As rich nations try to solve the financial crisis, it's
estimated that the global recession will cost developing countries 750 billion
dollars this year in lost income. The G20 summit in London next week (April 2nd)
will address the global crisis, but there's concern the problems of poor
countries may not be high on the agenda. The G20 represents the world's rich
nations, as well as emerging economies, such as China and India.
The London-Based Overseas Development Institute has published a
"Development Charter for the G20." ODI Director Simon Maxwell says the aim is
to convince developed nations that the financial crisis is hitting poor
countries very hard.
"When we suffered the financial crisis before Christmas, there
was a view amongst the political leadership that this was a crisis made in
developed countries, that would be solved in developed countries, and all we
had to do was to maintain aid flows and perhaps agree a DOHA (trade) deal, and
everything would be fine for the developing world. What we now see just a few
months later is that that was absolutely not true," he says.
Maxwell says that the effects are "real, rapid and severe." With
the right leadership, policies and money, Maxwell sees a recovery in 2010. But right
now, the financial crisis is taking its toll.
"We're seeing, for example, 25 percent of the mining workers in
Zambia have lost their jobs. We're seeing remittances down by well over 20
percent in Kenya. We're seeing stock markets down by 40 or 50 percent in many
countries. And we're beginning to see poverty rates rise. The estimate is that
90 million people will fall below the poverty line in 2009," he says.
The ODI estimates that sub-Saharan Africa alone will lose $50
billion dollars in income this year. Maxwell likens that to two weeks pay for
every man, woman and child on the continent.
"What would happen if of the hundreds of billions of dollars
that we're spending on our economies we were to compensate Africa for that and
put $50 billion either into consumption or into building infrastructure in
Africa? Well, it would benefit Africa, of course, in the short run. But, you
know what? It would be good for exports from the developed countries, as well.
Because when Africa grows, what it does is import more commodities and more
services, more tourists, for example. Our research shows that if we were to
spend $50 billion in Africa, about half of that would come back straight away
to the rich countries in the form of additional imports," he says.
The Development Charter for the G20 calls for a Global Poverty
Alert System to better monitor the effects of economic ups and downs. For
example, the full effects of the 1980s recession on Africa were not known until
Maxwell says, "One of the points we want to make is that we need
to be watching the human impact of the crisis, not in three years time, not in
five years time, but right now. Because every child who suffers from having
fewer meals, who becomes clinically undernourished, is damaged for life. That
child will not grow so well, will not learn so well, will not work so well as
an adult, will suffer long-term diseases."
The Overseas Development Institute also warns against imposing
protectionist practices in both trade and labor.
"When countries are faced by a crisis, their temptation is to close
their borders, to raise the tariffs or to start investing their money in
protecting their own industries. We've seen it with the car industry, with the
steel industry in Europe quite a lot in recent weeks," he says.
He says that would mean fewer trade opportunities for developing
countries. Instead, the ODI charter calls upon the World Trade Organization to
monitor protectionism and try to stop it and for world leaders to announce that
protectionism is harmful to the world economy.
British Prime Minister Gordon Brown has called for fulfilling
commitments made to poor countries, such as those made at the G8 summit in
Gleneagles, Scotland, in 2005. But G20 leaders may not be so eager to do so.
"It will be very easy for the leaders of these big global
economies, even if some of them are nominally developing countries like China
and India…to turn their back and to focus entirely on what looks like a very
urgent agenda – fixing the international bank regulation, making sure the
fiscal stimulus is coordinated. But if we do that then the chances are that, as
it's happened so often before, Africa will be left behind," says Maxwell.
The G20 summit will be held in London on April 2nd.
Organizers say the goals include stabilizing financial markets and enable
families and businesses to get through the recession.