Africa: Global Economic Crisis, 04/02/09
Africa: Global Economic Crisis, 1
AfricaFocus Bulletin
Apr 2, 2009 (090402)
(Reposted from sources cited below)
Editor's Note
"There is a need for developing countries to examine the options
for national policy on each aspect of the economic crisis and to
seek the appropriate policies. However, only some policy measures
can be taken at national level, especially if the country is too
small to rely on the boosting of domestic-led growth.
Regional-level measures are important. And most critical are the
reforms, actions and cooperative measures required at the
international level." - Martin Khor, South Centre
This AfricaFocus Bulletin, containing the full statement by Martin
Khor, is the first in a series of three posted today. It is
available on the web at
http://www.africafocus.org/docs09/gec0904a.php The other two
Bulletins in this series are available at
http://www.africafocus.org/docs09/gec0904b.php (also distributed by
e-mail) and http://www.africafocus.org/docs09/gec0904c.php (only on
the web, with the full text of the Commission of Experts
recommendation.
For previous AfricaFocus Bulletins on related issues, see
http://www.africafocus.org/econexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Statement by the South Centre
Statement at the UN General Assembly Extraordinary Thematic
Dialogue on The World Financial And Economic Crisis And Its Impact
On Development
By Martin Khor, Executive Director, South Centre
New York, 25 March 2009
http://www.southcentre.org
1. The extraordinarily serious global economic crisis has its origins in the developed
countries. Developing countries are not responsible, but they are severely affected, and
in ways that are worse than the developed countries, as they also lack the means to
counter the effects.
2. Developing countries are only in the past few months beginning to feel the effects
of the crisis, due to the lag time in transmission. The crisis will certainly last longer
than originally expected, and then it may take even more time before a full recovery.
3. There is thus growing anxiety in the developing world. When he met the British
Prime Minister Mr. Gordon Brown, last week, as part of the preparation for the G20 Summit,
the Ethiopian Prime Minister Mr. Meles Zenawi warned that African countries could face
political chaos if the recession hits at full force. In developed countries such as
Britain, the worst problem being faced in the downturn was unemployment. But in Africa,
the recession means that ôpeople who were getting some food would cease to get it
and instead of beng unemployed they would dieö, said Mr. Zenawi, as quoted in the
Financial Times.
4. The developing countries are being hit through two transmission
- levels
- trade and finance. The first transmission channel is
through trade. There has been a sudden and steep fall in
manufacturing exports, the fall being 30 to 50% in many Asian
countries. Then there is the fall in demand, prices and export
earnings for commodities, affecting especially low-income
commodity-dependent countries. On 17 March, The Economist's
commodity-price dollar index for all items had fallen by 40%
compared to a year ago (with declines of 29% for food, 44% for
non-food agriculture products and 56% for metals). Earnings from
services are also falling, for example in tourism (in the
Caribbean tourist arrivals are expected to fall by one third this
season) and migrant workers' remittances (a 6% drop is estimated
by the World Bank for 2009)..
5. The second transmission channel is through finance. There is a rapid decline of
bank loans to developing countries, whose companies may find it difficult to roll the many
hundreds of billions of dollars of foreign loans due this year. There is a reversal of
portfolio investment into developing countries, from large inflows in recent years to a
sudden huge exit. Net capital flows to emerging markets fell from $929 billion in 2007 to
$466 billion in 2008 and will fall further to $165 billion in 2009, according to the
estimates by Institute of International Finance. Even FDI is rapidly slowing down because
of difficulties in access to credit and economic contraction. If the past record is a
guide, aid flows can also be seriously affected in the near future. Trade financing has
also been affected by risk aversion, and is choking trade flows; a shortfall of $25
billion in trade financing was reported at a recent WTO meeting.
6. These trade and financial shocks are leading to stresses on the overall balance of
payments, with a fall in foreign reserves, and a depreciation of the local currency in
some countries. All these together threaten developing countries' ability to service their
external debt and avoid a debt default situation. There are already 10 countries that have
had to go to the IMF for emergency loans and many other countries are likely to be lining
up in the near future.
