28th September 1997


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International income gap worsens

The U.S. President, Bill Clinton and British Prime Minister, Tony Blair are a source of danger for similar reasons. They are riding high. They look good. They smile a lot and they owe much of their success to the remarkably prolonged era of economic expansion and renewed sense of prosperity they preside over. And, since they dominate the ubiquitous anglo - saxon press, they are spreading their globalization message with enormous effect.

But they mislead us into a state-of-unaware-being. A new United Nations report, published by its conference on Trade and Development (UNCTAD), makes plain the real situation. The world economy is growing slowly. World output growth has averaged only 2% this decade of liberalization, compared to the near 3% of the turbulent years of the 1980s. If the razzmatazz about globalisation is put to one side and the underlying trends more soberly analysed we will observe that there is also another big untold story - since the early 1980s the world economy has been characterised not just by slow growth but by rising inequality - and this is as true for the U.S. and Britain as it is for most of the rest of the world.

Despite high rates of growth in many Third World countries only a handful of economies - those of East Asia have actually managed to narrow the gap with the northern, industrialized countries. Moreover, increased polarization between the richer and poorer countries has been accompanied by a rising trend in income inequality within countries. The income share of the richest 20% has grown almost everywhere, while those in the lower ranks have experienced no rise in incomes to speak of . (Although they have benefited in kind through much improved educational and medical provisions). Even the middle classes have experienced little improvement.

What is most worrying is that this widening gap between the top 20% and the rest is apparent not just in the less promising developing countries but in the more successful ones too. Even in east Asia, with the exception of Taiwan and South Korea, inequality has increased.

At work is a common set of negative influences, unleashed by over-rapid liberalization. In almost every developing country that has undertaken rapid trade liberalization wage inequalities have increased, just as it has in many industrialized countries. Capital has gained. Profit shares have risen.


The untold story : "rising inequality"

Does this lopsidedness really matter? Students of economics have been taught for decades that the rich getting richer is usually a prelude to rapid growth and the trickling down of income gains to the poor. This theory holds less water by the year. The evidence is accumulating that concentrating national income in the hands of the few does not lead to higher investment and faster growth.

But don't think the socialists have the answer either. What matters is not inequality per se, but the manner in which incomes of the rich are used. We have no rational reason for minding about the wealth of Bill Gates, however grand the new house is, when he is investing the greater portion of what he earns. If the capitalists use their fortunes mainly to invest it is indeed a form of social tax on their profits and deserves all the approval we can muster.

In South Korea and Taiwan, where the rich receive less than 50% of national incomes, private savings and investment are one third of Gross Domestic Product. But in many countries it is as little as 15% and the rich absorb more than 50% of the income pie.

The pace of financial liberalization has fed this self-interested phenomenon. The premium that global finance now places on liquidity and the speedy entry into and exit from financial markets in search of quick gains has undermined longer-term commitments to investment in newly created productive assets.

In the world of sluggish growth that results labour shedding and wage regression are inevitable. The slambang attack on this situation by Malaysian Prime Minister Mahathir Mohamad, speaking at the joint World Bank/International Monetary Fund meeting in Hong Kong this week, was right on the mark.

To turn this around is going to require a lot of imagination and much political courage, particularly if policy makers are going to avoid the temptation to regress to socialism and the circumscribing of the role of the markets and private property. What we need is not socialism with a human face but capitalism with a human face.

The key is profits, harnessing the animal spirits of the entrepreneur, to encourage high rates of saving and high rates of investment from profits earned. Taxes and subsidies are tools for this, together with an array of trade, financial and competition policies. A political and social culture that discourages luxury consumption and closes unproductive channels of wealth accumulation are necessary ancillary tools. The IMF should also be applying the "Tobin tax" of 0.5% on international currency transactions, proposed by a Nobel Prize winning economist. This would curb excessive speculation while yielding about $ 1.5 trillion a year for health and education development.

This would be the "economy of the brave". Without it we could well see, despite the smiles and elan in Washington and London, an awesome backlash against globalisation and liberalisation, one that will be all the more ferocious because its reach will be world-wide.

