Global Crises Brewing Up Of Storm
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18-Oct-2014 -
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Transcript of Global Crises Brewing Up Of Storm
The global financial crisisBREWING UP OF STORM
A quadruple global crisis unfolds In the prime of globalization, we are
experiencing an accumulation of four interrelated crises, mutually feeding on each other: Climate change crisis oil and energy (price) crisis Food (and hunger) crisis Financial and economic crisis
A quadruple crisis unfolds The consequences of these crisis -
individually and even more so combined - for development and all stakeholders involved (people, governments, civil society, private sector, NGOs, multilateral agencies) may be devastating.
Hence there is an urgent need to develop effective strategies to prepare for all eventualities and to compensate and counter any negative fall-out.
The new global s(l)(h)owdown
Profound and deepening financial and economic crisis affecting all countries - the impact of real global interdependency -, requiring injection of (hundreds of) billions of US$ by Governments a) into banking sector to maintain liquidity of banks and uphold their ability to provide credit - and b) to provide economic stimulus programmes of a Keynesian nature
Real estate/housing market meltdown - with many foreclosures and personal bankruptcies
Stock and commodity market crash (“krach”) and shrinking confidence/trust in economy
The new global s(l)(h)owdown 2
Deep and long global economic recession looms for ALL countries - with high unemployment, shrinking tax receipts, lower exports and trade, gyration in value of currencies, decreasing tourism income, reduced consumption levels - and the specter of deflation
Oil and commodity prices are in a steep fall, affecting the income of many oil-producing (developing) countries - while lessening the burden for the majority of the developing countries, which had absorbed e.g. in many African countries all ODA inflows
The new global s(l)(h)owdown 3
All these pressures reduce the ability of Governments in industrialised and developing countries alike to steer their economies; budget deficits are rising again (in the EU likely above the 3% Maastricht mark)
Governments are forced to prune their budgets so as to reach as balanced a budget as possible, especially if they require IMF standby credits
The return of the virtue of deficit spending
Moral hazard: Need for more equity in policy-making and allocation of public funds
The ethical dimension The global financial crisis has spread like wildfire
across the world because one single model of globalization, i.e. liberalizing market economy without regard to diversity, different stages of development, needs etc. was pursued.
The deliberate pushing aside of alternative models and approaches points to a moral and ethical deficency, which policy-makers would have to account for.
Kofi Annan recently denounced as “incredibly short-sighted - as well as immoral for wealthy countries to use this financial crisis to drop promises to help the poorest“ (IHT)
The consequences
Developing countries, the most defenseless - and often times “innocent bystanders” - face a perfect storm (WB) and for them the crisis may translate into lower government budget allocations to social AND
productive sectors; Less (discretionary) funds for activities in ED, SC, CLT and
CI Lesser prospects for attainment of IADGs/MDGs by 2015 rising poverty levels - indeed more than 100 million
people have already been pushed back into poverty since onset of crisis (WB President Zoellick)
More demand for official development assistance (ODA) and foreign direct investment (FDI) flows
More demand for multilateral and NGO/foundation funds More recourse to South-South cooperation
The consequences 2
For industrialised countries, this may translate into Lower ODA earmarking and allocations, abandoning
commitments made only recently (e.g. 2005 G-8 Gleneagles commitment to double aid to Africa by 2010) - at present, US$ 30 billion short;
overall, more pronounced trend towards lower ODA Less ODA for select sectors, especially those not
protected by specific international pledges or agreements
Less availability of discretionary funds and hence lower/stagnant levels of extrabudgetary contributions to multilateral organisations
Lack of readiness to subscribe to new multilateral initiatives
The consequences 3
For the private sector, this may translate into Lower economic growth Less trade with developing countries irrespective of
trade barriers and custom levels Lower levels of FDI flows Less loans for investment and trade in developing
countries Lack of interest in new public-private partnerships
requiring private sector funding Overall, reduced confidence in market forces Lower volume of donations to NGOs and charities Lower programme funds earmarked by foundations?
The multilateral fallout Global “collisions” and contradictions
arise; difficult to resolve - e.g., lower budget allocations by developing countries makes them look towards UN agencies which by themselves my be hit by lower budgets - or promote trade while credit dries up
doing more with less: demand by developing countries for assistance will increase while contributions to agencies are likely to decrease (zng or worse)
It may also mean more focus on upstream advice
The multilateral fallout 2
Can there be additionality even for (UN) reform frameworks and how long will current commitments hold (e.g. MDG-F and its new windows; support to One UN Funds; no country left behind in EFA who has a credible national EFA plan)?
How will IMF loans and the related conditionalities affect UNDAFs and One Programmes/Funds (e.g. Pakistan)?
Will UN reform efforts at the country level be affected - if additional donor funds are not forthcoming to One or UNDAF Funds?
The multilateral fallout 3 Will governments and multilateral agencies be
able to maintain their professed commitment to fight climate change and environmental degradation - or will that be sacrificed for straightforward economic survival action and other more immediate priorities??
Will any sectoral priorities be sacrificed or pushed back?
Overall - will there be a need to redefine multilateralism - towards more collaboration?
Danger: excessive focus on new, more transparent and accountable financial architecture, without regard to the level of real needs of people and infrastructure needs
G-20 Summit Washington15 November 2008 - signal of hope? The G-20 Declaration of the Summit on Financial Markets and the World Economy on 15 November 2008 outlined a roadmap for future action to stabilise and reform financial markets, to preserve an open global economy, to promote trade, to provide credit and liquidity and to restart economic growth and overcome recession
Major focus was on strengthening transparency and accountability curbing speculation in currency, financial and commodity markets; enhancing sound regulation nationally and internationally; promoting integrity in financial markets; and reinforcing international cooperation
But the summit also emphasized in the concluding section on a “commitment to an open global economy” - though almost as an afterthought and with rather weak and little compelling language or conviction - on:
G-20 summit - a signal of hope? A commitment to free market principles which are essential
to economic growth and prosperity and have lifted millions out of poverty;
The importance of rejecting protectionism and not turning inward in times of financial uncertainty;
The impact of the crisis on developing countries, particularly the most vulnerable;
The importance of the MDGs, the development assistance commitments the participants have made
Urge both developed and emerging countries to undertake commitments consistent with their capacities and roles in the global economy
Reaffirm the development principles agreed at the 2002 Monterrey Conference on Financing for Development, which emphasized country ownership and mobilizing all sources of financing for development.
The lacunae in the G-20 message
Sadly, no word about preventing a rollback in the volume of development finance, the need for investment in education and health precisely at the present juncture to build the foundations for future development and prosperity, or underlining the critical role of and providing the necessary resources to other multilateral organisations than the Bretton Woods institutions…..
We are left simply with a statement that the summitteers are confident that through coordinated partnership, cooperation and multilateralism (of an undefined type), the world will overcome the challenges before it and restory stability and prosperity in the world economy.
World Bank calls for aid boost The World Bank President called on donors
to boost financial aid to developing nations which find themselves at the mercy of a crisis that “is not of their making”
Empowering developing and emerging countries and economies is imperative
Helping nations pursue economic development and long-term prosperity should be the goal of development finance.