many developing countries. A focus merely on market forces will lead to further disintegration of the world economy. The international institutions will have to be changed in order to integrate all countries of the world into a more just international order.



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