|Human Development Report 1999
OVERVIEW: Globalization with a human face
(Text version prepared by Dr. Róbinson Rojas from the PDF version of Human Development
Report 1999, as published by the Human Development Report Office for the UNDP.)
People everywhere are becoming connected affected by events in
far corners of the world
The real wealth of a nation is its people. And the purpose of development is to
create an enabling environment for people to enjoy long, healthy and creative lives. This
simple but powerful truth is too often forgotten in the pursuit of material and financial
wealth. Those are the opening lines of the first Human Development Report, published
in 1990. This tenth Human Development Report like the first and all the
othersis about people. It is about the growing interdependence of people in
todays globalizing world.
Globalization is not new, but the present era has distinctive features.
Shrinking space, shrinking time and disappearing borders are linking
peoples lives more deeply, more intensely, more immediately than ever before.
More than $1.5 trillion is now exchanged in the worlds currency markets each day,
and nearly a fifth of the goods and services produced each year are traded. But
globalization is more than the flow of money and commodities it is the growing
interdependence of the worlds people. And globalization is a process integrating not
just the economy but culture, technology and governance. People everywhere are becoming
connected affected by events in far corners of the world. The collapse of the Thai
baht not only threw millions into unemployment in South-East Asia the ensuing
decline in global demand meant slow-downs in social investment in Latin America and a
sudden rise in the cost of imported medicines in Africa.
Globalization is not new. Recall the early sixteenth century and the late nineteenth. But
this era is different:
-New markets foreign exchange and capital markets linked globally, operating 24
hours a day, with dealings at a distance in real time.
-New tools Internet links, cellular phones, media networks.
-New actors the World Trade Organization (WTO) with authority over national
governments, the multinational corporations with more economic power than many states, the
global networks of non-governmental organizations (NGOs) and other groups that transcend
-New rules multilateral agreements on trade, services and intellectual property,
backed by strong enforcement mechanisms and more binding for national governments,
reducing the scope for national policy.
Globalization offers great opportunities for human advancebut only with
This era of globalization is opening many opportunities for millions of people around the
world. Increased trade, new technologies, foreign investments, expanding media and
Internet connections are fuelling economic growth and human advance. All this offers
enormous potential to eradicate poverty in the 21st century to continue the
unprecedented progress in the 20th century. We have more wealth and technology and
more commitment to a global community than ever before.
Global markets, global technology, global ideas and global solidarity can enrich the lives
of people everywhere, greatly expanding their choices. The growing interdependence of
peoples lives calls for shared values and a shared commitment to the human
development of all people.
The postcold war world of the 1990s has sped progress in defining such values
in adopting human rights and in setting development goals in the United Nations
conferences on environment, population, social development, women and human settlements.
But todays globalization is being driven by market expansion opening national
borders to trade, capital, information outpacing governance of these markets and
their repercussions for people. More progress has been made in norms, standards, policies
and institutions for open global markets than for people and their rights. And a new
commitment is needed to the ethics of universalism set out in the Universal Declaration of
Competitive markets may be the best guarantee of efficiency, but not necessarily of
equity. Liberalization and privatization can be a step to competitive markets but
not a guarantee of them. And markets are neither the first nor the last word in human
development. Many activities and goods that are critical to human development are provided
outside the market but these are being squeezed by the pressures of global
competition. There is a fiscal squeeze on public goods, a time squeeze on care activities
and an incentive squeeze on the environment.
When the market goes too far in dominating social and political outcomes, the
opportunities and rewards of globalization spread unequally and inequitably
concentrating power and wealth in a select group of people, nations and
corporations, marginalizing the others. When the market gets out of hand, the
instabilities show up in boom and bust economies, as in the financial crisis in East Asia
and its worldwide repercussions, cutting global output by an estimated $2 trillion in
19982000. When the profit motives of market players get out of hand, they challenge
peoples ethics and sacrifice respect for justice and human rights.
The challenge of globalization in the new century is not to stop the expansion of global
markets. The challenge is to find the rules and institutions for stronger governance
local, national, regional and global to preserve the advantages of global
markets and competition, but also to provide enough space for human, community and
environmental resources to ensure that globalization works for people not just for
profits. Globalization with:
Ethics less violation of human rights, not more.
Equity less disparity within and between nations, not more.
Inclusion less marginalization of people and countries, not more.
Human security less instability of societies and less vulnerability of people, not
Sustainability less environmental destruction, not more.
Development less poverty and deprivation, not more.
The opportunities and benefits of globalization tion need to be shared much more
Since the 1980s many countries have seized the opportunities of economic and technological
globalization. Beyond the industrial countries, the newly industrializing East Asian
tigers are joined by Chile, the Dominican Republic, India, Mauritius, Poland, Turkey and
many others linking into global markets, attracting foreign investment and taking
advantage of technological advance. Their export growth has averaged more than 5% a year,
diversifying into manufactures.
At the other extreme are the many countries benefiting little from expanding markets and
advancing technology Madagascar, Niger, the Russian Federation, Tajikistan and
Venezuela among them.
