The spectres of Europe's sprawling debt crisis and a Greek Euro exit loom large over the upcoming G20 summit next week in Los Cabos, Mexico, where leaders must thrash out a plan to rescue the global economy. They’ve shown that they can find money, and political will, very quickly when their backs are against the wall. From Los Cabos Jörn Kalinski comments.
In London in 2009, the G20 agreed a trillion dollar boost to the world economy, pulling us back from the brink of a second Great Depression. Two months ago in Washington, they agreed over the course of a weekend to double the IMF’s lending power, building a $430bn firewall to shield the world from the European debt crisis.
* Blameless bystanders?
With any luck, they have another trick up their sleeves, and will wrap up their meeting in Los Cabos having averted a Euro zone meltdown. But they’re not off the hook on their commitments to the blameless bystanders in this crisis: people most at risk of losing their livelihoods and most likely to be pushed into poverty.
Even more than people here at home, people in poor countries have to defend themselves against the global crisis. They’re reeling from slashed aid budgets and volatile food prices. Income inequality globally is dangerously on the rise across the G20 and beyond, and 18 million people in the Sahel region of West and Central Africa are threatened by a severe food crisis. Right now, one in seven people around the world goes to bed hungry every night.
The best way to soften these blows would be for increased investment in health, education, and social protection. But developing countries often cannot afford the safety nets, unemployment benefits and healthcare that help us through the hard times. Without outside help, many will be locked into a vicious spiral where falling export earnings force them to reduce already limited spending. Already, gross capital flows to developing countries plunged to $170bn last year compared with $309bn in 2010.
* Greatest challenge?
In 2009, up against a financial crisis they said was “the greatest challenge to the world economy in our generation,” the G20 launched a framework for “strong, sustainable and balanced growth”. To pull this off, they said they would clamp down on tax havens, meet their aid commitments, and make sure the world’s poorest people got food, fuel, and finance. But so far there has been precious little action.
The stakes are high: if development issues are pushed to the margins, economic growth won’t be enough to prevent poverty escalating across G20 countries and beyond. Leaders must now take decisive steps to tackle poverty, hunger, and inequality.
* What’s at stake?
This demands that they boost scarce resources for development by better regulating tax havens, and obliging multinational companies to report the taxes they pay in the countries where they operate. A tiny tax on financial transactions and a carbon price on international shipping will also to free up significant resources to help people hardest hit by global shocks.
It means securing a more reliable food supply for people who desperately need it by curbing excessive food commodities speculation, supporting a system of emergency food reserves, scrapping bio-fuel subsidies and mandates, and investing more in small-scale food producers. And it will require investing in vital safety nets: free and public health and education services.
Our politicians have it in their power to lay the foundations of a fairer, more sustainable world – one that puts people first. It’s a chance we cannot afford them to miss in Los Cabos. Grasping it would set us on the right track towards a fairer and more sustainable development model in the future, and a more concerted and dynamic response to the crises that confront us now.
Recommended citation: Kalinski, Jörn (2012) ‘Grasping or missing the chance for fairer growth’, World Economy & Development In Brief (WDEV), Luxembourg, 13 May (www.wdev.eu)
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