Developing a Global Marshall Plan:
A Blueprint for Global Economic Renewal

Todd Lorentz, Centre for Global Negotiations

I.  Development Today

On July 6, 2005, leaders from the world’s eight richest countries met in Gleneagles, Scotland to decide the fate of the world’s most deeply impoverished nations. Against a backdrop of relentless poverty, mass starvation, widespread disease, and illness in the developing world, the G-8 leaders presented a plan for fulfilling their commitments to the United Nations Millennium Development Goals (MDGs) established in 2000. But the post-summit analysis of this vainglorious charade portrays a plan laden with inadequacy and political posturing, sustaining an apathetic status quo. Where developing nations sought immediate and wide-ranging relief from the debilitating weight of a combined $2.4 trillion debt (significant portions of which are illegitimate or odious), less than 20 nations were offered a $20 billion cancellation of debt under the destabilizing proviso that recipient nations forfeit control to foreign investment in many sectors of their domestic markets. Where African countries sought more significant development aid to meet the immediate needs of their malnourished and undereducated populations, the G-8 leaders capitulated with promises of future aid, increasing over the span of a half decade but only if they relinquished further debt relief eligibility—effectively giving with one hand and taking away with the other. So far, only Great Britain has met its Gleneagles pledge of aid while the American pledge by President Bush of an additional $3 billion in foreign assistance, primarily for Africa, has been scaled back by Congress to $600 million. By preventing developing nations from immediately accessing the resources and assistance needed to bring their economies into the 21^st century, millions of unnecessary deaths due to poverty, hunger, and preventable illness will occur and this shameful daily regime will continue to weigh heavily on the conscience of the developed world.

According to James Wolfenson, the former President of the World Bank, “across the world, 1.3 billion people live on less than one dollar a day; 3 billion live on under two dollars a day; 1.3 billion have no access to clean water; 3 billion have no access to sanitation; 2 billion have no access to electricity.” In 2001, the world’s 497 billionaires recorded a collective wealth of $1.54 trillion, an amount greater than the combined incomes of the poorest half of humanity. In a world where the bottom fifth of the global population consumes barely more than 1% of the world’s goods, 121 million children around the world had no access to education in 2004. According to a 2003 report from UNICEF, 30,000 children die each day due to poverty. That equals about 210,000 children around the world every week, or close to 11 million children under the age of five each year. In its 2005 report on “The State of The World’s Children”, UNICEF gave the following shocking figures:  Of the 2.2 billion children in the world today, 1 billion (or one in every two children) live in poverty. Of the 1.9 billion children living in the developing world, 640 million are without adequate shelter (one in every three children); 400 million have no access to safe drinking water (one in five); and 270 million have no access to health services (one in seven). As a result, 1.4 million children die each year from lack of access to safe drinking water and adequate sanitation; and 2.2 million children die each year for want of immunization.

Inside this train wreck of shameful statistics Africa bears the heaviest toll. Despite the hundreds of billions of dollars in loans and aid packages provided over the last three decades by industrialized nations, commercial banks, the United Nations and international institutions, Africa is the only continent worse off today than it was 20 years ago, and the current rate of progress will ensure that Africa will probably not meet its 2015 target date for the Millennium Development Goals until the year 2150. To give an example of the impossible situation facing many African states, $30 million dollars is spent each day in Sub-Saharan Africa toward the repayment of debts to the world’s richest countries and international institutions. Nigeria, alone, originally borrowed $5 billion and has since reimbursed its creditors approximately $16 billion. Yet it still owes a ransom of $32 billion – half of which will be “generously” written off by the Paris Club this year. Oftentimes these bad loans were knowingly made by international banks or the IMF in excess of a nation’s ability to repay, and then squandered by corrupt leaders, resulting in a form of financial blackmail that gives lenders de facto control of the country’s policies and resources.

