The Group of Eight: What should they do?

Every summer the heads of government of the “Group of Eight (G8),” the seven richest countries (the U.S., the U.K., France, Japan, Germany, Canada and Italy -- also known as the G7) plus Russia, meet in a “summit” to agree on their course of action on major global issues, with particular focus on economic issues.

Founded in 1975, the G7 added Russia as an observer in 1997, and will make it a full member this year. The first summit was held in France to discuss the oil crisis. The meetings have moved from focusing strictly on economic policy to focusing on a wide array of political and social issues. Its function also goes well beyond the summer summits now; contacts between the member governments go on throughout the year, and various subsets of officials -- finance and environment ministers, for example -- meet at regular intervals.

Despite the G8’s great influence, it does not provide discussion documents and releases only a broadly worded “communiqué.” Because it is an informal club, with no official collective power or role, the G8 is under no obligation to be accountable. That the G8 has become perhaps the leading forum for the interactions that ratify international policy is, then, both troubling and unsurprising -- given that it is away from prying eyes that decisions to employ power to maintain privilege and exclude others can most easily be made. G8 governments heavily influence the rules of the global economy through institutions such as the United Nations (where four of the five Security Council veto-holders are members), and at the World Bank and International Monetary Fund (IMF), where G8 countries control about 50% of the votes on the institutions’ boards. Just on economic terms, in 2000 the G8 controlled over 2/3 of the global economy.

In Evian this June, Jacques Chirac, President of France and host of the meetings, states that “it's time to consider how the industrialized nations can bring about better conditions for growth and welfare worldwide, not just for themselves.” Unfortunately, the group’s track record casts grave doubts over their noble concerns for those left behind in the global economy. In 1995, the G7 leaders called for a list of reforms at the IMF and World Bank, but in the past eight years little or no significant progress has been made. In 1999, the G8 committed to relieving $100 billion in debt relief for the poorest nations, then failed to pressure the IMF and World Bank, which they effectively control, to erase debts owed to them. At the 2000 summit, the Japanese prime minister cited the information technology gap of limited internet and phone usage as a serious problem plaguing developing countries. In the same year, 125 million primary school age children had no school to attend,(1) in addition to no computers. In 2001, leaders stressed the need to combat the AIDS epidemic, and then fell billions of dollars short in meeting the monetary needs for the Global Fund to fight HIV/AIDS, Malaria and Tuberculosis which they had endorsed.

It seems that the answers to Mr. Chirac’s question are simple. Take the promises made in G8 communiqués and in leaders’ statements seriously. Stop perpetuating misery by breaking promises and setting double standards. Here are some of your own observations for you to consider when you meet in June.

1. You cannot develop if you cannot invest.

"Excessive debt hampers development” (2)
- Jacques Chirac 2003

Low and middle income countries now owe almost 2.5 trillion dollars to wealthy nations, creditors and international financial institutions.(3) The nations of Africa spend $15 billion a year paying back wealthy creditors. Of course, money spent on debt is money not invested. In fact, ten African governments pay more on debt maintenance than healthcare and primary education combined.(4) G8 nations seem content to place responsibility for debt on Africans, pronounce that debt hinders development, and then fail to make connections. The G8 states that “the prime responsibility for Africa’s future lies with Africa itself,”(5) meanwhile, the largest economy in the world, the United States (per capita GDP $34,280), posts consecutive budget shortfalls of $127 billion and $159 billion. Paul O’Neill, former Treasury Secretary, blames the shortfalls on the stock market decline, recession, and September 11. “Together these events created a deficit.”(6) The message is clear: events create budget shortfalls in the U.S. and irresponsibility creates deficits and debt crises in developing nations.

There is however, a program touted by G8 nations to help relieve the debt burden. The HIPC initiative places a series of requirements on nations which after three years of austerity can demonstrate fiscal responsibility and receive some debt relief. But completion of HIPC terms does not guarantee a stable financial future free from debt. Uganda, which became the first “graduate” of the HIPC program in 1998, has already gone through it a second time because the optimistic projections for its economic growth were undone by a fall in global coffee prices -- and it now qualifies a third time as having an unsustainable debt, and may go through HIPC again. In addition, as many as nine HIPC countries will pay as much or more in debt servicing after qualifying for “relief.”(7) Overall, HIPC relief has brought a mere 27% reduction in average annual debt payments to the 22 countries that have begun to benefit, and the total value of this is only $735 million per year.(8) Many critics point out that the debts that are relieved could not have been paid back anyway, so the HIPC initiative only insures that the maximum amount of dollars are extracted from already impoverished nations.

2. It's tough to compete, when the competition is stacked against you.

"In order to achieve adequate growth rates, Africa must have broader access to markets.” (9)
- G8 statement, Kananaskis 2002

While the G8 calls for African nations to eliminate trade barriers, the developed nations heavily subsidize agriculture to the tune of $300 to $350 billion. This figure is greater than the combined GDPs of all Sub-Saharan African nations and is more than six times the amount of aid given to developing nations by the wealthiest nations. Subsidies to domestic producers have increased 20% over the last decade in industrialized nations, reaching $62 billion for the EU, $31 billion for Japan, and $19 billion for the U.S. In fact, this year’s host of the G8 summit, France, receives almost 25% of all EU agricultural subsidies.(10) The average European cow receives more in subsidies than about half the people in Africa earn. Analysts estimate that over 30 million farmers in the developing world have gone out of business because their governments followed World Bank and IMF demands to de-regulate trade.(11) When the EU subsidizes inefficient sugar production, dropping the world market price by 17%, efficient producers like Mozambique, one of the world’s poorest nations, lose in a competition fixed from the start.

