Presentation Sisters Union News Update June 2009 Print Version
The following article by Kevin Gallagher from the Guardian Newspaper gives an interesting overview.
No stimulus for the poor: Signs of economic recovery should not be an excuse for rich countries to abandon stimulus spending or ignore calls for reform - Kevin Gallagher, guardian.co.uk (Friday, June 19, 2009 16.00 BST)
Last week the G8 finance ministers hailed signs of growth and stabilisation and began an "exit strategy" from the financial crisis that will entail slashing spending and cutting deficits. Such action is ignorant of the global implications of the financial crisis and the need to prevent a crisis from happening again.
A UN meeting next week will not turn its back on economic reality and the world's poor, but who will listen or care?
From 24-26 June, the UN will hold an official high-level conference on the World financial and economic crisis and its impact on development. For this meeting the UN has put together an inclusive and rigorous set of analyses and recommendations regarding the cause of the crisis, its impact on the world's poor and what to do about it. According to recent estimates by the World Bank (pdf), 100 million slid into poverty because of the related food crisis of 2007-8, and 50-90 million more could do so in 2009 alone as a result of the current financial crisis. Taken together these losses could take a big chunk out of the gains in poverty alleviation that have occurred since the 1990s.
In contrast to the hyped G20 meetings on the financial crisis earlier this year in the UK, this meeting will boast more world leaders and be more representative of the planet's people. Absent however has been the Academy Award-like treatment that the G20 enjoyed leading up to and during their event. In contrast to the G20 meeting, the UN put together a high-level commission of experts consisting of renowned economists and former finance ministers from across the world to put forth a series of analyses and recommendations for policy.
Rich country analyses of global imbalances blame Asian nations and net commodity exporting countries for not saving. The UN report convincingly argues that the accumulation of reserves by developing nations was a rational act of self insurance against financial crises that stemmed from the failure of the world to adequately respond to the crisis of 1997.
After their experiences in the 1990s, no country in Asia or Latin America wanted the US or even more draconian IMF to step in during a crisis. And the global community failed to set up proper governance structure to prevent or deal with future crises. As a result developing nations kept cash on hand for an emergency. They obtained these reserves by purchasing the debt of rich countries. Put bluntly: the poor lent trillions of dollars to the rich for a consumption party that got out of hand.
To rectify the current crisis and set a course for crisis prevention, the report recommends additional fiscal stimuli by world governments (not less), and a pledge for 1% of stimuli to go to the world's poorest countries. The World Bank estimates that the US package currently allocates only 0.2% to the world's poor.
The report also calls for the establishment of a high-level Global Economic Coordination Council and a commitment to regulation that would supplant and be a more democratic alternative to the G8 and G20 processes. The council would hold annual meetings to forge a new system of global economic governance that could solve global imbalances and prevent future crises.
Perhaps most importantly the UN experts' report recommends a new global reserve system. Reliance on the currency of a dominant power that borrows too much and over-consumes has wreaked havoc on the world. If this isn't rectified, developing nations may have the incentive to save even more than they did during the run up to the current crisis. Such actions will only accentuate inequities whereby the poorer countries transfer wealth to the rich.
To be sure, positive steps toward recovery have been made. Without bailouts and stimulus spending we could have spun into a depression. We need to follow through so that recovery is ensured and won't happen again. To that end, we would do well to listen to the UN and its commission of experts. Exiting now is not
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