WASHINGTON, DC — The G20 must avoid small-scale tinkering and instead take immediate, aggressive action to tackle poverty while laying out an ambitious vision for reforming the world economy at its Financial Crisis Summit here Saturday.
In a new report, If Not Now, When?, international relief and development agency Oxfam says that people living in poverty will be hit hard by the financial crisis unless urgent action is taken, adding that the poor should not have to pay for rich countries? mistakes.
"Poor people had little to do with creating the crisis, but will carry the heaviest burden, whether it is families evicted from their homes in Detroit, or children dying in Mali for want of basic medical care," said Oxfam spokesperson Gawain Kripke.
The International Labor Organization estimates the number of workers living on less than one dollar a day may increase by 40 million and those living on less than two dollars a day could increase by more than 100 million. All of this while poor countries are still reeling from the impact of food and oil price increases, and increasing droughts, floods and other climate-related weather shocks. Grain-price increases cost developing economies $324 billion last year—more than three times what they received in aid.
"There is a risk that recessions in rich countries will lead politicians to take the short-sighted approach of cutting aid. Given the tiny amounts of money involved compared to rich country economies, this would do little more than offer symbolic budget savings, but at huge human cost," said Kripke. "Aid to all developing countries last year was $104 billion. In comparison the US and EU mobilized nearly 30 times this—around $3 trillion—in the last few months to help bail out their banks."
"Rich countries made promises and must keep them. But their work cannot end there—aid is not the whole answer," said Kripke. "We cannot repeat what happened around the Asian financial crisis, where no substantial reform was agreed. To prevent future crises and protect the poor over the long term, leaders must seize this opportunity to rewrite the rules to curb instability and make the market work for all, not just a few at the top of the economic food chain."
In If Not Now, When?, Oxfam says that global leaders should immediately develop a new international regulatory institution with teeth, to prevent future financial crises and protect the interests of workers, consumers, and the environment. This includes taking on the secretive tax havens which undermine regulations and rob poor countries' of vital revenue that could be spent on schools and hospitals. It also calls for leaders to build a new representative global governance structure to tackle the economic, climate, food and energy crises.
"We're dealing with a whole new world—the G20 is facing a seismic shift in global power," said Kripke. "It's painfully clear that the world's multilateral institutions are out of date and ill-equipped to deal with the multiple crises that are now upon us, whether related to finance, food, fuel or climate. Reform must include far greater roles for developing countries as well as the poorest. Rich countries are going to have to concede some power on governing bodies like the G20 because they are desperate to get their hands on the huge financial reserves held by emerging markets."
Oxfam urges global leaders to see the opportunity to develop a new 21st century political and economic system that puts people and planet before profits. Oxfam calls on the G20 leaders to do three things:
- Honor the OECD pledge not to cut development assistance, and increase aid instead by an additional $140 billion necessary to meet the UN target of 0.7 per cent of GNI immediately. In addition, urgently extend credit to emerging markets facing liquidity crises.
- Rewrite global financial rules and regulations, including tackling tax havens and moving towards a more stable exchange rate system, in order to make the market work for all and not just for the few.
- Build a new representative global governance system that can effectively tackle the economic, food, and energy crises.
"Just last week the world witnessed a massive political shift in the US," said Kripke. "World leaders meeting this weekend should harness this momentum and commit to a way forward on finding serious, long-term solutions to financial instability and the global economic downturn that work for all."