No Green Shoots for Poor Countries
As the West's economies start to recover, next week's G20 summit must remember its promises to the neediest
Almost six months after they met in London amid headlines warning of another Great Depression, G20 leaders could be forgiven a sense of quiet satisfaction. In contrast to the frenzied atmosphere at the ExCel Centre in Docklands in April, next week's summit in Pittsburgh will be held amid growing evidence of "green shoots" and cautious optimism that the worst of the recession is over.
Gordon Brown and other G20 leaders deserve credit for their April agreement to pump money into the global economy. But while the outlook is brighter for the rich and emerging economies that make up the G20, the same cannot be said of large swathes of Africa, Asia and Latin America. Poor countries hit by falling trade, investment and remittances show little or no sign of recovery. Crucially, their governments cannot borrow to stimulate their economies in the way Brown, Barack Obama and other G20 leaders have done. Oxfam analysis shows that government budgets in Sub-Saharan Africa will be $70bn (£43bn) worse off this year as a result of the crisis. That's $70bn less to spend on schools, medicines and helping their economies back to health.
Tragically, it is the people who need help most who are in danger of being left behind by the nascent global recovery - "left in the burning house", to borrow the colourful phrase of Robert Zoellick, the president of the World Bank. People in poor countries who lose their incomes have none of the safety nets that we fall back on when times are hard. There is no unemployment benefit; free health care is an exception rather than a rule; and support to help the unemployed back to work is non-existent. To make matters worse, the economic crisis arrived at a time when poor countries were already struggling to cope with a sharp increase in food prices and the droughts, floods and food shortages linked to climate change. The combined impact of these triple crises can be devastating. Put simply, the cost of living in these countries has increased just when fewer people are able to afford it. Progress towards reducing poverty is not only under threat; it could go into reverse.
According to the World Bank, 50 million more people will be pushed into extreme poverty during 2009. The UN warns that the number struggling to survive on less than 76p a day could top 100 million. The number of hungry people will rise to more than 1 billion this year - that's twice the population of the EU. Oxfam estimates that by 2015, 375 million people every year will be affected by climate-related disasters. These statistics should be enough to shake even the most complacent of G20 leaders. But with low-income countries only guests at the G20 and the media focusing largely on domestic recovery and bankers' bonuses, Oxfam is concerned that the needs of poor people will be relegated to the sidelines.
Poor countries need decisive action. The G20 has delivered less than half of the £30bn it promised for poor countries at the London summit, according to a report just published by the European Network on Debt and Development. At the same time, the G8, with the UK a notable exception, has failed to deliver on its aid promises. President Obama made a commitment in July that G20 finance ministers would come up with a funding package to help poor countries cope with climate change. Yet when the ministers met in London earlier this month, the subject
merited only a single line in the communiqué. While reports suggest that the US is the stumbling block to a deal on emissions reductions, the insistence of Germany and others that climate change money can be taken from aid also undermines help for developing countries. Poor people should not be protected from floods at the expense of schooling for their children or medicines for the sick. But despite the political wrangling, the G20 has a real opportunity to show the world it is serious about helping poor countries through these crises.
The G8 made an important start by promising $20bn to promote food security in developing countries. Although some of the money was recycled, it marked a welcome recognition of the importance of investing in agriculture in poor countries.
Given the continuing job losses and the threat of public-service cuts in the UK and other G20 countries it is perhaps not the easiest time to be asking taxpayers for more money to help the poor. But that does not mean there is nothing that can be done. Outrage among voters in rich countries has helped push the G20 to crack down on tax havens and recover lost revenue. But this has been based on bilateral deals that do not benefit poor countries. The G20 has now promised to examine a multilateral agreement that could help developing countries collect an extra $160bn from firms that use havens to evade taxes.
Momentum is also building for a currency transaction tax (popularly known as the Tobin tax), which has won the recent backing of Angela Merkel, Nicolas Sarkozy and Adair Turner, the head of the UK Financial Services Authority. A levy of just 0.005 per cent on every currency transaction could raise between $30-50bn a year for development. When you think that the total annual amount spent on aid is $120bn, it is clear that this could make a massive difference to poor people. At a time of anger against the banks, this could also be a rare example of a popular tax. Unfortunately the understandable push to cap bankers' bonuses is in danger of obscuring the needs of the poor. Surely if anyone is deserving of a bonus it is those in Bolivia, Bangladesh and Burundi who are suffering as a result of greed on Wall Street and in the City of London. To stand a chance of success, this proposal needs Anglo-Saxon backing. It is a chance for Brown to show that during tough times he is prepared to put the needs of the many above the interests of the few.
On climate, rich countries need to grasp the nettle. Poor countries need $50bn to protect themselves from extreme events and long-term changes in the weather linked to climate change. And they need a further $100bn to control their own emissions. Brown has spoken out about the need for finance while other world leaders have kept silent. Delivering on President Obama's promise would be in rich countries' interests. As Lord Stern clearly showed, failure to tackle climate change will devastate not just poor countries but the whole global economy. An estimated 20 per cent of global economic output could be wiped out forever, making this year's recession look like merely a bad day at the office. Poor countries that are already suffering the effects of climate change they did not cause cannot be expected to sign up to a deal that does not address their needs.
We are running out of time to strike a deal that will keep global warming below the C increase that would trigger catastrophic climate change. The G20 leaders can act to unblock negotiations in time to strike a deal in Copenhagen in December. Having avoided one potential rerun of the Great Depression, the G20 needs to act smartly to avert another.
2009 Independent News and Media.