Financial Crisis

UN Conference: “Recovering from Global Crisis”

I wanted to report back on another interesting session that I attended during last week’s UN Conference.  It was titled “Recovering from Global Crisis: Towards an Action plan for Africa and the Least Developed Countries” and included Dr Dipu Moni, the Foreign Minister of Bangladesh; Dr Asha-Rose Migiro, UN Deputy Secretary-General; and Mr Cheick Sidi Diarra, UN Under-Secretary-General, Special Adviser for Africa and High Representative for the Least Developed Countries (as represented left-to-right in the photo).

At the start of the session, Mr Cheick Sidi Diarra stated that Africa and the Least Developed Countries (LDCs) will likely be hit hardest by the global financial crisis.  Many of these countries lack the “fiscal space” to pursue countercyclical measures to protect their industries (think “bail outs”) and to fund social safety net programs (think healthcare, education and social services).  He warned that a reduction in Official Development Assistance (ODA) would make the prospect of meeting the MDGs even more remote and urged donor governments to: 1) deliver on the commitments they made at Gleneagles in 2005 as well as the recent G20 meeting; 2) resist protectionist trade policies; 3) finalize the Doha trade agreements; and 4) pursue reforming the global financial system, as to protect against instabilities and guard against future collapses.  As he said, these steps are critical “to laying the foundation for future growth and sustainable development.”

Dr Asha-Rose Migiro echoed the call for G8 countries to meet their 2005 Gleneagles commitments, mentioning that aid to Africa is about $20 billion short of the 2010 target of $50 billion per year.  As she stated, “there is abundant evidence that aid can help transform lives and must remain a central part of the global development agenda.”  She outlined what the UN considers their highest funding priorities, which are: 1) to close the funding gap for the Global Fund to Fight AIDS, TB and Malaria and the Global Alliance for Vaccines and Immunizations; 2) to provide agricultural development, including that for subsistence farmers; 3) to improve health systems and infrastructure for the world’s poor; 4) to ensure universal access to education, in support of the Education for All’s Fast Track Initiative; 5) to improve water and sanitation systems; and 6) to meet the gap for clean energy development.  That being said, she said that we all must recognize that aid works best in conjunction with market forces.

Dr Dipu Moni picked up on this statement, arguing that trade ¬can be the engine for growth and calling for the conclusion of the Doha Development Round, which could boost the global economy by at least $150 billion and would help fulfill its development mandate.  She pointed out that even though the G20 countries pledged not to turn inward, at least 17 of them have already broken their promises and have instituted protectionist and nationalistic trade policies, such as tariffs, trade-distorting subsidies and buy national requirements that favor domestic goods.  She said that the current crisis will have a serious impact on trade and that the outlook for 2009 is pessimistic, with the World Trade Organization (WTO) estimating that global trade volumes will fall by 9% in 2009, the largest decline since World War II.

Dr Asha-Rose Migiro ended the session by calling Member States to build upon the Conference to forge a new multilateralism and stronger global collaboration so that we can enter 2010 and the decade beyond with the global financial crisis behind us, a climate change plan in hand and working towards the achievement of the MDGs.

-Margaret McDonnell

More from the UN

Yesterday afternoon, I attended a side event during the UN Conference to launch the Joint Publication by the five UN Regional Commissions on “The Global Economic and Financial Crisis: Regional Impacts, Responses and Solutions.” <!– /* Font Definitions */ @font-face {font-family:”Cambria Math”; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:1; mso-generic-font-family:roman; mso-font-format:other; mso-font-pitch:variable; mso-font-signature:0 0 0 0 0 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-1610611985 1073750139 0 0 159 0;} @font-face {font-family:Verdana; panose-1:2 11 6 4 3 5 4 4 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:536871559 0 0 0 415 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:”"; margin-top:0in; margin-right:0in; margin-bottom:10.0pt; margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:”Calibri”,”sans-serif”; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-bidi-font-family:”Times New Roman”;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:10.0pt; mso-ansi-font-size:10.0pt; mso-bidi-font-size:10.0pt;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} –> Asha-Rose Migiro, the UN Deputy Secretary-General, spoke to the fact that no region in the world has been spared by the financial crisis as all are facing a decline in trade, remittances and capital flows and in turn, rising unemployment and poverty. As stated by Noeleen Heyzer, the Current Coordinator of the Regional Commissions, while the financial crisis is global in nature, enhanced cooperation and collaboration on the regional level will be vital towards addressing the challenges and developing innovative solutions towards recovery. The floor was then handed over for each of the Executive Secretaries of the Regional Commissions to speak about the effect that the crisis has had in their regions.