7. All of the above are causing a stress on the real economy, with declines in GNP and
industrial output, a reversal in poverty eradication and a slowdown in social development,
as governments face reduced revenues and budgetary stress. Most developing countries are
constrained from taking the fiscal expansion measures similar to those of developed
countries.
8. There is a need for developing countries to examine the options for national policy
on each aspect of the economic crisis and to seek the appropriate policies. However, only
some policy measures can be taken at national level, especially if the country is too
small to rely on the boosting of domestic-led growth. Regional-level measures are
important. And most critical are the reforms, actions and cooperative measures required at
the international level.
9. The South Centre views the two issues of reform and international actions needed to
counter the recession from the perspective of the problems and interests of the developing
countries. What are the priority issues for the developing countries, on which action is
urgently required?
10. Among the priorities for the South are (1) establishing an international system
that fosters financial stability for developing countries; (2) having access to adequate
and stable financial resources, as private flows and exports decline;
-
avoidance of financial and debt crises and proper management
of crises if they occur; (4) unimpaired access to markets for
goods and services; (5) avoiding collateral damage from policies
taken by developed countries in response to the crisis; (6)
formulating policies for the short and long term for recovery and
development, and being able to maintain and expand policy space to
implement these policies.
11. There is need to review and reform the international financial and economic
systems to ensure the problems that led to the crisis are not repeated and that the
international system does not prevent but positively encourages developing countries to
have the adequate policy space to deal with the crisis nationally.
12. There are dangers that some crisis measures taken by developed countries may have
adverse effects on the South, and thus a need to prevent or offset these actions. For
example, developed countries' agriculture subsidies used to be the main distortion in
world trade but these are now accompanied by huge subsidies to financial institutions and
emerging subsidies to manufacturing (the auto industry). Developing countries lack funds
to match these subsidies; they should be allowed to take measures to prevent subsidised
service providers like banks and subsidised goods from overwhelming their domestic
markets. In the area of tariffs, developing countries should be allowed to exercise their
right to use the policy space to raise their applied tariff if it is below the bound
tariff. A moratorium against raising applied tariffs would be imbalanced because there is
little difference between the applied and bound rates in developed countries, unlike the
developing countries.
13. Private investors and public agencies in some developing countries invested in or
lent to private and public institutions in developed countries. Developed countries'
governments should assure that the assets of developing countries are protected. Pressures
from interest groups that exclude developing countries' assets or loans from bailout plans
(for example the suggestion that AIG should only honour claims from nationally-owned
institutions) should be resisted.
14. New forms of trade protection that affect developing countries should not be
introduced. The fiscal stimulus programmes should not exclude goods and services from
developing countries, as has happened with the Buy American clause in the recent US
stimulus package. Developed countries are mainly exempted from the clause due to their
membership of the WTO plurilateral procurement agreement, of which most developing
countries are not members. There is also need to guard against a new trade protectionist
element being proposed in the climate policies and legislation of some developed
countries; if this is introduced, it could have a further adverse effect on developing
countriesÆ exports and add more stress in this crisis period.
15. A high priority for developing countries is to establish international measures to
foster financial stability and avoid activities driven by speculation. The crisis
originated from banking deregulation and excessive liquidity creation, causing speculation
to be rife in capital and currency markets. Developing countries have been hit by these
speculative activities leading to violent fluctuations in capital flows. But because of
highly costly self-insurance taken in large stock of reserves, these swings have not
created the kind of dislocations seen in 1997 in Asia. An important part of the solution
is to reinstall firewalls and regulations to avoid speculative capital flows unrelated to
real economic activities (trade and investment) and to establish a system of currency
exchange where currency rates reflect underlying fundamentals. This should be a major
priority in the reform of the international financial architecture.