The obvious conclusion is that the G-8 leaders, along with the institutions through which they implement global economic policy, appear incapable of creating meaningful or effective solutions. Strangled by the competing interests of political ideologies, pressures from government lobbyists, an ongoing focus on establishing global security through military expansionism, and a ruthless protectionist competition for global market share, the stalemate in the global development crisis has now become focused within the very institutions that were originally created to overcome human misery and suffering. A recent report by the Organization for Economic Co-operation and Development (OECD), published in The Financial Times (UK), found that "limited progress" is being made toward achievement of the UN MDGs.  In a world where over half the population now lives on less than $2 a day, it is clear that the Bretton Woods era of monetary policy, controlled by and benefiting the world’s richest nations through institutions such as the World Bank and the IMF, has failed. It is crucial that the world move quickly now to take stock of the reasons for this failure and implement true global economic reform that seeks to finally overcome these longstanding human miseries. But what would such reform look like, and how should humanity deal with the present disaster of widespread global poverty, mass starvation and disease, and an environment on the verge of collapse?

II.  Global Marshall Plan

At present, there is no credible international discussion at the governmental level that minimally responds to the degree of crisis facing the world today. The global community must be courageous enough to engage in a completely new approach to this global crisis if we are to have any chance of rescuing our civilization. We must rapidly develop new relationships between governments, corporations, international institutions, religious groups, scientific communities, and the chief stakeholders who are the citizens of this planet—relationships based on an equitable distribution of the world’s resources, mutual respect for human rights, and a profound recognition that humanity, as one family, is responsible for the co-management and stewardship of this planet. The solution rests in a plan for large-scale global reform and renewal, not unlike what has been previously proposed in the Brandt Commission Report of 1980, to end poverty and hunger in the developing world and establish a global economic and political system based on justice, cooperation and sharing. Projected by many as a type of Global Marshall Plan, such an effort would reflect a new global ethic and establish the economic conditions whereby the Millennium Development Goals could not only be met by their target date of 2015, but would be sustained and expanded upon into the future. At present, there exists no long-range plan for humanitarian relief and global development beyond those ascribed in the MDGs. A Global Marshall Plan would bring together the conditions for justice, equality and democracy in the world’s political and economic institutions. The present time is critical for developing this saner direction. The world community, en masse, suffers from a global crisis of confidence materializing as mass unrest, rampant consumerism, a systemic breakdown in the rule of law, national and international militarism, and wholesale terrorism. Without a critical intervention providing for the reordering of global priorities, the crisis unfolding before our eyes threatens to become global chaos, apocalyptic in scale.

 Not unlike its predecessor, the American Marshall Plan (1948-52), which addressed post-war poverty in Europe, the Global Marshall Plan would be a global action program designed to address today’s most intransigent problems. It would be comprehensive enough to establish the basis upon which true economic freedom, social stability, and global human rights can flourish in the generations ahead.

III.  Two Components of a Global Marshall Plan

The Global Marshall Plan, as a major development program, cannot work if the world does not also adopt measures to ensure that it is successful. A comprehensive plan must contain two major components: first, a short-term emergency relief program to address the immediate needs of the developing world in terms of hunger, poverty, aid and debt; and second, a long-term strategy for global economic restructuring, international institutional reform, and the establishment of conditions for long-term proactive global development.

The first component – a short-term emergency relief program – would use as its initial benchmark the eight essential targets agreed upon by all nations of the world in the MDGs. The international community must come to the recognition and acceptance of the fact that ending hunger and poverty is the top global priority of our era and that fulfillment of the MDGs by the target date 2015 is still attainable through a coordinated global effort. The establishment of a Global Development Fund (GDF) is essential to the success of this priority and could function under the supervision of a North-South body of appointed officials, and ultimately under the United Nations Development Program with input from economists, statesmen, and others. This independently financed fund would be partially disbursed into programs that alleviate the immediate needs of the global population in areas of hunger, poverty, aid and debt relief. Until now, funding for these issues has been largely discretionary – based upon the generosity of the G-8 and other rich nations, circumscribed by the constraints of their own national budgetary limits and political circumstances. As global markets vacillate and regional economies undergo various pressures, so too does the willingness diminish of G-8 leaders to allocate these discretionary funds. In the present scenario, an awkward and unbalanced rivalry is created between the needs of individuals, corporations and special interest groups in wealthy nations, and the needs of impoverished citizens in the developing world.

