Ann Pettifor’s Statement at the UNDP seminar on “Development Effectiveness” during the FfD Conference in Monterrey, Thursday March 21, 2002. 

For the international Jubilee 2000 movement there is a central irony to the debate on finance for development being conducted here at Monterrey. The irony is this: we are discussing ways in which the rich world can help the poor world, when in fact it is the poor world that is financing and sustaining the rich world.

Let me explain. Each day the poor world lends its environment to finance “supersistent” as opposed to subsistent livelihoods for the rich countries. 

If we were to peel off the proportion of wealth of G7 industrialised countries that relies on unsustainable consumption, per person, of fossil fuels, it would add up to between $13 trillion and $15 trillion per year. [1] For every day that people in the rich world eat up fossil fuels over and above the threshold for sustainable consumption, they accumulate de facto an ecological, or more precisely, carbon debt.  

In real terms that debt is counted in the accumulation of disruptive greenhouse gases in the atmosphere. But, it also has a very real economic footprint. Already the economic damage attributable to climate-change-driven natural disasters has been put at over $300bn per year. The failure to properly capture costs in poor countries means that figure could easily be doubled.  

But the poor countries are not just financing the development of the rich countries by giving away their share of environmental resources, and bearing the cost of unsustainable rich country consumption; they are also literally financing the development of, e.g. the United States – through debt repayments, but above all, through capital flight.  

Martin Wolf of the Financial Times argued a couple of weeks ago[2] that the US’s stock of net liabilities amounts to $5,800 bn. This amounts to 46% of US GDP and about 15% of the world’s GDP. Of these liabilities the US trade deficit last year hit $392 bn. We know that the Japan, most Asian developing countries, oil exporters and the EU contributed $210bn towards financing this deficit; towards financing US consumption and development.  

But this leaves a hole of around $182bn – the amount the US needs to balance its books. Where does it come from? Wolf and many other economists believe that the US deficit is financed largely by capital flight from poor countries.  

So the poor are financing the rich – and they don’t even know they are. They think they are poor, and they need help from the rich. Little do they that it is they, the poor, who are financing the development of rich countries.  

This for us is the irony at the heart of this conference. Until we reverse these flows; until we in the rich countries limit our consumption of the earth’s scarce resources, and start to repay our ecological debts; there will be no justice. Until the rich start financing their own development, and stop robbing the poor – there will be there will be no development in poor countries. Above all, until these injustices are reversed, there will be no peace.  

Thank you.  

[1] See “Chasing Shadows” a report from the New Economics Foundation, on our website: www.jubileeplus.org.

[2] Martin Wolf, Financial Times, February 26, 2002. “This means the net international position must have been minus $2,600bn at the end of last year. Five years from now the stock of net liabilities (if one ignores changes in valuations) would be $5,800bn. This would be 46 per cent of US GDP and about 15 per cent of the rest of the world's. 

“The IMF says last year the US current account deficit was about $392bn. Newly industrialised Asian economies, Japan, Asian developing countries, oil exporters and the European Union contributed around $210bn. But the world as a whole ran a notional current account surplus with itself of $182bn. About this black hole little can be said, except that it must largely consist of unrecorded exports and capital flight from developing countries..”