In fact, none of the G8 economies developed through the method of “free trade.” The world’s richest economies developed through protecting domestic industry and publicly subsidizing business. Later, the success of the Asian tigers again showed how protections can benefit a burgeoning industry from more advanced outsiders. Despite a clear trend in history, G8 nations promote liberalized trade restrictions and the elimination of subsidies as the path to development. Their proscriptions do not match their history, just as they do not match the current practice of protectionism by the developed nations.

3. Broken promises leave broken lives.

"As a matter of strong principle, our commitment to respond to situations of humanitarian need remains universal and is independent of particular regimes.” (12)
-G8 statement, Kananaskis 2002

In 1992, at the Earth Summit, wealthy nations agreed to a target of spending 0.7% of their GDPs on official development aid. Yet the World Bank states that official development assistance has dropped over 20% throughout the 1990s. The United States spends the fewest dollars relative to the size of its economy, less than one-tenth of one percent, and most of this aid goes to strategic allies, rather than the most impoverished nations (1/100th of a percent goes to Sub-Saharan Africa). However, at the April 2003 meeting of the IMF and World Bank, G8 leaders acknowledged the importance of alleviating global poverty through support of the millennium development goals including halving those living on less than $1 a day and those who suffer from malnutrition, achieving universal education and substantially increasing access to technology. To actually attain millennium development goals,(13) the entire debt for all 42 HIPC nations would have to be eliminated in addition to allocating $46.5 billion in new aid per year -- a figure that represents less than the 2002 increase in the U.S. defense budget.(14) Nowhere has any G8 leader called for this amount of funding. The string of broken promises continues.

The AIDS crisis provides one more example of the hollowness of G8 principles and promises. The group endorsed the creation of the Global Fund to fight HIV/AIDS, Malaria and Tuberculosis at the 2001 Genoa, Italy meeting. Endorsement has not translated into dollars. The fund received 1/10 of the $10 billion it needs to win the fight against AIDS in its first year, 2002. The bankrupt fund now faces a $1.6 billion shortfall for a new round of grant proposals in October 2003. President Bush asked Congress for only $200 million for the Global Fund in 2004. In his 2003 State of the Union address, Bush said that he would ask Congress to commit $15 billion, including $10 billion in new funding to turn the tide against AIDS. The next week, Bush released the White House’s proposed budget for 2004. Strangely, Bush only asked for $450 million in new money. Worse yet, the paltry sum was paid in part through a half-billion cut in international child health care assistance and cuts in the President’s own development program for poor nations, the Millennium Challenge Account. In addition, the U.S. Trade Representative continues to block efforts to allow generic AIDS drugs to be sold to people who cannot afford the more expensive treatments patented by wealthy pharmaceutical corporations which receive exorbitant profits. Meanwhile, it is estimated that three million people will die of AIDS this year. Even trade?

A look at what gains are being made towards the millennium development goals in Sub-Saharan Africa shows what priorities are taking precedence. The number of phones in Sub-Saharan Africa has tripled to 32 per 1000 people between 1990 and 2000 and the number of computers has shown a slow but steady rise to 9 computers per 1000 people. During the same time period, the percentage of the undernourished poor increased one percentage point to reach an even one-third -- over 200 million people. The number of Sub-Saharan Africans living on $1 a day or less increased as well, approaching an even one-half. It is projected that 70% of the population will be living on less than one dollar a day in 2015, a far cry from the lofty goals sought.(15) It is no surprise that gains are made in the usage of telephones and computers while the impoverished millions starve. Profits are made by selling fancy laptops and nifty wireless phones to those with money, not by providing access to basic healthcare or food. The lesson of development funding: profits for corporations, technology for the wealthy few, and starvation for the people.

The Group of 8 admits every year that globalization and development are not benefiting all. The trick is to actually do something about it. Stop setting goals that you have no intention of helping people realize. Admit that you are a club of greed, composed of the wealthiest nations in the world or, back up humanitarian rhetoric with tangible results.

1. The World Bank Group, “Millennium Development Goals” 2003
2. http://www.g8.fr/evian/english/navigation/2003_g8_summit/priorities_of_the_g8_french_presidency.html
3. source: The World Bank Group, “World development Indicators 2002”
4. http://www.africaaction.org/action/debt2003.pdf
5. G8 Africa Action Plan - 2002 Kananaskis Summit
6. http://www.whitehouse.gov/omb/pubpress/2002-66.pdf
7. http://www.eurodad.org/uploadstore/cms/docs/eurodad_debtsustainability_hipcreview.pdf (2002)
8. Drop the Debt, "Reality Check. The Need for Deeper Debt Cancellation and the Fight Against HIV/AIDS", April 2001.
9. G8 Africa Action Plan - 2002 Kananaskis Summit
10. http://www.oxfam.org.uk/policy/papers/31dumping/31dumping.pdf
11. http://www.tradeobservatory.org/news/index.cfm?ID=3727
12. http://www.g8.fr/evian/english/navigation/g8_documents/archives_from_previous_summits/kananaskis_summit_-_2002/g8_africa_action_plan.html
13. http://www.g8.fr/evian/english/navigation/news/statement_of_g-7_finance_ministers_and_central_bank_governors.html
14. Romilly Greenhill, “The Unbreakable Link- Debt Relief and the Millennium Development Goals” Jubilee Research February 2002
15. The World Bank Group, “Millennium Development Goals” 2003