This column is syndicated to and appears today in Bangkok Post, Boston Globe, Dawn, Japan Times, Los Angeles Times, Manila Chronicle, New Straits Times, Philadelphia Inquirer, San Francisco Chronicle, Statesman, Toronto Star.

Canada: balancing immigrants, liberties

By Howard Schneider

In the taxonomy of global terrorism, Canada might seem like a bit player, a middle power with no symbolic value as a target, no colonial past to inspire vengeance and few controversial entanglements in the world.

But on the streets of Toronto, an estimated several thousand members of the Tamil Tiger rebel group have taken temporary refuge from their rebellion against Sri Lanka, using Canada as a base to regroup and seek funds. In some neighbourhoods, rival gangs, not directly linked to the Tigers but vicious nonetheless, have duelled in gun battles for control of the local turf.

In British Columbia, militant Sikhs press their cause for a separate state in India through local clashes with more moderate members of the religion and, in one notorious case, the 1985 bombing of an Air-India jet.

Canadian security officials say the radical Shitte Muslim group Hezbollah has an "infrastructure" in Canada to harbour terrorists from abroad and possibly plan future attacks. And since the 1960s, Jewish and other groups have monitored and complained about, the relatively comfortable lives that Nazi war criminals, convicted Palestinian terrorists and others have had in some of Canada's most innocuous middle-class neighbourhoods.

The country in modern times has opened its arms to the world offering shelter to tens of thousands of refugees seeking protection under United Nations conventions, encouraging the immigration of skilled workers and investors and transforming the nation's cities into a polyglot mosaic. But in doing so, Canada also has imported the political struggles of those refugee and immigrant groups and some security analysts say offered too passive a response.

"We need to wise up in more general terms the growing nature of the threat," said Dave Harris, president of Insignis Strategic Research and the former director of strategic planning for the Canadian Security Intelligence Service, Canada's spy agency.

"It all adds up to expanding networks, and it is the network nature of what is going on that is alarming," Mr. Harris said, citing expatriate groups such as the Tamil Tigers trying to support a rebellion from abroad and organizations such as Hezbollah that see Canada as a gateway to the fest of North America.

"You have organized channels and movement and infrastructure and we are seeing evidence of the expansion of these things with the use of Canada as a base."

But Benoit Chiquette, a spokesman for the Canadian immigration service, said that whenever concern over terrorist activity in North America was raised, it had to be counter balanced with concern for the civil liberties and rights that had made Canada attractive to the vast majority of law-abiding immigrants. Politics alone does not make a person dangerous, he said, a basic principle upheld in the Canadian courts.

"We live in a democratic society where we have chosen to have freedom of movement." Mr. Chiquette said. "With the huge movement of people, it would be impossible to assure that we would never allow in someone inadmissible."

'Gathering intelligence on groups such as the Tigers of Hezbollah, or on individuals who might pose a security threat in Canada, falls primarily to the Security Intelligence Service. The agency says little publicly about its work, only that it coordinates closely with the immigration service. Mr. Harris points out, however, that the agency's budget has been cut along with that of every other government department as Canada battles its deficit and that its total staffing has fallen to 2,200 from an estimated 2,700.

There would seem to be no shortage of work for it to do, however. Twice in the past few months, individuals from the Middle East who had surfaced in Canada subsequently were linked to actual or planned bomb-attacks aimed at Americans.

Hani Abdel Rahim Sayegh was deported to the United States from Ottawa to face charges associated with the bombing of an apartment building in Saudi Arabia a year ago that killed 19 American military personnel.

He was seeking refuge status in Canada but was arrested after U.S. and Saudi officials told Canadians about his possible involvement in the bombing and his membership in Hezbollah. He offered no counter-argument at his deportation hearing.

In their case against him, Canadian officials contended that Hezbollah had an active organization in Canada, a belief they developed in part after hearing testimony from another accused member of the radical group, Mohammed Hussein Husseini, who was given refugee status in Canada in 1991 but later deported to Lebanon after the security agency decided he was a security risk.