Mr Abdoulie Janneh, the Executive Secretary for the UN Economic Commission of Africa, argued that while Africa might have been expected to be less affected by the global financial crisis (as it has been less integrated in the global economy and has smaller financial markets), the crisis has already reached most African countries, reducing growth and threatening hard-won achievements in human development. He said that their biggest concern is that donors may reduce Official Development Assistance (ODA) flows to the region, which would reduce the ability of African countries to boost growth and to achieve the Millennium Development Goals (MDGs). As reflected in the report, “Donors will therefore need to honour their existing commitments to enable governments in the region to protect the vulnerable and prevent more people from falling into poverty.” In closing, he pleaded that that Africa’s challenges are too great to face alone and will require international involvement in aid, climate change, investment and trade.

The findings and recommendations for each region can be found in the publication.

Meanwhile, Miki attended the side event called the “People’s Right Before Corporate Profits.” The key guest speaker of the event was Mr. Raphael Correa, President of Ecuador. President Evo Morales of Bolivia was also scheduled to attend the event, but he was apparently unable to come to NY due to technical problems with his official plane. President Correa, an economist by training, expressed strong criticism to capitalism, the structure of the current global financial and trading system for its role in the global economic and financial crisis. He told the mainly civil society audience that the policies of liberalism, that is, free movements of capital, only benefit the multinationals and those at the top. As a consequence, the world is experiencing a “dictatorship of capital” – and ultimately, lower income workers are those who lose out in such a system. He went as far as to say that if he had his way, the International Monetary Fund (IMF) and the World Bank, two bodies within the group of so-called Bretton Woods institutions, would be dismantled. Failing such drastic measures, these institutions, which were set up in the aftermath of World War II, should at least hold less power over the world’s poor countries. His powerful words were welcomed by a standing ovation.

-Margaret McDonnell and Miki Imai

Live from the UN

We spent yesterday in the United Nations headquarters in New York for the UN Conference on the global economic crisis and watched the opening plenary session live on a big screen in a designated room with our NGO colleagues.

Mr. Miguel d’Escoto Brockmann, the President of the General Assembly, stated at the outset of his speech that we are meeting because “we are going through the most singular moment in human history when our common future is at stake.” He said we must acknowledge that the current economic and financial crisis is the result of “an egotistical and irresponsible way of living, producing, consuming and establishing relationships among ourselves and with nature that involved systematic aggression against Earth and its ecosystems,” which masked social imbalance and global social injustice. He called for “a sustainable way of life,” which stems from a shared vision of the values and principles that promote the well-being of present and future generations, and a creation of a new global ethic to share our common global good that is the “Mother Earth.” This should be extended in dealing with the concerns of environment as well as humanitarian issues including poverty, which is a “time bomb” against humanities of all societies. He concluded his moving speech with a plea that that we “arm ourselves with solidarity and cooperation in order to make a qualitative leap forward to a future of peace and well-being.” You can read a transcript of his speech here.

UN Secretary-General Ban Ki-Moon also raised concerns that the world is “still struggling to overcome the worst ever global financial and economic crisis since the founding of the United Nations more than 60 years ago.” He called the international community to take three urgent actions. First, he stated the need for real time data on the vulnerability of the crisis to the poor. In this regard, he informed us that the UN is leading the construction of a global crisis alert mechanism. Second, the international community must keep their commitments on their development targets including the 2005 Gleneagles commitments made by the G8 leaders. Third, he called for the international community to work together to reform the world institutions. “The world institutions created generations ago must be made more accountable, more representative and more effective.” Ban Ki-Moon also said he had just sent a letter to leaders of the G8 urging “concrete commitments and specific action to renew our resolve.”