16. In the absence of reform and an international system regulating these flows,
developing countries must have the policy space and be allowed to undertake national
policy measures to regulate capital flows and to defend themselves from speculation.
However the required policy space to take the required measures is hindered by (1)
IMF-World Bank conditionality that mandates an open capital account; (2) Many North-South
free trade agreements that (a) mandate the free and unregulated inflow and outflow of
funds; (b) liberalisation of financial services, including the entry of foreign
institutions for "new financial instruments"; (c) liberalisation and deregulation of
investments. These barriers (the loan conditionality and the FTA provisions) to the
required regulation should be reviewed. Existing FTAs should be reviewed to consider
amending clauses that prevent the required regulation. Current negotiations on FTAs such
as the EPAs between the EU and the African and Pacific countries should fully take this
into account.
17. A major plank of the new financial architecture is the reform of the IMF. Its
policy conditionalities have previously not been appropriate in assisting developing
countries deal with crises. These include: (1) the policy of an open capital account
system, that deregulates capital flows (increasing financial vulnerability) and
discourages or prevents capital controls over inflows and outflows; (2) pro-cyclical
monetary and fiscal policies that have magnified contractionary conditions; (3) trade
policy linked to extreme liberalisation of imports and industrial policy based on
non-state intervention, which have damaged domestic agriculture and industry in many
developing countries. A preliminary review of recent crisis loans to 10 countries
(including some developing countries) by the IMF show that contractionary financial and
fiscal policies (such as a significant increase in interest rates, and a reduction of
government spending) are still maintained as part of the loan conditions.
18. A reform of the IMF is thus crucial. Without the reform, it is premature to expand
its resources. The IMF should not impose or promote an open capital account or prevent
regulation of capital flows. It should not deal with trade and industrial policies and
other development-related policies. The reform process should lead to its creditor role
being confined to providing short-term loans to countries to deal with temporary balance
of payments difficulties. In that area, its policies should be counter-cyclical and not
pro-cyclical. Countries should not be requested to provide loans to the IMF to augment its
resources because this would compromise the ability of the IMF to carry out its
surveillance function and to discipline the policies of countries that provide the loans.
It can obtain resources from the market or from the issuance of SDRs, instead of obtaining
loans from governments. The imbalances in the system of governance, with its present
serious imbalance in voting rights and decision-making, should also be addressed. [Several
of these points in this and the following paragraphs are in Yilmaz Akyuz, "Key issues in
the reform of the international financial architecture"; and "The IMF is back in business
- as usual?"]
19. One major source of financial instability is that the international reserve
currency is the currency of a single country
(the United States). This causes instability as availability of
reserves for the world economy depends on the reserve currency
country (the US) having growing current account deficits. This
problem is worsened under the present crisis because of : (a) the
absence of multilateral discipline over exchange rate and
macroeconomic policies of the US; (b) developing countries'
increased vulnerability to fluctuations in capital flows and
exchange rates; (c) pro-cyclical behaviour of financial markets;
(d) developing countries holding large stocks of foreign reserves
at very high costs. As an alternative, an international reserves
system based on the SDRs could be established. The IMF could
distribute SDRs to itself to make it available to members, and
there should be greater automaticity in access to it.
20. The new financial architecture should include establishment of a multilateral fund
or funds. This could be similar to the two oil facilities set up in the 1970s to assist
countries cope with the oil price increases and to prevent a global recession. The fund
can assist developing countries counter the recession and to offset the multiple losses of
financing caused by reduced exports, migrant remittances, service payments, loans,
investments, trade financing, etc. The shortfall facing developing countries may total
many hundreds of billions of dollars a year. The fund should thus be of a major amount.
The channels of funding and its multiple uses should be determined together by the
international community.
21. Developing countries should also be encouraged to explore and expand regional
financial cooperation. Examples of this are the
Chiang Mai Initiative and its extension in Asia, and the Bank of
the South in Latin America.