These countries are becoming even more marginal ironic, since many of them are
highly integrated, with exports nearly 30% of GDP for Sub-Saharan Africa and
only 19% for the OECD. But these countries hang on the vagaries of global markets, with
the prices of primary commodities having fallen to their lowest in a century and a half.
They have shown little growth in exports and attracted virtually no foreign investment. In
sum, today, global opportunities are unevenly distributed between countries and
people (see tables).
________________________________________________________________________ Tables.- Stark disparities between rich and poor in global opportunity
Shares of world GDP
Richest 20% Middle 60% Poorest 20%
Shares of exports of goods and services
Richest 20% Middle 60% Poorest 20%
Shares of foreign direct investment
Richest 20% Middle 60% Poorest 20%
Shares of Internet users
Richest 20% Middle 60% Poorest 20%
Source: Human Development Report Office.
If global opportunities are not shared better, the failed growth of the last decades will
continue. More than 80 countries still have per capita incomes lower than they were a
decade or more ago. While 40 countries have sustained average per capita income growth of
more than 3% a year since 1990, 55 countries, mostly in Sub-Saharan Africa and Eastern
Europe and the Commonwealth of Independent States (CIS), have had declining per
Many people are also missing out on employment opportunities. The global labour market is
increasingly integrated for the highly skilled corporate executives, scientists,
entertainers and the many others who form the global professional elite with high
mobility and wages. But the market for unskilled labour is highly restricted by national
Inequality has been rising in many countries since the early 1980s. In China disparities
are widening between the export-oriented regions of the coast and the interior: the human
poverty index is just under 20% in coastal provinces, but more than 50% in inland Guizhou.
The countries of Eastern Europe and the CIS have registered some of the largest increases
ever in the Gini coefficient, a measure of income inequality. OECD countries also
registered big increases in inequality after the 1980s especially Sweden, the United
Kingdom and the United States.
Inequality between countries has also increased. The income gap between the fifth of the
worlds people living in the richest coun-tries and the fifth in the poorest was 74
to 1 in 1997, up from 60 to 1 in 1990 and 30 to 1 in 1960. In the nineteenth century, too,
inequality grew rapidly during the last three decades, in an era of rapid global
integration: the income gap between the top and bottom countries increased from 3 to 1 in
1820 to 7 to 1 in 1870 and 11 to 1 in 1913.
By the late 1990s the fifth of the worlds people living in the highest-income
countries had: 86% of world GDP the bottom fifth just 1%. 82% of world export
markets the bottom fifth just 1%. 68% of foreign direct investment the bottom
fifth just 1%. 74% of world telephone lines, todays basic means of communication
the bottom fifth just 1.5%.
Some have predicted convergence. Yet the past decade has shown increasing concentration of
income, resources and wealth among people, corporations and countries:
-OECD countries, with 19% of the global population, have 71% of global trade in goods and
services, 58% of foreign direct investment and 91% of all Internet users.
-The worlds 200 richest people more than doubled their net worth in the four years
to 1998, to more than $1 trillion. The assets of the top three billionaires are more than
the combined GNP of all least developed countries and their 600 million people.
-The recent wave of mergers and acquisitions is concentrating industrial power in
megacorporations at the risk of eroding competition. By 1998 the top 10 companies in
pesticides controlled 85% of a $31 billion global market and the top 10 in
telecommunications, 86% of a $262 billion market.
-In 1993 just 10 countries accounted for 84% of global research and development
expenditures and controlled 95% of the US patents of the past two decades. Moreover, more
than 80% of patents granted in developing countries belong to residents of industrial
All these trends are not the inevitable consequences of global economic integration
but they have run ahead of global governance to share the benefits.
The past decade has shown increasing concentration of
income, resources and wealth among people, corporations
Globalization is creating new threats to human security in rich countries and
One achievement of recent decades has been greater security for people in many countries
more political freedom and stability in Chile, peace in Central America, safer
streets in the United States. But in the globalizing world of shrinking time, shrinking
space and disappearing borders, people are confronting new threats to human security
sudden and hurtful disruptions in the pattern of daily life.
Financial volatility and economic insecurity. The financial turmoil in East Asia in
199799 demonstrates the risks of global financial markets. Net capital flows to
Indonesia, the Republic of Korea, Malaysia, the Philippines and Thailand rocketed in the
1990s, reaching $93 billion in 1996. As turmoil hit market after market, these flows
reversed overnight with an outflow of $12 billion in 1997. The swing amounted to 11%
of the precrisis GDPs of these countries. Two important lessons come out of this
First, the human impacts are severe and are likely to persist long after economic
Bankruptcies spread. Education and health budgets came under pressure. More than 13
million people lost their jobs. As prices of essentials rose sharply, real wages fell
sharply, down some 4060% in Indonesia. The consequences go deeper all
countries report erosion of their social fabric, with social unrest, more crime, more
violence in the home.
Recovery seems to be on the way, most evidently in Korea and least in Indonesia. But while
output growth, payment balances, interest rates and inflation may be returning to normal,
human lives take longer to recover. A review of financial crises in 80 countries over the
past few decades shows that real wages take an average of three years to pick up again,
and that employment growth does not regain pre-crisis levels for several years after that.