A Global Development Fund would seek international sources of funding with the objective of creating a stable and sufficient pool of resources to meet global challenges. One such source, suggested by British Chancellor of the Exchequer Gordon Brown, is a market-driven mechanism called the International Financing Facility (IFF), which would issue debt bonds through the investment market to generate loans and grants for development. However, many have criticized this operation as a means of profiting further on the poor while, at the same time, merely shifting the burdens of debt and poverty onto future generations. More promising sources of stable revenues for the establishment and maintenance of a Global Development Fund include:

·        The implementation of a 0.1% to 0.25% Tobin tax on the $1.3 trillion daily volume of international currency exchange, which would generate revenues of 10 to 25 cents for every $100 traded. Intended originally as a mechanism to stabilize currency markets and dampen short-term volatility, estimates suggest that $300 billion to $1 trillion could be generated annually.

·        Automatic yearly fees or levies on international corporations (i.e. global business licenses) and on international investments that utilize the global commons (i.e. investment in resource use such as hydroelectric projects, or investments in raw resource extraction).

·        Incremental taxes on the use of the global commons including taxes or levies on ocean fishing and sea-bed mining, offshore oil and gas exploration and production, maritime freight transport, international airline tickets, electromagnetic spectrum usage, satellite parking spaces, military arms exports, toxic waste deposition, fossil fuel energy consumption, and durable luxury goods.

These combined revenue sources would realistically generate a stable flow of development-targeted income, totalling between $600 billion and $1.5 trillion per year, and demonstrate a serious international commitment to humanitarian relief far beyond the current G-8 pledge of $92 billion.

Applied to hunger relief, the Global Development Fund could support immediate measures to increase the infrastructure of developing nations to receive adequate supplies of food and water to those most in need. This would include provisions for short-term transportation needs, refrigeration, storage, and communications in under-developed regions. Programs designed to expand and secure domestic food production and land security, to provide access to reliable markets (local, national and international), to supply research and technology, and to eliminate specific agricultural subsidies and tariffs, could be fulfilled in a coordinated effort between local development experts, the Food and Agricultural Organisation, the UN, and the International Fund for Agricultural Development, with assistance from the private sector, governments and international relief agencies.

Poverty now affects half of the people on this planet, with over 3.2 billion people living on less than $2 US per day. According to UNICEF, 30,000 children die each day in the world from poverty and its terrible offspring: malnutrition, treatable disease, environmental pollution, loss of habitat, pestilence, crime, torture, and war. An immediate international aid program is required to reallocate resources to provide food, water, energy, technology and medicine to those areas hardest hit by poverty. Basic healthcare and education facilities, basic water and sanitation infrastructure, better civil administration, and programs for local employment and the protection of worker’s rights would require a coordinated effort among all levels of society.

In the area of direct aid to developing nations, it is imperative that developed nations succeed at achieving the international standard of 0.7% GDP – with a more ambitious provision to increase that allocation to 1% by 2015. Currently, the top 22 wealthiest OECD countries give an average of only 0.47% GDP ($92 billion), with the US ranking second to last in generosity at 0.22% GDP ($25 billion). Canada’s contribution is only slightly better at 0.34% GDP, but Canada is also the only G-8 nation which under-contributes while running successive annual budget surpluses. Simply honouring the current 0.7% GDP target would more than double present development funding to over $200 billion, and an increase to 1% GDP by 2015 would generate close to $300 billion per year. Increases beyond this amount would place an unfair and unrealistic burden on many donor nations and could not be absorbed effectively by recipient nations. For example, by doubling contributions from 1% to 2% GDP, the American expenditure would increase to nearly $250 billion per year from its present obligation of $81 billion—of which only $25 billion is presently honoured.

