A MAI-Day Alert

This May, the Multilateral Agreement on Investment, a business treaty being negotiated by the richer nations that make up the Organization for Economic Cooperation and Development (OECD), will be presented to the rest of the world's nations to sign, with little chance for amendments or additions. The MAI will be a blow against the environment and against the world's poor. It will give near-total freedom to foreign investors, effectively reducing the rights of host nations.

Under MAI, participating nations must:

    Open all economic sectors, including real estate, broadcasting, and natural resources, to foreign ownership
    Remove requirements on investor behavior to merit market access
    Compensate investors in full for assets expropriated by "unreasonable" regulation or by seizure
    Treat foreign investors as favorably as domestic ones
    Allow investors to sue governments in any dispute resolution
    Ensure that all levels of government comply with the MAI
Advocates argue that the MAI is needed to protect international investors against discrimination and expropriation and will open new markets to investment. Many others, however, contend that it will encourage nations -- to an even greater degree than at present -- to compete for investors by lowering wages and environmental safeguards. It will also allow investors to challenge safety and other regulations that might inconvenience the unrestricted flow of capital. Critics see as particularly serious the likelihood that even more money will flow out of poorer countries, whereas, at present, they may restrict the amount investors can withdraw. For this and other reasons, the national debts of our world's poorest countries are sure to rise under the agreement.

Today, one in every five persons in the world is considered extremely poor by the United Nations. Women are the majority in that class. Children, the elderly, the disabled, migrants, refugees and indigenous peoples, as well as those long out of work, are other categories of the poorest. While the majority are rural, many are moving to the cities for the new industrial jobs, swelling poverty there and often leaving behind -- and further impoverishing -- women and children.

Wherever and whenever they can, corporations will buy low (paying third-world wages) and sell high (to first-world buyers). Their profits on sales of cheap goods or resource result in huge rewards of wealth, first to top management and then to stockholders. The nations supplying the labor, resource or goods gain little financially and consistently suffer social, economic and environmental damage.

Cash incomes of transnational employees in less developed nations may seem good at first, but costs of food, shelter, transportation and other needs soon begin to outstrip wages. Workers who flock to the cities are often entering the cash economy for the first time. Everything that was obtained before by gardening, sewing, weaving and bartering now costs money -- even water in some places. Now, there is no such thing as "getting by", picking local fruit, trading eggs for grain or being cared for by neighbors or extended family. Many workers have had to leave their families behind in rural villages and now have no social support if they need any help.

City laborers for big business often live in slums without sewers, clean water or access to health centers, schools or transportation. Labor conditions, even where good regulations are ignored, can be unhealthy, inhumane and dangerous. In some developing nations -- usually not the poorest -- workers may earn more, save and raise their standards of living. Also, transnational corporations sometimes contribute to schools, health centers, roads and other community needs. But positive examples of globalized industry, agriculture or worker communities are very rare.

There are many hidden costs to the community, nation and the world, including lost revenue (when corporations receive subsidies or abatements), pollution, job health hazards, forests destroyed for sprawled factories and houses or cheap export timber, deserts created by over-farming and over-lumbering or over-irrigation of more affordable sites, silted lakes and rivers, et al. Indigenous peoples are especially vulnerable.

Since 1945, when the UN was started, global GNP has increased 700%; global per capita income, 300%. Yet, the 48 poorest nations, with 10% of the world's population, have only one tenth of one percent of the world's income. Their average per capita income in 1993 was $300 -- less than a dollar a day, compared to $906 for the developing world as a whole, and $21,593 for most of the developed nations.

South Asia has the largest number of poor people but half of all Africans and many East Europeans are also poor. The United States and Western Europe have only 1% of the world's poor -- but that is 15% of their populations. Developed countries have 34 million people out of work.

And the most wretched of the earth's nations and people are getting poorer. In 1960, the richest fifth of the world's population had 30 times more income than the poorest fifth. By 1991, the gap had more than doubled, the richest fifth having 61 times more income than the poorest fifth.

To call world attention to the tragic and dangerous crisis of poverty, the UN has designated the next ten years, 1997-2006, the "First International Decade for the Eradication of Poverty". October 17, the day the Universal Declaration of Human Rights was signed in 1948, has been chosen as the day, each year, when nations and groups worldwide protest against poverty as a violation of human rights and show what they are doing to help eradicate it.

UN studies and declarations agree that poverty is linked to lack of control over resources, especially unequal access to land. The UN world conference on Habitat, which took place June 1996, in Istanbul, recommended the recapture of speculative gains in land values through local taxes in order to alleviate poverty and increase affordable housing. Real estate generally becomes more valuable as population grows and as communities improve themselves. Therefore, "recapture", is an accurate term since rising land value is presently being captured mostly by those who do little to increase its value. Their business is simply to anticipate such rises, then monopolize land parcels until they can sell them and reap high returns on their investments while depriving others of the use of land at affordable prices.

Unfortunately, references to the problems created by transnational corporations, the WTO and others are few and weak in most UN commitments and resolutions. Sadly, the MAI will probably even receive official endorsement by the UN. Reform groups call poverty a human rights violation. In The Crime of Poverty, American economist and philospher, Henry George wrote, "The crime...the meanness born of poverty...poison(s)...the very air which rich and poor alike must breathe...There is one sufficient cause that is common to all nations; and that is the appropriation, as the property of some, of that natural element on which and from which all must live."

That "natural element" is land. All nations, 185 countries, rich and poor, must realize that the appropriation of land and its resources by "some" results in poverty, endangers the environment and peace, and so threatens to poison "the very air which rich and poor alike must breathe."