Second, far from being isolated incidents, financial crises have become increasingly
common with the spread and growth of global capital flows. They result from rapid buildups
and reversals of short-term capital flows and are likely to recur. More likely when
national institutions regulating financial markets are not well developed, they are now
recognized as systemic features of global capital markets. No single country can withstand
their whims, and global action is needed to prevent and manage them.
Job and income insecurity. In both poor and rich countries dislocations from
economic and corporate restructuring, and from dismantling the institutions of social
protection, have meant greater insecurity in jobs and incomes. The pressures of global
competition have led countries and employers to adopt more flexible labour policies with
more precarious work arrangements. Workers without contracts or with new, less secure
contracts make up 30% of the total in Chile, 39% in Colombia.
France, Germany, the United Kingdom and other countries have weakened worker dismissal
laws. Mergers and acquisitions have come with corporate restructuring and massive layoffs.
Sustained economic growth has not reduced unemployment in Europeleaving it at 11%
for a decade, affecting 35 million. In Latin America growth has created jobs, but 85% of
them are in the informal sector.
Health insecurity. Growing travel and migration have helped spread HIV/AIDS. More
than 33 million people were living with HIV/AIDS in 1998, with almost 6 million new
infections in that year. And the epidemic is now spreading rapidly to new locations, such
as rural India and Eastern Europe and the CIS. With 95% of the 16,000 infected each day
living in developing countries, AIDS has become a poor persons disease, taking a
heavy toll on life expectancy, reversing the gains of recent decades. For nine countries
in Africa, a loss of 17 years in life expectancy is projected by 2010, back to the levels
of the 1960s.
Cultural insecurity. Globalization opens peoples lives to culture and all its
creativity and to the flow of ideas and knowledge. But the new culture carried by
expanding global mar-kets is disquieting. As Mahatma Gandhi expressed so eloquently
earlier in the century, I do not want my house to be walled in on all sides and my
windows to be stuffed. I want the cultures of all the lands to be blown about my house as
freely as possible. But I refuse to be blown off my feet by any. Todays flow
of culture is unbalanced, heavily weighted in one direction, from rich countries to poor.
Weightless goods with high knowledge content rather than material content now
make for some of the most dynamic sectors in todays most advanced economies. The
single largest export industry for the United States is not aircraft or automobiles, it is
entertainmentHollywood films grossed more than $30 billion worldwide in 1997.
The expansion of global media networks and satellite communications technologies gives
rise to a powerful new medium with a global reach. These networks bring Hollywood to
remote villages the number of television sets per 1,000 people almost doubled
between 1980 and 1995, from 121 to 235. And the spread of global brands Nike,
Sony is setting new social standards from Delhi to Warsaw to Rio de Janeiro. Such
onslaughts of foreign culture can put cultural diversity at risk, and make people fear
losing their cultural identity. What is needed is support to indigenous and national
cultures to let them flourish alongside foreign cultures.
Globalization opens peoples lives to culture and all its
creativityand to the flow of ideas and knowledge
Personal insecurity. Criminals are reaping the benefits of globalization.
Deregulated capital markets, advances in information and communications technology and
cheaper transport make flows easier, faster and less restricted not just for medical
knowledge but for heroin not just for books and seeds but for dirty money and
Illicit trade in drugs, women, weapons and laundered money is contributing to
the violence and crime that threaten neighbourhoods around the world. Drug-related crimes
increased from 4 per 100,000 people in Belarus in 1990 to 28 in 1997, and from 1 per
100,000 to 8 in Estonia. The weapons trade feeds street crime as well as civil strife. In
South Africa machine guns are pouring in from Angola and Mozambique. The traffic in women
and girls for sexual exploitation 500,000 a year to Western Europe alone is
one of the most heinous violations of human rights, estimated to be a $7 billion business.
The Internet is an easy vehicle for trafficking in drugs, arms and women through nearly
untraceable networks. In 1995 the illegal drug trade was estimated at 8% of world trade,
more than the trade in motor vehicles or in iron and steel. Money laundering which
the International Monetary Fund (IMF) estimates at equivalent to 25% of global
GDP hides the traces of crime in split seconds, with the click of a mouse.
At the root of all this is the growing influence of organized crime, estimated to gross
$1.5 trillion a year, rivalling multinational corporations as an economic power. Global
crime groups have the power to criminalize politics, business and the police, developing
efficient networks, extending their reach deep and wide.
Environmental insecurity. Chronic environmental degradation todays
silent emergency threatens people worldwide and undercuts the livelihoods of at
least half a billion people. Poor people themselves, having little choice, put pressure on
the environment, but so does the consumption of the rich. The growing export markets for
fish, shrimp, paper and many other products mean depleted stocks, less biodiversity and
fewer forests. Most of the costs are borne by the poor though it is the worlds
rich who benefit most. The fifth of the worlds people living in the richest
countries consume 84% of the worlds paper.