Last month, Gazi Ibrahim, Abu Mezer, 23, was arrested in Brooklyn after police there were told that he and a roommate were planning a bomb attack on the New York subway system.

Mr. Abu Mezer had been living in Canada since 1993, when he won refugee status by arguing that, as Palestinian, he had been persecuted in Israel, according to the U.S. Immigration and Naturalization Service. He was arrested in Washington state after his third attempt to enter the United States illegally across the lightly guarded border. Released on bond, he was in the midst of deportation proceedings when police raided his Brooklyn apartment.

American officials are not yet alleging the same kind of connection with a terrorist group in Mr. Abu Mezer's case that they are with Mr. Sayegh, and New York's mayor, Rudolph Giullaui, has criticized the U.S. immigration agency, contending that it shared responsibility for releasing Mr. Abu Mezer on bond and then not keeping track of him until his scheduled deportation Aug. 23.

The authorities said there were five bombs, apparently rigged for a suicide attack, in his apartment when police arrested him.

But in some ways, Mr. Abu Mezer's case illustrates even better the vulnerabilities of each country's immigration system.

Back home, Mr. Abu Mezer had done little more than throw rocks along with other youths during the Palestinian uprising known as the Intifada - hardly the mark of a suicide bomber and little reason for Canadian immigration officials to consider him a security threat.

'Likewise the United States had simply given Mr. Abu Mezer the due-process rights expected of a democratic country; he was freed on bond when there was no apparent evidence of the violent anti- U.S. sentiment subsequently found in pamphlets found in his apartment.

But Canadian law enforcement officials know all too well the repercussions of a mistake. In 1985, Air India Flight 182 exploded off the coast of Ireland, en route from Toronoto to India. The explosion killed all 329 people aboard, most of them Canadians. The chief suspects were members of a Sikh separatist group based in British Columbia.

One of the central suspects was killed in a gun battle with Indian police several years ago, but the Royal Canadian Mounted Police are still trying to gather evidence so others can be charged.

In another case, the mounted police had to charge one of their own after it was discovered that a man who had been hired to translate documents, Kumaravelu Vignarajah, was a commander of the Liberation Tigers of Tamil Eelam, a paramilitary group that Canada classifies as a "terrorist organization."

He was also apparently a spy for the Sri Lankan intelligence service.

Mr. Vignarajah, one of an estimated several thousand possible Tiger guerrillas in the Toronto area, was given refugee status in 1989; when the police searched his home, they found stolen police electronic equipment and transcripts of cases he had worked on. Mr. Vignarajah ultimately pleaded guilty to the thefts; a spokesman for the mounted police said no investigations had been compromised.

In such cases, Canadian officials say, the country is swift to move and has shown its willingness, as it did with Mr. Sayegh, to invoke national security and deport people considered to pose a terrorist threat.

More ambiguous, say activists such as Bernie Farber, director of the Canadian Jewish Congress, has been the response to people who have done wrong abroad but seem to pose little threat to Canada itself.

In a country that prides itself on diversity, the risk of offending any particular nationality when there is no imminent danger to Canadians can weigh heavily.

For example, the country has only begun investigating a handful of cases despite the likely presence in Canada of at least several dozen, and perhaps several hundred, former Nazis including some who fled from the United States as a result of investigations there.

Others also have been able to stay in Canada far too long, Mr. Faber contends Mahmoud Mohammad Issa Mohammad was convicted in Greece in the late 1960s for the bombing of an EI AI plane, an act carried out under the banner of the Popular Front for the Liberaton of Palestine.

Released from a Greek prison in a hostage exchange, he eventually was allowed to emigrate to Canada. A political uproar ensued, and Canadian officials decided to move to deport him. That was 10 years ago. His case is still in the courts.

"Unless they can bring past criminals who abuse our immigration system to justice," Mr. Farber said, "today's criminals will look to Canada."- (IHT)

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