22. The new financial architecture should also deal with the threat of new debt crises
facing developing countries. The current account and overall balance of payments of many
developing countries and their foreign reserves are or will be coming under increasing
stress, due to a crisis that was not of their doing. The reform process should as a
priority establish an international system of debt standstill and debt workout for
countries that face debt servicing difficulties. Proposals on this (which originated at
UNCTAD) had been rather extensively discussed, including at the IMF, but did not lead to
any conclusions. Given the present crisis, this should again be a priority proposal. A new
round of debt elimination and debt relief should also be looked at now.
23. For many of the poorer countries, dependence on commodities has revived as a
serious problem because the positive conditions and high prices of the past several years
have vanished. The stabilisation of commodity prices and fair remuneration to producing
countries has thus become a priority crisis issue for developing countries. International
cooperation on resolving commodity issues should thus be on the reform agenda.
24. The crisis provides an opportunity to address the deficits and imbalances in the
governance of global finance and economic issues. The United Nations used to play a
central role in policy formulation and in reaching and implementing agreements. However in
recent years, too much faith and power had been given instead to the markets and to
international financial institutions which supported the drive towards "marketisation" and
"financialisation." At the national level, in developed countries in the centre of the
storm, the pendulum has swung, with the leadership and interventionist role of the state
being emphasised. The international counterpart of this national-level development should
be the strengthening of the role of the United Nations, including its General Assembly and
its economic arms, particularly ECOSOC. Greater authority provided to a strengthened and
more effective UN should be a crucial element of the new global economic
architecture.
25. The UN General Assembly high-level conference in June is an important opportunity
for discussion and follow-up actions on the wide range of issues of the crisis and how it
affects development, and the remedies required. The South Centre is willing to contribute
to the success of this very important event.
Africa: Global Economic Crisis, 2
AfricaFocus Bulletin
Apr 2, 2009 (090402)
(Reposted from sources cited below)
Editor's Note
"The Group of 20 (G20) is making a big show of getting together to
come to grips with the global economic crisis. But here's the
problem with the upcoming summit in London on April 2: It's all
show. What the show masks is a very deep worry and fear among the
global elite that it really doesn't know the direction in which the
world economy is heading and the measures needed to stabilize it."
Walden Bello, Foreign Policy in Focus
The G-20 have completed their meeting in London today, with a
communique promising new action to deal with the global economic
crisis. But few, including the participants, are likely to be fully
satisfied with the results. And there are parallel discussions
taking place not only among protesters but also in multiple other
fora, including the United Nations General Assembly, which some are
now referring to as the G-192.
This AfricaFocus Bulletin, the second in a series of three posted
today, contains excerpts and links to several related commentaries,
particularly highlighting the expert commission appointed by the
president of the United Nations General Assembly. It is available
on the web at http://www.africafocus.org/docs09/gec0904b.php The
other two Bulletins in this series are available at
http://www.africafocus.org/docs09/gec0904a.php (also distributed by
e-mail) and
http://www.africafocus.org/docs09/gec0904c.php (only on the web,
with the full text of the Commission of Experts recommendations).
Interactive Thematic Dialogue of the UN General Assembly on the
World Financial and Economic Crisis and Its Impact on Development
http://tinyurl.com/dbql9h
The Commission of Experts of the President of the UN General
Assembly on Reforms of the International Monetary and Financial
System
http://tinyurl.com/cp3w5k
The G20 ought to be increased to 6 Billion By Daniele Archibugi,
2009-03-31
http://www.opendemocracy.net/node/47639
For previous AfricaFocus Bulletins on related issues, see
http://www.africafocus.org/econexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
United Nations General Assembly Press Release
Deep Reforms of Global Financial System Inevitable Response to
Protracted Crisis,
But Question Is Whether They Will Be Ad Hoc or Orderly, General
Assembly Hears
Expert Commission Chief Says Both Immediate Economic Stimulus,
Redesigned Financial Regulatory Schemes Needed, as Three-Day Run-Up
to June Event Concludes
http://www.un.org/News/Press/docs/2009/ga10817.doc.htm
March 27, 2008
Fundamental reforms in the global financial system were inevitable
given how deep and prolonged the economic crisis facing the world
community would be, the General Assembly was told today as it
concluded its three-day interactive dialogue on the World Financial
and Economic Crisis and Its Impact on Development. ...