Want more information?

Pat Aller, December 4, 1997

Go to Part II

What Folks Have Been Saying

Once again, you people are out of the mainstream. What do you think will happen to employment and living standards in countries that refuse to sign on to this agreement?
Max Schmoo <
[email protected]>
Brooklyn, - Tuesday, January 06, 1998 at 19:22:30 (EST)
Thank you for this important article. It represents a call to arms for all those concerned with Earth's ecosystem and the hellish spiral of destruction the world's poor are already undergoing. It is certain nearly every nation will sign on to this document, considering the stranglehold that the international financial community has on trade between nations. World government is becoming a frightening reality and the interests of the environment and the world's poor are diametrically opposed to those in charge of it. Nobody asked the people of this world if they wanted to be controlled by international bankers and corporations, yet, with the signing of this document, they will be. Something for Americans to consider is that as conditions worsen, which they will, for third world populations, it is increasingly likely America will be viewed as an enemy instead of a friend as we have in the past and as we would like to be. The MAI might seem like good news to American stockholders at the moment, but it could very easily backfire on Americans in general. The MAI troubles me for a lot of reasons. I stand with you in opposition to the MAI. Perhaps if enough Americans became aware of this pending legislation and voiced their opposition to it, eyes would be opened when they run it through anyway.
Adam Monroe <[email protected]>
Texas City, TX 77590 - Saturday, January 10, 1998 at 18:58:21 (EST)
first thing that went through my mind was that the world is desperate in a new and fair economics system that would not mean that a person who are rich may become richer while the poor is to live to become poorer.I would say that the scarcity of sources may be a problem but if the world would come together and cooperate where the rich is willing to help out the poor I would certainly think that it will be a breakthrough in the economic system.
Raja Zurina Raja Mohamed Ali <[email protected]>
nottingham, UK - Friday, January 16, 1998 at 09:41:54 (EST)
Thank you for reporting on this important treaty. Unlike one of the above commentators, I am very glad that you are not "in the mainstream," because the best ideas never come from the mainstream. For additional links concerning the MAI, may I suggest the collection in this article-- http://www.progress.org/mai.htm
Hanno Beck <[email protected]>
Washington, DC USA - Wednesday, January 21, 1998 at 14:41:05 (EST)
without lvt won't the agreement worsen the worsening distribution of wealth
- Wednesday, January 21, 1998 at 14:54:05 (EST)
Of course it would, and *, as usual, puts her/his finger on the paradoxical fact of our economy. What's wrong, after all, per se, with foreign investment? We have to realize that there's nothing at all wrong with it -- if investors invest in actual productive capital, and if the community collects the rental value of land as it should. Then, and only then, international trade will be the win/win situation promised by the MAI's advocates.
Lindy, unfrozen in Maine <[email protected]>
- Thursday, January 22, 1998 at 10:49:32 (EST)
This article is very disappointing and motivating. As countries get poorer other countries, already with money and enough resources to waste, get richer. I would like some information on what people in the world, especially my country and state are doing on October 17, or any other day for the eradification of poverty. Are there any goups in my area or well known groups involved?
ellen Feighny <[email protected]>
greeley, CO US - Tuesday, January 27, 1998 at 18:51:42 (EST)
Ellen, at this risk of sounding glib, let me say that many groups are fighting to eradicate poverty in many different ways. We here at the Henry George Institute are fighting with all we've got to eradicate poverty. How? Not by grabbing the wealth of the wealthy (they'll just ghrab it back before long). Our mission is to educate as many people as we possibly can about the fundamental causes of poverty in the midst of plenty, and what can be practically, sustainably done to remove those causes. I want badly to eradicate poverty -- and so I challenge you to take our course, and then see what you can do.
Lindy yet again
- Wednesday, January 28, 1998 at 10:11:41 (EST)
As the metanationals consolidate, developments like MAI do not surprise me. However, since it's being passed off as Free Trade, So how does a working stiff like me oppose this?
Rob Wagner <[email protected]>
Brooklyn, NY us - Wednesday, January 28, 1998 at 13:57:25 (EST)
Wow, is that ever a tough question. I guess the first step is by understanding how such agreements are NOT free trade, and articulating this to Those Who Are Confused. There is a very definite tendency, as Rob points out, for people to believe politicians when they say something represents free trade (possibly because many people mistakenly think free trade is inherently bad for workers).

But how is it free trade to require nations to remove all strictures on investors' behavior -- and even to compensate investors for overly "intrusive" regulations? By eroding nations' sovereign power to protect their health, safety and environments, the MAI actually amounts to a powerfully protectionist policy. Why? Because multinationals are being protected from the costs of doing business in nations that choose to enforce their health and safety regulations!
Lindy one mo time
- Wednesday, January 28, 1998 at 15:32:01 (EST)

I am deeply perturbed by the plight of impoversihed nations, but I do not precisely understand the position here. On the surface, it would appear that a relaxation of international trade barriers would eventually have a good effect on all commerce and for all peoples. And it is certainly justifiable that an investor from another country have rights in the one he invests, however, I do NOT find acceptable the idea that a foriegn investor might have the right to bypass our environmental laws when producing his product here, nor have I ever understood the right of a foriegn producer to ship products into this country which have been produced under sub-standard conditions. --- In the matter of the MIA: am I to understand that the agreement is already cut-and-dried, and that it is just a matter of signing the document? Are we faced with a fait accompli, or can we citizens still take some action here?
Art Scholbe <[email protected]>
Cahokia, IL USA - Friday, February 06, 1998 at 15:10:27 (EST)