Political and community insecurity. Closely related to many other forms of
insecurity is the rise of social tensions that threaten political stability and community
cohesion. Of the 61 major armed conflicts fought between 1989 and 1998, only three were
between states the rest were civil.
Globalization has given new characteristics to conflicts. Feeding these conflicts is the
global traffic in weapons, involving new actors and blurring political and business
interests. In the power vacuum of the postcold war era, military companies and
mercenary armies began offering training to governments and corporations.
Accountable only to those who pay them, these hired military services pose a severe threat
to human security.
New information and communications technologies are driving globalizationbut
polarizing the world into the connected and the isolated.
With the costs of communications plummeting and innovative tools easier to use, people
around the world have burst into conversation using the Internet, mobile phones and fax
machines. The fastest-growing communications tool ever, the Internet had more than 140
million users in mid-1998, a number expected to pass 700 million by 2001.
Communications networks can foster great advances in health and education. They can also
empower small players. The previously unheard voices of NGOs helped halt the secretive
OECD negotiations for the Multilateral Agreement on Investment, called for corporate
accountability and created support for marginal communities. Barriers of size, time and
distance are coming down for small businesses, for governments of poor countries, for
remote academics and specialists.
With the costs of communications plummeting and innovative tools
easier to use, people around the world have burst into conversation
Information and communications technology can also open a fast track to knowledge-based
growth a track followed by Indias software exports, Irelands computing
services and the Eastern Caribbeans data processing.
Despite the potential for development, the Internet poses severe problems of access and
exclusion. Who was in the loop in 1998?
-Geography divides. Thailand has more cellular phones than Africa. South Asia, home to 23%
of the worlds people, has less than 1% of Internet users.
-Education is a ticket to the network high society. Globally, 30% of users had at least
one university degree.
-Income buys access. To purchase a computer would cost the average Bangladeshi more than
eight years income, the average American, just one months wage.
-Men and youth dominate. Women make up just 17% of the Internet users in Japan, only 7% in
China. Most users in China and the United Kingdom are under 30.
-English talks. English prevails in almost 80% of all Websites, yet less than one in 10
people worldwide speaks it.
This exclusivity is creating parallel worlds. Those with income, education and
literally connections have cheap and instantaneous access to information. The
rest are left with uncertain, slow and costly access. When people in these two worlds live
and compete side by side, the advantage of being connected will overpower the marginal and
impoverished, cutting off their voices and concerns from the global conversation.
This risk of marginalization does not have to be a reason for despair. It should be a call
to action for:
-More connectivity: setting up telecommunications and computer hardware.
-More community: focusing on group access, not just individual ownership.
-More capacity: building human skills for the knowledge society.
-More content: putting local views, news, culture and commerce on the Web.
-More creativity: adapting technology to local needs and opportunities.
-More collaboration: developing Internet governance to accommodate diverse national needs.
-More cash: finding innovative ways to fund the knowledge society everywhere.
Global technological breakthroughs offer great potential for human advance and for
eradicating povertybut not with todays agendas.
Liberalization, privatization and tighter intellectual property rights are shaping the
path for the new technologies, determining how they are used. But the privatization and
concentration of technology are going too far. Corporations define research agendas and
tightly control their findings with patents, racing to lay claim to intellectual property
under the rules set out in the agreement on Trade-Related Aspects of Intellectual Property
Poor people and poor countries risk being pushed to the margin in this proprietary regime
controlling the worlds knowledge:
-In defining research agendas, money talks, not need cosmetic drugs and slow-ripening
tomatoes come higher on the priority list than drought-resistant crops or a vaccine
-From new drugs to better seeds, the best of the new technologies are priced for those who
can pay. For poor people, they remain far out of reach.
-Tighter property rights raise the price of technology transfer, blocking developing
countries from the dynamic knowledge sectors. The TRIPS agreement will enable
multinationals to dominate the global market even more easily.
-New patent laws pay scant attention to the knowledge of indigenous people. These laws
ignore cultural diversity in the way innovations are created and shared and
diversity in views on what can and should be owned, from plant varieties to human life.
The result: a silent theft of centuries of knowledge from some of the poorest communities
in developing countries.
-Despite the risks of genetic engineering, the rush and push of commercial interests are
putting profits before people.
Poor people and poor countries risk being pushed to the margin in
this proprietary regime controlling the worlds knowledge
A broader perspective is needed. Intellectual property rights were first raised as a
multilateral trade issue in 1986 to crack down on counterfeit goods. The reach of those
rights now goes far beyond that into the ownership of life. As trade, patents and
copyright determine the paths of technology and of nations questioning
todays arrangements is not just about economic flows. It is about preserving
biodiversity. Addressing the ethics of patents on life. Ensuring access to health care.
Respecting other cultures forms of ownership. Preventing a growing technological gap
between the knowledge-driven global economy and the rest trapped in its shadows.
The relentless pressures of global competition are squeezing out care, the invisible
heart of human development.