The interactive dialogue was intended to help Member States define
a common position for taking stock of the crisis, evaluating
alternative short-term emergency measures and shaping an effective
approach for longer-term efforts to restore dynamism, revive
employment and enhance equity in the world economy. Its
deliberations centred around a set of draft recommendations made by
the "Stiglitz Commission", which will provide a final set of
prescriptions before the high-level United Nations conference on
the economic crisis scheduled from 1 to 3 June.
In his closing comments, Mr. Stiglitz said a dichotomy had surfaced
in the Assembly's discussions between immediate economic stimulus
or a redesign of financial regulatory regimes, but it was a false
dichotomy, as both actions were needed. Moreover, while it was
prudent to make use of existing institutions, it was important both
to reform them and create new ones.
Among the new institutions, the Commission was calling for a global
economic coordination council at the level of the General Assembly
or Security Council; a global reserve system; a new credit facility
to provide developing countries with greater resources; a financial
products safety commission; a global financial regulatory
authority; a global competition authority; and an international
bankruptcy court.
Mr. Stiglitz argued that the critical difference between the
current crisis and past ones, like the Asian crisis when talk of
reform had been mere words, was the developed world's position at
the epicentre. "This is not a downturn that happened on the
periphery. It began in the centre and has gone to the rest of the
world with devastating effects on the periphery."
In that way, the crisis had exposed flaws in the global economic
system and in globalization, making a return to the world of the
past impossible, he said. It was, therefore, in the interest of
every country -- rich and poor, debtor and creditor alike -- to
create the kind of strong institutions the Commission had proposed.
Indeed, since instability in the international economic structures
affected each country, global action would be critical.
[more at
http://www.un.org/News/Press/docs/2009/ga10817.doc.htm]
U-20: Will the Global Economy Resurface?
Walden Bello | March 30, 2009
Foreign Policy in Focus
[excerpts: full text at http://www.fpif.org/fpiftxt/6001]
The Group of 20 (G20) is making a big show of getting together to
come to grips with the global economic crisis. But here's the
problem with the upcoming summit in London on April 2: It's all
show. What the show masks is a very deep worry and fear among the
global elite that it really doesn't know the direction in which
the world economy is heading and the measures needed to stabilize
it.
The latest statistics are exceeding even the gloomiest
projections made earlier. Establishment analysts are beginning to
mention the dreaded "D" word and there is a spreading sense that
a tidal wave just now gathering momentum will simply overwhelm
the trillions of dollars allocated for stimulus spending. In this
environment, the G20 conveys the impression that they're more
commanded by than in command of developments (In addition to the
seven wealthy industrial nations that belong to the G7, the G20
includes China, India, Indonesia, Mexico, Brazil, Argentina,
Russia, Saudi Arabia, Australia, South Korea, Turkey, Italy, and
South Africa.).
Indeed, perhaps no image is more evocative of the current state
of the global economy than that of a World War II German U-Boat
depth-charged in the North Atlantic by British destroyers. ...
The current capitalist crew manning the global economy doesn't
know whether Keynesian methods can re-inflate the global economy.
Meanwhile, an increasing number of people are asking whether
using a clutch of Social Democratic-like reforms is enough to
repair the global economy, or whether the crisis will lead to a
new international economic order.
A New Bretton Woods?
The G20 meeting has been trumpeted as a new "Bretton Woods." In
July 1944, in Bretton Woods, New Hampshire, representatives of
the state-managed capitalist economies designed the postwar
multilateral order with themselves at the center.