Current and Projected Foreign Development Aid (FDA) expenditures

   *   OECD, billions USD, based on prices and exchange rates <www.oecd.org/dataoecd/48/4/33727936.pdf>

   ** OECD, net Official Development Assistance (ODA) in 2005 <www.oecd.org/dataoecd/34/27/36418598.pdf>

A more sustainable program would see the Global Development Fund disburse this amount more consistently and fairly, internationalizing the sources of funding for development on a more equitable basis. In fact, achieving development targets set through the Global Development Fund could eventually lead to decreases in the percent of GDP contributions by OECD nations.

The debt of developing nations remains one of the most contentious and insidious forms of economic subversion functioning in the world today. For every dollar sent in aid to the poorest countries of the world, $1.30 flows back to lenders in debt service. In this way the poor Global South subsidizes the wealthy Global North. The JUBILEE Act, a bill with bi-partisan support in the US Congress, calls for full debt cancellation for 50 of the world’s poorest nations. Christian Aid, ActionAid, and the Jubilee Debt Campaign in the UK have indicated that 62 nations require 100% debt cancellation as a first step to reaching the Millennium Development Goals. A Global Marshall Plan would seek to implement this debt cancellation strategy immediately. Assistance in restructuring legal and financial systems, along with the execution of specific mechanisms to end government corruption (in both developed and developing nations), will serve as a basis for creating lasting stability and security. Moreover, support is needed for developing countries in obtaining long-term capital. Access to capital through aid and loans has often meant that developing nations have had to meet restrictive IMF and World Bank conditions called Structural Adjustment Programs (SAPs). These programs include such actions as the privatization of public services like healthcare, electricity, sewer, and water, or to open local markets to domination by large foreign-owned transnational corporations. In a 2002 report the World Bank admitted openly that close to 65% of its SAPs had failed and had left developing nations in worse condition than if they had not been implemented at all. Access to capital should be facilitated in ways that are more protective of infant economies through increased access to capital markets, direct foreign investment incentives, and increased lending opportunities by commercial banks and other non-bank institutions.

Finally, support for an emergency relief program would include strategies for fair trade and broader access to global trade markets, with protective rules for vulnerable and emerging economies. According to many development economists, infant economies require protection in order to become viable market participants and, not surprisingly, that is the case for today’s wealthy nations. In 1980, Africa held a 6% share of world trade. By 2002, Africa, with 12% of the world’s population, had slipped to 2% of world trade. Analysts suggest that if Africa were to regain just 1% share of global trade, its export income would be increased by nearly $70 billion—three times the amount currently received in international assistance. Nevertheless, the current global trade regime prevents Africa from regaining its foothold in the world economy, and subsequently indentures African nations to this dysfunctional global relationship. The termination of trade subsidies and tariffs, and a program to make energy and the resources of the world more accessible to all nations, would begin to establish the fair playing field needed for global economic development and security.

An emergency program similar to the one just proposed was recently put forward by German mathematician and economist Dr. Franz Josef Radermacher—called the Global Marshall Plan Initiative (GMPI). Radermacher’s Initiative builds on the MDGs and proposes a comprehensive development program for poor nations that incorporates ecological sustainability with programs to stimulate economic growth. However, increasing global interdependence will sooner or later require that all major global issues be strategically linked. Moreover, steps beyond Radermacher’s Initiative must be undertaken to rehabilitate the underlying pathology in the Bretton Woods system and move beyond the monetary policy which is driving its current collapse. Without a fundamental restructuring of the global economic system, initiatives similar to that put forward by Radermacher will continue to have their agendas dominated by transnational corporations, multilateral institutions with little or no public accountability, and profit-driven market forces.

Therefore, the second aspect of a Global Marshall Plan – a long-term strategy for global economic restructuring and international institutional reform – would seek to link together the major global issues and institute fundamental structural changes in the global economy to secure the conditions for long-term global development. The Global Development Fund would remain a key component of this strategy as well and would aim toward the complete eradication of hunger and poverty. The momentum created in achieving the MDGs by 2015 should be seen as part of a more ambitious 20-year plan, stretching to 2025 and beyond, to liberate all of humanity from the tortuous grip of poverty. While NGOs and civil organizations have often been the most effective method of delivering relief, the involvement of the United Nations Development Program, government agencies and public oversight committees is necessary to ensure accountability and balance. This long-term strategy would be multifaceted and comprehensive, and would require the coordinated efforts of NGOs, communities, governments, international institutions, corporations, international relief agencies and, of course, global citizens. The galvanizing impetus behind such an ambitious plan is the recognition that global economic reform is fundamentally necessary in order to enable the entire world community to participate more fully in society and, in time, to release the spiritual and creative potential of more than 4 billion people.

