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World: Economist Denounces International Financial Institutions

Harvard economist Jeffrey Sachs is famous -- and sometimes demonized -- for his work in the early 1990s as an economic adviser to Russian reformers. RFE/RL correspondent Don Hill reports that Sachs made a ringing appeal at Forum 2000 in the Prague Castle yesterday for the rich of the world to do more for the poor.

Prague, 14 October 1999 (RFE/RL) -- World-renowned economist Jeffrey Sachs says that after the transcendent issues of war and peace, the most urgent problems on the planet are those of the poorest nations -- those he called, "the poorest of the poor."

These often are called, inaccurately, "developing nations." But Sachs says they are not developing, but are locked into poverty by location, climate, a century-long late start, and the failures and ignorance of rich countries and international institutions. They need help -- drastic, varied and immediate, he said.

He called for the West to hasten full integration of what he called "the near periphery" -- the Czech Republic and Poland -- into the West. He spoke yesterday before an audience of international intellectuals and spiritual leaders at the final day of the third annual Forum 2000 in the Czech capital Prague.

Economist Sachs distinguishes what he terms "core nations," like the United States and those of the European Union, from those he designates as peripheral, that is, outside the core.

The Czech Republic and Poland are, by his calculations, on the near periphery, while many nations in Africa, Asia, South America, and those in the tropics generally, are on the far periphery.

The center of the core, Sachs said, only partly facetiously, is from 15th Street to 19th Street NW in the U.S. capital, Washington. That's where the White House, U.S. Treasury Department, World Bank, and International Monetary Fund are located. Sachs charged that the latter two, the world financial institutions, have reached the limits of their legitimacy. He called this charge "a very serious indictment." Sachs said:

"The international system is grossly imbalanced. The Bretton Woods (i.e. the 1944 UN International Financial and Monetary Conference that created the World Bank and the IMF) institutions, I think, have reached the limits of their legitimacy. The UN system is emasculated. The European Union acts like a rich-country exclusive club. The World Trade Organization is also at risk of illegitimacy, even in its early years, because the developing world believes it (the WTO) already has been co-opted by rich-country interests, for example in the area of intellectual property rights. So we have a very serious and unfulfilled challenge."

Sachs said he was issuing four very broad challenges. He called for the following:

One -- Fully integrate the near periphery. He said that countries like the Czech Republic and Poland can already sit at the West's table.

"I mean that countries like the Czech Republic or Poland really have all that it takes to achieve higher income levels. This country is not plagued by malaria. It's not plagued by tropical disease. It's not plagued by poor agricultural productivity, except from what was left behind by the socialist system. But it finds itself far behind, without the vibrant technological indigenous base that it would have had, had the 1920s smoothly continued to the 1990s. And so it faces a challenge of full integration. This is mainly a political and institutional challenge, not a science and technology challenge."

Two -- Stabilize and incorporate the far periphery. One-third of the world, as Sachs put it, "isn't even in the game right now." The rich nations should set out to promote local science to deal with local problems like agriculture and health, should commit technical resources to poor countries, and should promote demographic control through education and work toward gender equality. He said the rich nations and international institutions must cancel the debt of deserving poor countries to, as he put it, "show that we have some dignity in the world."

Three -- Take prompt steps to protect the global ecosystem. Sachs said that what he called "the fifth great biologic extinction" on planet Earth already is under way. Hundreds of animal and plant forms are being irreversibly lost every day. Global warming isn't just an esoteric issue promoted by silly green parties and fanatics, he said.

Four -- Reform global governance. He said that the IMF and World Bank are at the edge of illegitimacy, acting not as last-resort lenders but as political instruments of the United States and other powerful, rich nations at the core.

Forum 2000 is planned as a series of five annual international conferences. Czech President Vaclav Havel launched the series to bring together intellectuals, spiritual leaders, and others from around the world to discuss how to create a more just international society for the next millennium. The first conference convened in the Prague Castle in 1997. The fifth is scheduled for 2001. This year's was the third.

The Harvard economist, who travels widely in the Third World as an economic adviser to nations, said he didn't expect such reforms to result from practical politics alone. He said they would have to spring from the development of an active world conscience: "That would be the greatest result of this wonderful gathering."