In fact, the two meetings couldn't be further apart.
The London meeting will last one day; the Bretton Woods
conference was a tough 21-day working session.
The London meeting is exclusive, with 20 governments arrogating
to themselves the power to decide for 172 other countries. The
Bretton Woods meeting tried hard to be inclusive to avoid
precisely the illegitimacy that dogs the G20's London tryst. Even
in the midst of global war, it brought together 44 countries ...
The Bretton Woods Conference created new multilateral
institutions and rules to manage the postwar world. The G20 is
recycling failed institutions: the G20 itself, the Financial
Stability Forum (FSF), the Bank of International Settlements and
"Basel II," and the now 65-year-old International Monetary Fund
(IMF). ...
In short, institutions that were part of the problem are now
being asked to become the central part of the solution.
Unwittingly, the G20 are following Marx's maxim that history
first repeats itself as tragedy, then as farce.
Resurrecting the Fund
The most problematic component of the G20 solution is its
proposals for the International Monetary Fund (IMF). The United
States and the European Union are seeking an increase in the
capital of the IMF from $250 billion to $500 billion. The plan is
for the IMF to lend these funds to developing countries to use to
stimulate their economies, with U.S. Treasury Secretary Tim
Geithner proposing that the Fund supervise this global exercise.
If ever there was a non-starter, this is it.
First of all, the representation question continues to exercise
much of the global South. So far, only marginal changes have been
made in the allocation of voting rights at the IMF. Despite the
clamor for greater voting power for members from the global
South, the rich countries are still overrepresented on the Fund's
decision-making executive board and developing countries,
especially those in Asia and Africa, are vastly underrepresented.
Europe holds a third of the chairs in the executive board and
claims the feudal right to have a European always occupy the role
of managing director. The United States, for its part, has nearly
17% of voting power, giving it veto power.
Second, the IMF's performance during the Asian financial crisis
of 1997, more than anything, torpedoed its credibility. ...
Thailand paid off the IMF in 2003 and declared its "financial
independence." Brazil, Venezuela, and Argentina followed suit,
and Indonesia also declared its intention to repay its debts as
quickly as possible. Other countries likewise decided to stay
away, preferring to build up their foreign exchange reserves to
defend themselves against external developments rather than
contract new IMF loans. This led to the IMF's budget crisis, for
most of its income was from debt payments made by the bigger
developing countries.
Partisans of the Fund say that the IMF now sees the merit of
massive deficit spending and that, like Richard Nixon, it can now
say, "we are all Keynesians now." Many critics do not agree.
Eurodad, a non-governmental organization that monitors IMF loans,
says that the Fund still attaches onerous conditions to loans to
developing countries. ... And despite the current focus on fiscal
stimulus - with some countries, like the United States, pushing
for governments to raise their stimulus spending to at least 2%
of GDP - the IMF still requires low income borrowers to keep
their deficit spending to no more than 1% of GDP.
Finally, there is the question of whether or not the Fund knows
what it's doing. One of the key factors discrediting the IMF has
been its almost total inability to anticipate the brewing
financial crisis. ... However large the resources the G20 provide
the IMF, there will be little international buy-in to a global
stimulus program managed by the Fund.
The Way Forward
The North's response to the current crisis, which is to revive
fossilized institutions, is reminiscent of Keynes' famous saying:
"The difficulty lies not so much in developing new ideas as in
escaping from old ones." So, in Keynes' spirit, let's try to
identify ways of abandoning old ways of thinking.
First of all, since legitimacy is a very scarce commodity at this
point, the UN secretary general and the UN General Assembly -
rather than the G20 - should convoke a special session to design
the new global multilateral order. A Commission of Experts on
Reforms to the International Monetary and Financial System, set
up by the president of the General Assembly and headed by Nobel
Prize laureate Joseph Stiglitz, has already done the preparatory
policy work for such a meeting. The meeting would be an inclusive
process like the Bretton Woods Conference, and like Bretton
Woods, it should be a working session lasting several weeks. One
of the key outcomes might be the setting up of a representative
forum such as the "Global Coordination Council" suggested by the
Stiglitz Commission that would broadly coordinate global economic
and financial reform.