Caring labour providing for children, the sick and the elderly, as well as all the
rest of us, exhausted from the demands of daily life is an important input for the
development of human capabilities. It is also a capability in itself. And it is special
nurturing human relationships with love, altruism, reciprocity and trust. With out enough
care, individuals do not flourish. Without attention and stimulus, babies languish,
failing to reach their full potential. And without nurturing from their families, children
underperform in school.
Human support to others is essential for social cohesion and a strong community. It is
also essential for economic growth. But the market gives few incentives and few rewards
for it. Societies everywhere have allocated women much of the responsibility and the
burden for care women spend two-thirds of their work time in unpaid activities, men
only a quarter. Women predominate in caring professions and domestic service. Families,
nations and corporations have been free-riding on caring labour provided mostly by women,
unpaid or underpaid.
But todays competitive global market is putting pressures on the time, resources and
incentives for the supply of caring labour. Womens participation in the formal
labour market is rising, yet they continue to carry the burden of care womens
hours spent in unpaid work remain high. In Bangladesh women in the garment industry spend
56 hours a week in paid employment on top of 31 hours in unpaid work a total of
87 hours, compared with 67 by men. Mens share of unpaid care work is
increasing slowly in Europe and other OECD countries but not in most developing countries
and in Eastern Europe.
Meanwhile, fiscal pressures are cutting back on the supply of state-provided care
services. Tax revenue declined in poor countries from 18% of GDP in the early 1980s to 16%
in the 1990s. Public services deteriorated markedly the result of economic
stagnation, structural adjustment programmes or the dismantling of state services,
especially in the transition economies of Eastern Europe and the CIS.
And global economic competition has put pressure on the wages for caring labour, as the
wage gap increases between tradable and non- tradable sectors, and between the skilled and
How can societies design new arrange ments for care in the global economy? The traditional
model of a patriarchal household is no solutiona new approach must build gender
equity into sharing the burdens and responsibility for care. New institutional mechanisms,
better public policy and a social consensus are needed to provide incentives for rewarding
care and increasing its supply and quality:
-Public support for care services such as care for the elderly, day care for
children and protection of social services during crises.
-Labour market policies and employer action to support the care needs of employees.
-More gender balance and equity in carrying the burden of household care services.
Each society needs to find its own arrangements based on its history and conditions. But
all societies need to devise a better solution. And all need to make a strong commitment
to preserving time and resources for care and the human bonds that nourish human
All need to make a strong commitment to preserving time and resources
for careand the human bonds that nourish human development
National and global governance have to be reinvented with human development and
equity at their core.
None of these pernicious trends growing marginalization, growing human insecurity,
growing inequality is inevitable. With political will and commitment in the global
community, they can all be reversed. With stronger governance local, national,
regional and global the benefits of competitive markets can be preserved with clear
rules and boundaries, and stronger action can be taken to meet the needs of human
Governance does not mean mere government. It means the framework of rules, institutions
and established practices that set limits and give incentives for the behaviour of
individuals, organizations and firms. Without strong governance, the dangers of global
conflicts could be a reality of the 21st century trade wars promoting national and
corporate interests, uncontrolled financial volatility setting off civil conflicts,
untamed global crime infecting safe neighbourhoods and criminalizing politics, business
and the police.
With the market collapse in East Asia, with the contagion to Brazil, Russia and elsewhere
and with the threat of a global recession still looming, global governance is being
re-examined. But the current debate is:
-Too narrow, limited to the concerns of economic growth and financial stability and
neglecting broader human concerns such as persistent global poverty, growing inequality
between and within countries, exclusion of poor people and countries and persisting human
-Too geographically unbalanced, dominated by the largest economies usually the G-7,
sometimes just the G-1, and only occasionally bringing in the large newly industrializing
countries. Most small and poor developing countries are excluded, as are peoples
Nor does the debate address the current weaknesses, imbalances and inequities in global
governance which, having developed in an ad hoc way, leaves many gaps.
-Multilateral agreements have helped estab lish global markets without considering their
impacts on human development and poverty.
-The structures and processes for global policy-making are not representative. The key
economic structures the IMF, World Bank, G-7, G-10, G-22, OECD, WTO are
dominated by the large and rich countries, leaving poor countries and poor people with
little influence and little voice, either for lack of membership or for lack of capacity
for effective representation and participation. There is little transparency in decisions,
and there is no structured forum for civil society institutions to express their views.
-There are no mechanisms for making ethical standards and human rights binding for
corporations and individuals, not just governments.
With stronger governance, the benefits of competitive markets can be
preserved with clear rules and boundaries, and stronger action can be taken to meet the
needs of human development
In short, stronger national and global governance are needed for human well-being, not for
Reinventing governance for the 21st century must start with strong commitments:
-TO GLOBAL ETHICS, JUSTICE AND RESPECT FOR THE HUMAN RIGHTS OF ALL PEOPLE. Global
governance requires a common core of values, standards and attitudes, a widely felt sense
of responsibility and obligations not just by individuals, but by governments,
corporations and civil society organizations. The core values of respect for life,
liberty, justice, equality, tolerance, mutual respect and integrity underlie the Charter
of the United Nations and the Universal Declaration of Human Rights. They now need to be
the guiding objectives of globalization with a human face.
