In their Declaration of the London Summit, the G-20 leaders acknowledged the human dimension of the world-wide financial crisis, stating in no uncertain terms, “We recognize that the current crisis has a disproportionate impact on the vulnerable in the poorest countries and recognize our collective responsibility to mitigate the social impact of the crisis…”
This is welcome news to the poorest people and their advocates in the world. If followed through in action, the G-20 commitments could inject a new vigour to the lackluster pursuit of the Millennium Development Goals and some hope to millions of people in the least developed countries facing steep rise in food prices, and now suffering from the downturn in tourism, and remittances from their migrant workers.
In the case of Nepal, for example, the global financial crisis is expected to cause up to 30 percent decline in remittances that provide the life-line for many rural communities, and prevented the total collapse of its national economy during the last decade of a horrendous civil war. Tourism, another major income earner, has declined by some 20 percent in the first quarter of 2009.
Nepal’s example is multiplied all across the poorest countries of Asia and Africa. Additionally, many low and middle-income countries in Latin America and elsewhere are suffering from the devastating collapse of commodity prices.
During the last two years, two billion people living on less than $2 dollars-a- day, have watched or heard with incredible awe the news of billionaires becoming just millionaires, the giants of global banking and financial institutions falling like dominoes, and the courage and commitment of the world’s richest countries investing trillions of dollars, euros, yens and yuans to rescue these profligate institutions and individuals from their self-made plight of casino capitalism.
Yes, there were some cries for help for the world’s poorest from the likes of UN’s Ban Ki-Moon, the World Bank’s Robert Zoellick, and the usual suspects who habitually champion the cause of the down-trodden. But so far, those with the command of the purse strings in the richest countries were, understandably, solely preoccupied with the plight of their domestic constituents. So the G-20 commitment from London comes as a breath of fresh air to the bottom billion of humanity.
What exactly have the G-20 leaders committed to? They have agreed to triple the resources available to the International Monetary Fund to $750 billion; to provide even more liquidity to the IMF, they have agreed to create Special Drawing Rights (a kind of guaranteed “virtual” money) of another $250 billion; to boost international trade, they have agreed to invest $250 billion; they will allocate $100 billion for additional lending by the multilateral development banks. They will also authorize the IMF to sell some of its gold reserves to generate more funds for concessional lending to the poorest countries. After deducting for some double counting, the total new commitment for a global rescue plan would amount to some $1.1 trillion.
Besides financial commitments, the G-20 leaders have also pledged to make some bold policy changes. These include, better coordination and information sharing among the world’s major economies; ending banking secrecy and exposing tax havens that safeguard the ill-gotten fortune of corrupt dictators and casino-style capitalists; recapitalizing legitimate financial institutions; ending protectionism in international trade; and making the operations of international financial institutions more transparent, rigorous and accountable, including appointment of their leaders through an open, transparent and merit-based selection process.
The intentions of the G-20 leaders are laudable, but it is still an open question as to how the poorest people in the poorest countries of the world will actually benefit from these commitments. There are 3 big potential flaws in the G-20 commitment from the vantage point of the poorest developing countries.
1. The declaration often lumps together “emerging market economies” and the poorest/low-income countries. In the competition for scarce resources, there is a likelihood that the needs of “emerging economies” will trump over those of the poorest/low-income countries. After all, several influential emerging economies have seats at the G-20 table and can articulate their needs and priorities directly, whereas the poorest, low-income countries and the least developed countries have to rely on benevolent intermediaries like the UN, civil society activists and academics to make their case.
2. The G-8 agreement puts great faith on the IMF and assigns it a major role and responsibility for analytical work, policy recommendations and practical support to emerging economies and developing countries. In the past, IMF’s record has been less than stellar. In the 1980s, IMF promoted policies on structural adjustment that were so flawed and caused so much damage to vulnerable populations that UNICEF and others challenged them and called for “adjustment with a human face”.
3. In the late 1990s during the Asian economic crisis, the initial IMF prescriptions failed miserably, leading the then World Bank economist Joseph Stiglitiz and others to argue that some of IMF’s policy recommendations were part of the problem rather than part of the solution. Both in the 1980s and 90s, IMF was initially defiant and defensive, but eventually moderated and adjusted its policies, but only after much damage was done. It is to be hoped that IMF’s performance will be better this time, but vigilance rather than blind trust is warranted.
The G-20 leaders have boldly made an unequivocal commitment to promote global free trade and reject protectionism. “We will not repeat the historic mistakes of protectionism of previous eras”, they thundered from London. This is not the first time that leaders have made such commitments at global forums, only to recoil back to protectionism when confronted with powerful domestic constituencies. Currently, OECD countries spend $1 billion per day in farm subsidies. European countries that claim to be great friends of developing countries and of sub-Saharan Africa, spend $900 a year in subsidy for every single cow, to protect their dairy farmers from competitive international trade. Whether they will really be able to resist domestic pressure for protectionism, likely to be very strong in these difficult times, is yet to be seen.
Wisely, the G-20 leaders have called upon the United Nations, working with other global institutions, to establish an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable. To his credit, UN Secretary-General Ban Ki-Moon has been a strong and consistent champion of the world’s poorest, and has emphasized the need to link a pro-poor global rescue package with the pursuit of MDGs and a green economy.
To fully merit the trust of the G-20 leaders, and his global constituency of developing countries, Mr. Ban will need to institute a strong monitoring and advocacy mechanism involving not just the UN Secretariat’s normative departments and regional commissions, but operational agencies such as UNDP, UNICEF and WFP that have extensive field presence on the ground and can convey not just cold statistics but first hand stories of human suffering and human upliftment.
There is more than enough pessimism and cynicism in the world today. While there is no guarantee, maybe – just maybe – the historic and catastrophic nature of the global financial crisis, the hopes raised by Barrack Obama’s rise to power in the US, and the unprecedented commitment of the G-20 leaders in London, could well be the turning point for fixing the world economy in ways that will benefit not just billionaires and millionaires but the world’s bottom billion people as well.
But ultimately, external support can only help produce good results if domestically developing countries practice good governance and genuinely pro-poor development strategies. The G-20 can help, but the buck still stops with G-77 and the world’s poorest countries.
( Mr. Gautam, a citizen of Nepal, is former Assistant Secretary-General of the United Nations, and Deputy Executive Director of UNICEF)
Source: www.ipsterraviva.net, Published On: April 06, 2009