Second, to immediately assist countries to deal with the crisis,
the debts of developing countries to Northern institutions should
be cancelled. Most of these debts, as the Jubilee movement
reminds us, were contracted under onerous conditions and have
already been paid many times over. Debt cancellation or a debt
moratorium will allow developing countries access to greater
resources and will have a greater stimulus effect than money
channeled through the IMF.
Third, regional structures to deal with financial issues,
including development finance, should be the centerpiece of the
new architecture of new global governance, not another financial
system where the countries of the North dominate centralized
institutions like the IMF and monopolize resources and power. In
East Asia, the "ASEAN Plus Three" Grouping, or "Chiang Mai
Initiative," is a promising development that needs to be
expanded, although it also needs to be made more accountable to
the peoples of the region. In Latin America, several promising
regional initiatives are already in progress, like the Bolivarian
Alternative for the Americas and the Bank of the South. Any new
global order must have socially accountable regional institutions
as its pillars.
These are, of course, immediate steps to be made in the context
of a longer-term, more fundamental and strategic reconfiguration
of a global capitalist system now on the verge of collapsing. The
current crisis is a grand opportunity to craft a new system that
ends not just the failed system of neoliberal global governance
but the Euro-American domination of the capitalist global
economy, and put in its place a more decentralized, deglobalized,
democratic post-capitalist order. Unless this more fundamental
restructuring takes place, the global economy might not be worth
bringing back to the surface.
The G20 ought to be increased to 6 Billion
By Daniele Archibugi,
2009-03-31
http://www.opendemocracy.net/node/47639
The G20 is important in the eyes of the world. Its pronouncements
could decide whether you can get a job, refinance a mortgage, get
a loan if you are a small company and, in the poorer parts of the
world, even put your kids to bed with a full stomach.
Is the G20 really the right institution to address so many hopes
and fears? From the standpoint of legitimacy, not at all. It has
no employees, no headquarters and not even a statute. Indeed the
international relations handbooks cannot tell us how to handle
it, as it is situated half way between an international
organization and the more formalized practices of traditional
diplomatic channels.
In spite of the name, it does not even have 20 member states: it
has only 19, boosted by the addition of a European Union
representative. The member governments are by no means
featherweights; as they themselves often remind us, they
represent 85 per cent of world production, 80 per cent of world
trade and two thirds of the world population.
However, these are merely quantitative values and have little to
do with legitimacy. For Bangladesh it is not enough to have a
population six times greater than that of Saudi Arabia to become
part of the group. The only representative from the continent of
Africa is South Africa. The G20 is lacking in logic also as far
as income is concerned: Spain, Iran, Taiwan, the Netherlands and
Poland have a gross domestic product exceeding that of Saudi
Arabia, Argentina and South Africa but have not been invited.
Also other countries of crucial importance for world financial
architecture, such as Switzerland with its banking system and the
Arab Emirates with its Sovereign Wealth Fund assets, are absent.
How does that one third of the world population whose state
representatives have not even been invited to the Summit feel
about it? A good 173 countries in the world have been left out
and can only wait and see what is decided in London. We are
talking about one third of the world population which has all the
problems of the other two thirds and often many more, but in this
case have no voice.
However, it is still better than the G8, it might be objected,
which groups the governments of only 14 per cent of the world
population, all of which located in the North of the world. It
might be argued that to enlarge the meeting and turn it into a
G192, a kind of UN General Assembly on a school outing, would
make it more representative but also inconclusive as there would
be no possibility of taking effective decisions. The crisis that
has hit the financial markets calls for strong messages to be
transmitted, which can only come from those governments that have
enough resources to guarantee them. But the countries that have
fat wallets do not seem to be interested in sending these
messages, perhaps because they have not been given a mandate to
act on behalf of all countries.