-TO HUMAN WELL-BEING AS THE END, WITH OPEN MARKETS AND ECONOMIC GROWTH AS MEANS. Human
development and social protection have to be incorporated in the principles and practices
of global governance. Recent advances in global governance have been built on concepts and
principles of economic efficiency and competitive markets. These are important but not
enough, just as they would be in national governance.
-TO RESPECT FOR THE DIVERSE CONDITIONS AND NEEDS OF EACH COUNTRY. Economic pol icy-making
should be guided by pragmatism rather than ideology and a recognition that what
works in Chile does not necessarily work in Argentina, what is right for Mauritius may not
work for Madagascar. Open markets require institutions to function, and policies to ensure
equitable distribution of benefits and opportunities. And with the great diversity of
institutions and traditions, countries around the world need flexibility in adapting
economic policies and timing their implementation.
- TO THE ACCOUNTABILITY OF ALL ACTORS. Multilateral agreements and international human
rights regimes hold only national governments accountable. National governance holds all
actors accountable within national borders, but it is being overtaken by the rising
importance of supranational global actors (multinational corporations) and international
institutions (IMF, World Bank, WTO, Bank for International Settlements). Needed are
standards and norms that set limits and define responsibilities for all actors.
The agenda for action to secure human development in this era of globalization should
focus on seven key challenges, each requiring national and international action.
1. Strengthen policies and actions for human development, and adapt them to the new
realities of the global economy.
Social policies and national governance are even more relevant today to make
globalization work for human development and to protect people against its new threats.
New policies are needed to tackle:
-Changing labour markets not by going back to the old rigidities of labour market
policies that protect elite labour, but by promoting job-creating growth, investing in
workers skills, promoting labour rights and making informal work more productive and
remunerative. This is the new road to flexibility in the labour market.
-Shrinking fiscal resources of states, the results of liberalizing trade and financial
markets, of the global tax competition and of the growth of the underground economy
by generating more revenue from new sources, such as taxes on income and land,
abysmally low in many developing countries, or on value added; by improving efficiency in
tax administration, cutting costs and increasing collections; by reducing military
spending globally, still as high as a third of education and health spending.
-Increasing pressures on peoples ability to provide caring labour in the family and
community and on the states ability to support it by restoring strong
commitments to preserving time, resources and rewards for care and restoring gender
balance in the distribution of costs and burdens.
-Declining cultural diversity by supporting national cultures, not by shutting out
imports but by supporting local culture, arts and artists.
All countries need to rethink their social policies for redistribution, for safety
nets, for the universal provision of social services. The current debate focuses on the
choice between a targeted, minimum cost approach, as in such countries as the United
Kingdom and the United States, and a more universalist approach, as in the Nordic
countries and several continental European countries. What is appropriate for developing
countries? An approach that combines human development and poverty eradication with social
_________________________________________________________________________ br> Social policiesand national governanceare even more relevant
today to make globalization work for human development and to protect people against its
2. Reduce the threats of financial volatil ityof the boom and bust
economyand all their human costs.
Last years financial crisis in East Asia spotlighted the inadequacies of national
and global governance in managing economic and financial integration. Dominating the
financial markets are the big players from the United States to Brazil to China. But
all countries are affected by the swings of the world economy from South Africa to
the Lao Peoples Democratic Republic particularly if they have opened their
economies. While countries need to manage their vulnerabilities to these swings,
international action is needed to manage and prevent financial instability. Policy should
-Liberalizing the capital account more care fully, with less international pressure and
greater flexibility for countries to decide on the pace and phasing based on their
-Subjecting financial institutions to greater transparency and accountability. Developing
countries need to strengthen the legal and regulatory institutions in their financial
-Integrating macroeconomic management and social policies to reduce the impact of
financial turmoil on the economy and to minimize the social costs.
-Strengthening international action to regulate and supervise banking systems
building on the provisions of the Basle Committee and the G-10 in requiring greater
transparency and disclosure of information both nationally and internationally. The UN
Economic and Social Council (ECOSOC), the World Bank and the IMF should conduct an
international study of regulatory gaps, especially for short-term bank loans, for
reversible portfolio flows and for the activities of hedge funds.
-Instituting standstill provisions on debt service to the IMF, the World Bank and the
regional development banks, as proposed by the recent UN task force on the architecture of
the international financial system.
-Developing better institutions of early warning and crisis management. The international
community mobilized more than $170 billion in the 199799 financial crisis for Thai
land, Indonesia, Korea, Russia and Brazil. But what ultimately is needed is a true lender
of last resort, with more resources than the IMF is now equipped to provide. A world
central bank to perform the functions of a lender of last resort should be seriously
-Establishing an international lender of last resort for people to complement
financial packages. The real losses and risks from financial crises are felt by people,
and a parallel funding mechanism should be established to protect them and their
rights to development.
3. Take stronger global action to tackle global threats to human security.
Stronger global cooperation and action are needed to address the growing problems beyond
the scope of national governments to manage.