In the arena of global security, the tension between North and South – between the have and have-not nations – has brought us to the brink of global chaos and nuclear war. The future of humanity on this planet is now critically threatened and the formula for our mutual survival is simple:

1.      that Sharing the world’s resources equitably is essential to Justice

2.      that Justice is an essential requirement for the establishment of Peace

3.      that Peace is fundamental to our planetary survival and future

If we do not take these steps, attempts toward significant global development will fail and we will condemn our children to a world of civil breakdown, widespread ecological destruction, and global chaos. Humanity is one interdependent and interconnected family, and generosity and compassion must govern the activities of our foreign policy initiatives. The global community must redefine security as development, rather than as military defence or interventionism, and progressive steps must be put in place to restrict, and eventually eliminate, the global sale and distribution of arms. Concrete measures must be formulated to ensure that developing nations can create the types of political and administrative infrastructures that will allow for transparency and long-term stability. Regional and sub-regional economic agreements can enhance administrative efficiency in development and cement cooperative relationships. The negotiation of disarmament agreements and new dispute resolution mechanisms will provide effective and mature ways to deal with regional disputes and bring genuine, non-violent and lasting solutions to conflict.

Issues involving global governance will require significant focus and emphasis in order to properly manage global development. Reform is needed within the United Nations and would include the establishment of high-level advisory bodies or a world governance council – comprised, perhaps, of an international assembly of philosophers, theologians, economists, scientists and others – to oversee and monitor the operations of international institutions (like the IMF and World Bank), the Global Development Fund, energy resource redistribution, environmental protection, and the establishment of a new negotiating framework for North-South discussions. Likewise, it is critical that a more honest proportional representation be reflected in the power structures of the UN. The United Nations is the central meeting house of all democratic nations in the world yet, in itself, does not fully function democratically. Developing nations must be given an equal voice at the negotiation table.

The area of environment must take center stage if we are to overcome many of the world’s most life-threatening problems. Through the recognition of our deep dependence upon nature and a healthy ecosystem, along with an understanding that industrialization and poverty are key factors that result in extreme pressures on our environment and individual health, international leaders must sustain efforts to minimize global environmental destruction. An international Environmental Policy will be needed to secure long-term fresh water supplies, expand reforestation efforts, reduce industrial emissions, monitor the global ecosphere through environmental impact assessments and pollutant analysis, reduce or eliminate the use of chemicals in agricultural practices, and reduce the impact of noise pollution in large urban areas. International agreements to enforce environmental standards would discourage heavy polluters through taxes and penalties, while subsidies, credits, resource taxes and tradable permits can drive the search for environment-enhancing innovations in agriculture, industry, social infrastructure, and energy supply.

Fossil fuel dependence remains one of the most short-sighted suicidal economic policies in the world today. This obsessive dependency makes oil, coal and natural gas the main culprits in climate warming, energy scarcity, widespread devastating pollution, pervasive health degeneration, global currency hegemony, wildlife and species extinctions, financial market instability, national and international economic tensions, and much, much more. Yet, at last count, China, India and the United States have put forward plans to construct an additional 850 new coal-fired power plants. Development of basic services and infrastructure in the developing world will require massive quantities of cheap, reliable energy; in amounts staggeringly unrealistic to even contemplate as coming from fossil fuel sources. While development aid is usually viewed in terms of aid to developing nations, the current ‘foot-dragging’ and reluctance at implementing such strategies as the Kyoto Protocol will mean that we will be forced to take more radical steps in the very near future. A new Global Energy Policy will require the use of the Global Development Fund to assist industrialized nations in converting existing energy systems to sustainable green sources. However, this will need to be carefully balanced against the simultaneous sponsorship of sustainable green energy development for developing nations, as a comprehensive and just program for reducing global dependence on fossil fuels. The wholesale conversion to sustainable green sources of energy – such as solar, wind, ocean wave, hydrogen and geo-thermal – is a necessary and inevitable requirement for global survival and industrialized nations will reap enormous economic benefits on this path.

