Economic View: Euro a day keeps poor at bay

You do not need to have much sympathy with Greenpeace to be disturbed by the scale of wealth differentials in the world
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The Independent Online

It's economic summit time again. The leaders of the seven largest economies, plus Russia, have gathered in the French spa of Evian, while the lesser delegations are billeted across Lake Geneva in Lausanne. You might think they have the best of the deal: a half-an-hour commute by boat and a better view of the Alps. But genteel Lausanne and its neighbour the free city of Geneva don't think so, for they have become the focus of dissent. The protesters are being kept out of Evian and instead are making their views known to the Swiss.

Group of Eight meetings have long since stopped being principally about economics, and have become largely political. Unsurprisingly, much of the attention will be on whether, and to what extent, the rift between the US and "old Europe" can be bridged. But the US at least has a larger agenda.

You can see that from the comments made by President Bush ahead of the meeting, when he included among his priorities stamping out terrorism and eradicating Aids in Africa. "I've laid the groundwork for the trip by talking about some of the great goals that wealthy nations can achieve," he declared.

This agenda has its parallels with that of many of the protesters. In Annemasse, in France, another summit has been taking place, the Summit for Another World. Here, the head of the French branch of Greenpeace, Bruno Rebelle, made a startling observation. He pointed out that one euro was what one-third of humankind, two billion people, had to live on. Two euros a day was the average subsidy that every cow in the EU received. And three euros a day was what each American spent on defence.

Some of us might feel that Americans get better value from their three euros than Europeans do from our two, but of course his essential point is that one euro a day is bare subsistence level. You do not need to have much sympathy with a multinational pressure group such as Greenpeace to be disturbed by the scale of wealth differentials in the world today. Surely, narrowing that gap ought to be one of "the great goals that wealthy nations can achieve"?

A couple of years ago there was a wonderful study of the changing balance of the world economy over the past 1,000 years. Angus Maddison, an economic historian, wrote a book for the OECD called The World Economy: a Millennial Perspective. The graph above is taken from it. I wrote about it at the time in this column: the thing that struck me was the extent to which wealth has diverged over the past 1,000 years. In the year 1000, the entire world was around subsistence level, with an income per head of some $400 a year - or a euro a day. Indeed, Africa had a slightly higher income per head than Europe, which itself had become slightly poorer than it was at the time of the Roman Empire.

Now the divergence has become huge. The US is more than 20 times richer than Africa, and while some areas have been closing the gap in recent years - both China and to a lesser extent India have been growing swiftly - the gap between Africa and the rest of the world seems to be widening still further.

In any human sense of values, this ought to be the central issue at an economic summit. The finance ministers and central bankers can fret about the danger of global deflation, or the fact that it looks as though Germany is back in recession. There is certainly a need for better co-ordination of global economic policies. The dollar, for example, should not have been encouraged to become as strong as it did two years ago and the euro is starting to rise to a level where a recession threatens the whole eurozone, not just Germany and the Netherlands. But presidents and prime ministers are not very good at this sort of stuff. They don't understand economics, nor should they be expected to. They should understand about power and, in particular, the extent to which global disparities of wealth threaten the liberal Western nations they represent.

This is surely recognised by George Bush and Tony Blair. That Bush quote above and the famous Blair speech about the plight of Africa show their own concerns. But what is the point of having two particularly preachy leaders if all they do is talk? There is an extraordinary disjunction between what they say and what they do. For example, one of the stated aims of Mr Bush is to "bolster trade so that people can rise out of poverty" - which would be great if he had not also sanctioned increases in US agricultural subsidies that have exactly the opposite effect.

As for Mr Blair, well, the EU's agricultural policies are probably the biggest single barrier in the world to trade in food products and directly damage the poorest countries of the world. But we allowed ourselves to be stitched up by the French and the Germans, who have agreed to postpone reform for many more years. We were cross about this, sure, but as in so many other aspects of the EU, we had no influence over the outcome.

The problem of global imbalances is so huge and so intractable that one summit is not going to change the direction of the policy. In any case, this is not something that the wealthy nations can crack by writing out cheques. We have first to accept both that we have failed and that without better governance in many parts of the world, those nations whose people live on one euro a day will continue to fail too. I don't doubt the motives of Messrs Bush and Blair (in contrast to the motives of some of the other folk there). But if they could just move on a few tiny steps from preaching towards policy, then gatherings like the Evian one would be a little bit less of a waste of time.