More: http://www.opendemocracy.net/node/47639
African leaders and experts warn that reform of global governance
will fail if poorest countries are sidelined
27th Mar 2009
Africa Progress Panel launches new publication bringing together
views of African leaders and development experts
Africa Progress Panel (Geneva)
http://www.africaprogresspanel.org
Geneva, 27 March 2009 - The Africa Progress Panel has today
launched a new publication ahead of the G20 Summit in London next
week, bringing together the views of eleven African leaders and
development experts. They conclude that a new and improved form
of multilateralism is needed to allow the developing world to
overcome the challenges created by the economic crisis, warning
that reform will not be effective or sustainable if the world's
poorest countries are not included in reformed governance
structures.
The eleven contributors include Kofi Annan (Chair of the Africa
Progress Panel), Michel Camdessus (former Managing Director,
IMF), Goodall Gondwe (Minister of Finance, Malawi), Gilbert
Houngbo (Prime Minister, Togo), Trevor Manuel (Minister of
Finance, South Africa), Simon Maxwell (Director, Overseas
Development Institute), Festus Mogae (former President of
Botswana), Linah Mohohlo (Governor, Bank of Botswana), Todd Moss
(Senior Fellow, Center for Global Development), Benno Ndulu
(Governor, Central Bank of Tanzania) and Ngaire Woods (Director
of the Global Economic Governance Programme, University of
Oxford).
The contributors make a number of key policy recommendations,
including:
- The Bretton Woods Institutions must be reformed at several
levels to make them more inclusive. While the World Bank's
allocation of a third seat on its Executive Board to Sub-Saharan
Africa is a first step in the right direction, others like it
must follow to ensure a more equitable and fair distribution of
voting power.
- Backroom deals should give way to transparency and full
representation, whether in the Bretton Woods or other financial
institutions such as the Financial Stability Forum and the Basel
Committee on Banking Supervision.
- In the short term, if the G20 is to become the premier forum
for coordinating a global response, then the African Union should
be systematically represented. In the longer term,
multilateralism must be underpinned by institutions with
universal reach such as the UN whose legitimacy is beyond
question.
- This crisis will not be overcome by institutional reform alone.
Donors must renew their commitment to boost resource levels for
the least developed countries, ease access to credit, review debt
sustainability criteria and lessen aid conditionality.
Mr Annan, Chair of the Africa Progress Panel, states in the
report that:
"Africa now needs urgent support to maintain economic activity
and protect the vulnerable from the crisis. But while trillions
of dollars are being found, at short notice, for stimulus plans
and bail outs in the richer countries, the least developed
countries find themselves lacking access to credit and faced with
lending policies and practices that minimise their chances of
receiving loans".
"Lacking the means to argue their case at the top tables in the
global economic and financial architecture, Africa's countries
are left to face the very real danger of malignant decoupling,
derailment and abandonment".
[More:
http://www.africaprogresspanel.org/english/pressrelease.php?id=99
]
Other Recent Resources
G-20 Official Site
http://www.g20.org
London Summit Official Site
http://www.londonsummit.gov.uk
Summit Communique, April 2, 2009
http://tinyurl.com/cjuqfr
Put People First Coalition
(coalition organizing London demonstrations)
http://www.putpeoplefirst.org.uk/about-us/policy-platform/
Africa Continent's Four Demands of IMF and World Bank
Ngaire Woods (affiliated with Africa Progress Panel)
http://allafrica.com/stories/200903270167.html
Open Democracy, The G20 and the post-crisis world by David Hayes
http://tinyurl.com/cwnrap / http://www.opendemocracy.net
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************************************************************* from africafocus@igc.org
date Thu, Apr 2, 2009 at 5:14 PM
subject Africa: Global Economic Crisis, 1
Page Editor: Ali B. Ali-Dinar, Ph.D.