Yesterday afternoon, we attended a dialogue between the civil society participants and the Commission of Experts on the Reforms of the International Monetary and Financial Systems, convened by the President of the General Assembly. Professor Joseph Stiglitz, the chair of the commission, gave an overview of the recommendations that was released ahead of the Conference and answered questions from the civil society participants. He called for a package of strong, coordinated and effective actions to stimulate the global economy and a number of systemic reforms of the current financial systems, including the creation of a new global reserve system to better deal with risks, and better surveillance systems. He criticized the recent G20’s attempt in tackling the financial crisis, as follows– grants should be provided to the poor rather than debt-incurring loans, their agreements on regulation were more cosmetic than real, and too much of the new resources to the poor will be provided by the IMF, who has been criticized for imposing harmful conditions in return for IMF funding. In his closing remarks, Stiglitz reminded us that the financial crisis is an opportunity for us to change the current skewed global financial and economic system, but that there is a real danger that real reforms will be blocked by a number of governments who do not want to make those changes. Encouragingly, the Commission added that continuous pressure by civil society on governments to make the necessary reforms will be vital in preventing this from happening. The Commission’s report can be found here.

Check back for more updates from the UN!

-Mikiko Imai

Enroute to NY for UN Summit

This morning, Miki Imai and I are heading to the United Nations Conference on the Financial and Economic Crisis and its Impact on Development. This UN Conference will be a valuable opportunity for all countries- developed and developing alike- to have a seat at the table to discuss possible solutions to this systemic crisis. As indicated on the website, the purpose of the Conference is “to identify emergency and long-term responses to mitigate the impact of the crisis, especially on vulnerable populations, and initiate a needed dialogue on the transformation of the international financial architecture, taking into account the needs and concerns of all Member States.” For more information about the Conference, including background materials, official documents and side events, go to: http://www.un.org/ga/econcrisissummit/

During the Conference, we will meet with other civil society organizations and social movements from around the globe that have come to NYC to demonstrate solidarity with the world’s poorest people. Numerous organizations and networks have rallied behind 10 Days of Action: Countdown to Commitments, which “aims to mobilize public opinion and deliver the message to world leaders that civil society is watching and expects just, equitable and sustainable solutions to the financial and economic crisis which are focused on the urgent needs of people and the planet.” To learn more about the 10 Days of Action here.

Keep posted for more updates from the Ccnference!

-Margaret McDonnell, ONE’s NGO Partnerships (US) & Faith Relations Team

ODI: Financial Crisis Hitting Developing World Far Harder than Previously Thought.

Several months after the global financial crisis hit, many news reports suggest that we may be nearing the end of the downturn here in the U.S. Unfortunately, we can’t say the same for developing countries, particularly in Africa. A sobering study from The Overseas Development Institute finds that the global financial crisis is hitting the developing world far harder than previously thought.

In the study, ODI identifies four “transmission belts” through which the effects of the financial downturn reach the countries: trade, aid, private financial flows, and remittances (money emigrants send back to their home countries). Each of these areas has taken a hit from the financial crisis.

Trade results vary from country to country, but ODI says that “the value of trade is declining” everywhere. Regarding financial flows, all countries showed a dramatic drop in portfolio investment. In Africa, banks have tightened credit restrictions and even put the issuing of bonds on hold in some countries. The study found that the money received from remittances had fallen in every country, and may fall up to 14% this year. ODI also found that the crisis directly affects private finances in developing countries.

The study also looked at economic growth in each country. Predicting further dramatic fallout, ODI also reports that economic growth slowed across the board last year, along with significant drops in employment. Forecasts for growth have been revised downward for each country. ODI also predicts that the number of households in poverty in each country will rise far more than they would have without the crisis.

The good news is that, according to the study, there is no evidence so far that the economic crisis is causing a decrease in aid to developing countries. However, ODI claims that there aren’t adequate policy responses for these newly low predictions, and therefore both developed and developing countries need to “ask themselves whether growth and development strategies, economic policies and institutions need a complete rethink in these turbulent times.”

See the report and links to papers on each transmission belt and country here.

-Grace Lamb-Atkinson, ONE U.S. Communications Intern