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G20 Given Outline to Help the Poor During Global Recession

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 years later.

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.