IV.  Co-management of the International Economy

A new approach to co-management of the international economy should include an international agreement that ends US global currency hegemony. The global monetary system must be neutral and a new reserve currency system might involve the development of a stable international reserve currency centered, perhaps, on Special Drawing Rights (SDRs) issued through the International Monetary Fund.  Another approach might be a G-4 currency band, which would establish global currency values based on a ‘basket’ of the US dollar, the Euro, the Japanese Yen, and the Chinese Yuan.  A third approach could involve a new global currency unit that would reflect the value of a ‘basket’ of several select global resources. Transition to a new trade currency or universal currency should proceed in an orderly and managed fashion with cooperation from the global financial community in offsetting panic-selling or market manipulation. Furthermore, a new exchange rate regime would involve the creation of a Global Foreign Exchange Agency to monitor the stability of international exchange rates and oversee international investment, banking, and foreign exchange. A new United Nations council of international representatives – reporting to the UN, heads of state, and finance ministers – could be formed to manage the global economic system, bringing consistency and stability for long-term development strategies. Their function would include the periodic review and monitoring of international financial institutions, overseeing global economic interdependence, managing international mergers, and establishing global accounting and auditing procedures. Finally, a new self-adjusting global balance of payments mechanism would allow nations to voluntarily cooperate in a system of fair trade exchange. John Maynard Keynes introduced such a scheme at the Bretton Woods talks in 1944, called the International Clearing Union. Within this program, interest payments or fines would be levied against nations running both trade surpluses and trade deficits, thus encouraging all nations to close out their annual balance of payments. Such a system would encourage a more balanced trade relationship between developed and developing nations, and any levies collected would find their way back to the Global Development Fund and be used for the common good of all nations.

Global negotiations to implement new rules governing fair trade will bring both transnational corporations and international institutions within one coherent global development strategy. A new world trade strategy, perhaps under supervision of the United Nations Conference on Trade and Development (UNCTAD) in association with the WTO, will allow for a proportionate representation from developing nations and ensure a more equitable settlement of trade disputes. Linking international institutions like UNDP, UNCTAD, ILO, WTO, IMF, and the World Bank, and reforming the voting processes within these bodies to create fairer representation and governance, will help bring these institutions under the direction of overarching and consistent labour laws, fair trade mechanisms, environmental policies, technology sharing agreements, global pollution standards, equitable energy redistribution policies, balanced monetary policies, and culturally sensitive social development programs. A massive transfer of appropriate technology and training, from the North to the South, will serve to improve technical skills, increase local expertise, and enhance long-term success and stability in development.

A new global ethics policy must provide transparency rules for international corporations and reaffirm the commitment to labour practices that provide dignity and security to workers around the world. Both governments and corporations should work together to end discriminatory practices and recognize that human rights must not be renegotiated for profits. Therefore, mechanisms must be put in place to limit profiteering in the areas of health, education, food supply, basic housing, and basic energy requirements of individuals.

In conclusion, these programs and policies 1) the emergency relief program and 2) the long-term strategy of global economic restructuring and international institutional reform, lay the groundwork for international development and global renewal. While these reforms are extensive, they are the minimum response needed in order to meet the challenges put before the global community today. Nothing less than the measures outlined here are acceptable and a failure to commit ourselves to solving these challenges condemns our children to a hopeless and catastrophic future. The Global Marshall Plan is a measured response for global economic renewal and represents, for the first time in our history, a collective realization of our inherent wholeness as a people and as a planet.

About the Author

Todd Lorentz, MA

Information Coordinator,

Centre for Global Negotiations

<tlorentz@telusplanet.net>

Copyright 2006 - Journal of Globalization for the Common Good - www.commongoodjournal.com