Last weekend, at a meeting of the finance ministers of countries forming the G7, there was a debate on a proposal submitted by the Chancellor of the Exchequer of the United Kingdom, Gordon Brown, to cancel the foreign debt that the most poor countries have with developed countries, as well as increase aid to these countries. Unfortunately, the proposal put forward by the United Kingdom was not approved and a sort of compromise was found. According to the media one of the main opponents to the UK proposal was the United States, for reasons best known to themselves.
In fact, it is even yet uncertain how the compromise solution that was found will be funded. However, I believe that it is still important to register the fact that the cancelling of debt as a principle was accepted, even though this will now happen on a case by case basis.
The UK had also proposed that there should be a doubling of the aid that should be given to poorest countries in the world. Of this proposal, what is left is a pilot project that is meant to channel more vaccines to these countries to combat illnesses that have developed into epidemics like AIDS.
All this may appear as a big step forward. The fact, that certain principles were accepted should represent an important step forward. However, in terms of the expectations that there were before this meeting, we had a big step backwards. This meeting was meant to set the scene in the coming years to reduce drastically the very wide economic gap that exists between the ten richest countries in the world and the 30 to 40 poorest countries.
It was a recognition of a situation that has evolved over the years, namely that it is useless to push for western style political democracy, if countries were to be left saddled with unsustainable debts that they can never hope to pay back.
This debt continues to drain resources from investment in infrastructure that would eventually attract investment in productive activities and create jobs.
This was meant to be one of the ways in which the poorer countries were meant to benefit from the globalisation of the international economy. This is why it was critical that the UK proposal be approved.
The poorer countries may rightfully claim that the drive towards globalisation has left them at the mercy of big business because they have had to accept investment that left very little in terms of value added in their economies. This investment has sought to maximise all the benefits that the removal of trade barriers has brought but the jobs that it created have been low paid ones and temporary in nature.
The only way that the poorer countries can attract investment that does not exploit the local workers is through a thorough upgrading of the infrastructure and the modernisation of their economies. The cancellation of their debt would have released resources to achieve this objective.
Someone might ask whether this has any relevance for Malta. In some ways it does; in other ways it does not. We are today members of an institution that comprises 25 members. One of the principles on which this institution is based is that of solidarity, both at a macro level and at a micro level.
This is why Malta and other countries, and even regions within countries, claim that it should receive financial assistance from the EU.
Does the lack of a comprehensive agreement on cancelling the debt of the world's poorest countries mean that the principle of solidarity is being put aside? If it does mean that, where does that leave Malta?
On this issue, as in a number of others, there has been an open disagreement between the United States and the richer countries of Europe. Malta has always taken a stand that is seen to be equidistant from either side. It was seen to be in the interest of Malta to adopt such an approach, both from an economic perspective and from a social perspective.
Shall this continue to be possible in future? Moreover, if globalisation is being seen more and more to be beneficial to big business but not necessarily to the weaker economies, should this require us to look at this process with a more critical eye? Some have derided it and judged it to have little or no impact on the Maltese economy. Are they still of the same opinion?
Does our membership of the EU acquire a new dimension? I believe that it definitely does. It gives us an element of protection that would otherwise have not been there. The issue of the cancelling of debt of the world's poorest countries may be seen to be too distant to us. On the other hand, it reinforces once more that being a member of the European Union is a much better option than staying out.