-The fight against global crime requires national police to take cooperative action as
rapidly as the crime syndicates do. Dismantling bank secrecy and providing witness
protection for foreign investigations would dramatically improve the effectiveness of the
global fight against global crime. The proposed United Nations Convention against
Transnational Organized Crime is an important first step deserving support.
-The loud emergencies of environmental degradation (acid rain, global warming
and ozone depletion) have transboundary consequences, particularly for poor people and
nations. Such emergencies demand global action, with initiatives building on the progress
at the global conferences in Kyoto and Buenos Aires and on proposals for tradable permits
and clean development mechanisms.
-Violations of human rights are often observed in export processing zones and in the
factories of multinational corporations. The international community should formulate
codes of conduct for multinationals to safe guard workers rights.
- More global action is essential to address HIV/AIDS, which is penetrating borders
everywhere. Efforts should be directed at disseminating the benefits of research
from developed to developing countries, providing medicines and preventive measures at
reasonable cost in developing countries and strengthening public health systems in the
4. Enhance public action to develop tech nologies for human development and the
eradication of poverty.
The potential of the new technologies for human development and poverty eradication must
-Intellectual property rights under the TRIPS agreement need comprehensive review to
redress their perverse effects undermining food security, indigenous knowledge, biosafety
and access to health care.
-The governance of global communications especially the Internet must be
broadened to embrace the interests of developing countries in decisions on Internet
protocols, taxation, domain name allocation and telephony costs.
-Public investments are needed in technologies for the needs of poor people and poor
countries in everything from seeds to computers. An international programme should
be launched to support this, based on the model of the Consultative Group on International
Agricultural Research (CGIAR).
-New funds must be raised to ensure that the information revolution leads to human
development. A bit tax and a patent tax could raise funds from those who
already have access to technology, with the proceeds used to extend the benefits to all.
Stronger global cooperation and action are needed to address the
growing problems beyond the scope of national governments to
5. Reverse the marginalization of poor, small countries.
Nearly 30 years ago the Pearson Commission began its report with the recognition that
the widening gap between the developed and the developing countries has become the
central problem of our times. But over the past three decades the income gap between
the worlds richest fifth and its poorest fifth has more than doubled, to 74 to 1.
And with that gap comes migration, environmental pressure, conflict, instability and other
problems rooted in poverty and inequality.
Narrowing the gaps between rich and poor and the extremes between countries should become
explicit global goals to be rigorously monitored by ECOSOC and the Bretton Woods
institutions. These would complement the goals for poverty reduction and social advance
agreed to in the global conferences of the 1990s.
Action can start at the national level. All countries need strong and coherent policies
for managing their integration into the rapidly changing global economy:
-To capture the opportunities of markets in trade and investment, each country should
adopt a coordinated policy package. As the better-performing countries in each region have
shown the Dominican Republic, Ireland, Poland, Tunisia the fundamentals do
not stop with sound macroeconomic management. They must build on widely spread human
capabilities, better incentive structures and sound governance.
-To negotiate more favourable provisions in multilateral agreements, poor and small
countries should pursue active participation in the global dialogues on multilateral
agreements from their development to negotiations to implementation. In trade, for
example, to negotiate for more rapid implementation of the agreement on textiles and
clothing, for a reduction of agricultural tariffs and subsidies and for a slower pace in
implementing the TRIPS agreement.
Poor and small countries can gain from collective action to link negotiations on
intellectual property rights with rights to emit carbon into the atmosphere and to
link environmental assets, like rain forests, to negotiations on trade, debt and
investment. They can also gain in negotiations by pooling resources for policy analysis
and developing common negotiating positions. Regional collective action is a first step in
Stronger international action is needed to support growth and accelerate human development
in marginalized countries. This requires reversing the decline in flows of official
development assistance (ODA), down by almost a fifth in real terms since 1992. Even
without increasing resources, ODA can be much better targeted to the countries in greatest
need, and to achieving key human development goals. Another priority is debt relief for
the 41 heavily indebted poor countries (HIPCs), whose debt service amounted to $11.1
billion in 1996 and whose debt payments have been squeezing spending on education and
health. The HIPC initiative is welcome but it delivers too little too late. Why not
reduce the ceiling for a coun trys debt burden from 200250% of exports to 100%
or less? And why not reduce from six years to three (or even one) the performance
requirement for eligibility?
Narrowing the gaps between rich and poor and the extremes between
countries should become explicit global goals
6. Remedy the imbalances in the structures of global governance with new efforts to
create a more inclusive system.
Poor countries and poor people have little influence and little voice in todays
global policy- making forums. The most important and influential is the G-7, whose members
control the Bretton Woods institutions through voting rights, and the UN Security Council
by occupying three of the five permanent seats. There is no developing country equivalent
to the G-7 or OECD with similar levels of resources, consultation and policy
coordination though there have been many efforts to develop collective third world
positions through such bodies as the G-15, the G-24 and the G-77.
Four actions could be rapidly set in motion to strengthen the bargaining position of the
poor and small countries:
-Provide legal aid. WTO dispute settlement mechanisms can be fair only when the parties to
a dispute have access to expert services of equal calibre to argue their case. An
independent legal aid centre is needed to support poor countries.
-Appoint an ombudsman to respond to grievances and investigate injustices.
- Support policy research. OECD countries arrive at multilateral forums with a battery of
policy research to formulate and defend their positions. The UNDP South Centre set up to
support developing countries is still grossly underfunded.
- Rely more on regional solidarity and regional institutions to develop common positions
for negotiations. Regional support would help in crises, as with the regional fund for
financial stability proposed in 1997. By using peer pressure, it would also help to
maintain policies and practices consistent with economic and financial stability.
At the other extreme is the concentration of influence in rich countries, institutions and
corporations influence not yet used to ensure that globalization works
for human development. The voting patterns of the Bretton Woods organizations need to be
reviewed. Greater public accountability and more transparency would make their operations
more democratic and increase their credibility. Multinational corporations influence the
lives and welfare of billions of people, yet their accountability is limited to their
shareholders, with their influence on national and international policy-making kept behind
the scenes. If they were brought into the structures of global governance, their positions
would become more transparent, and their social responsibilities subject to greater public
-A multilateral code of conduct needs to be developed for multinational corporations.
Today, they are held to codes of conduct only for what national legislation requires on
the social and environmental impact of their operations. True, they have in recent years
taken up voluntary codes of ethical conduct. But multinationals are too important for
their conduct to be left to voluntary and self-generated standards.
-National policies ensure free competition in national markets, but there is no parallel
in global markets. Human Development Report 1994 proposed a world antimonopoly authority
to monitor and implement competition rules for the global market. That authority could be
included in the mandate of the WTO.
-A task force should be established on global economic governance with perhaps 10
industrial and 10 developing countries, but also with representatives of civil society and
private financial and corporate actors. That task force would report to the key
institutions of global governance: to ECOSOC, the IMF, the World Bank, as well as to the
-A joint World BankUN task force should be set up to investigate global inequalities
and suggest policies and actions on how they can be narrowed over the next two or three
decades. The task force should report to ECOSOC and to the World Bank Develop ment
An essential aspect of global governance is responsibility to
people to equity, to justice, to enlarging the choices
7. Build a more coherent and more democ ratic architecture for global governance in the
Just as the nineteenth-century mechanisms of national government were inadequate for the
challenges of the postwar era, so todays institutions of international governance
are inadequate for the challenges of the 21st century. Many of the basic elements of
national governance will be needed in a more robust structure of global governance. An
essential aspect of global governance, as of national governance, is responsibility to
peopleto equity, to justice, to enlarging the choices of all.
Some of the key institutions of global governance needed for the 21st century include:
-A stronger and more coherent United Nations to provide a forum for global leader ship
with equity and human concerns.
-A global central bank and lender of last resort.
-A World Trade Organization that ensures both free and fair international trade, with a
mandate extending to global competition policy with antitrust provisions and a code of
conduct for multinational corporations.
-A world environment agency.
-A world investment trust with redistributive functions.
-An international criminal court with a broader mandate for human rights.
-A broader UN system, including a two-chamber General Assembly to allow for civil society
Even before these long-term changes are initiated or achieved, many actions could be taken
in the next one to three years:
-Developing countries could take collective especially regionalinitiatives to
strengthen their positions in global negotiations in trade, intellectual property rights
and other areas.
- Individual countries could set up a high-level group to coordinate policy on
globalization and manage their integration for a more positive impact on human
-Donor countries could accelerate action on debt relief and redirect aid in favour of
poorer countries and human development priorities.
-An independent legal aid facility and ombudsman could be created to support the poor and
weak countries in the WTO.
-All countries could cooperate more to fight global crime, relaxing restrictive bank
-New sources of financing for the global technology revolution could be investigated, to
ensure that it is truly global and that its potential for poverty eradication is
mobilized. Two proposals: a bit tax to generate resources, and a public programme for
development technology similar to CGIARs programme for food.
-A representative task force could be set up to review global economic governance,
including some 20 or so countries large and small, rich and poor but also the
private sector and the civil society. It could report jointly to ECOSOC, the IMF Interim
Committee and the World Bank Development Committee.
The surge of globalization over the past decade or two is only a beginning. The globally
integrated world will require stronger governance if it is to preserve the advantages of
global market competition, and to turn the forces of globalization to support human
On the eve of the millenium, people are unusually expectant of a more fundamental
diagnosis, more ready to receive it, more eager to act on it. Millenium fever is already
stimulating many groups to sketch out their visions of the future for their
community, their contry and their planet. The future of global governance
objectives, institutions, responsibilities and actions needs to be part of this
exploration by people everywhere. And the Millenium Assembly of the United Nations is a
global forum that could provide powerful momentum for moving the agenda forward.
Stronger governance is needed to preserve the advantages of global
market competition, and to turn the forces of globalization to
support human advance
(Text prepared by Dr. Róbinson Rojas from the PDF version of Human Development
Report 1999, as published by the Human Development Report Office for the UNDP.)