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G20 should ensure recovery fights poverty

By Oxfam

World leaders have an historic opportunity to reform the global economy to ensure that the one in six people who live in extreme poverty benefit from economic recovery, international agency Oxfam America said today ahead of the G20 summit in Seoul.

Oxfam is calling on the G20 to forge a new Seoul Development Consensus to replace the failed Washington Consensus of the past. The new consensus should combine financial support for countries’ development priorities with action to make the global economy work in the interests of poor countries.

“This week, the G20 can help set a course for a sustainable economic recovery, while making progress tackling poverty,” said Gawain Kripke, Oxfam America’s Policy Director. “There is a danger, however, that poor people and low-income countries will instead become casualties in the conflict over currencies.”

As the first non-G8 member to host a G20 heads of state summit, South Korea has made development a central part of its agenda with a focus on boosting poor countries’ growth. But a narrow focus on growth will not be enough to tackle poverty, cautioned the international agency. From 1981-2001, when the Washington Consensus was at its height, the world economy grew by $19 trillion but people living in extreme poverty received only 1.5% of that.

“Growth without a concern for equity could mean very little poverty reduction. This means the G20 must pay special attention to the needs of low-income countries and poor people,” said Kripke. “The triple shocks of economic, climate and food price crises have pushed millions into extreme poverty.  Many developing country governments face yawning budget gaps that could force brutal cuts to healthcare, education and social support.”

The World Bank estimates that the global slump has pushed 64 million more people into extreme poverty, forcing them to live off less than $1.25 a day. Research conducted for Oxfam shows that 56 poor countries face a $65 billion fiscal hole in their budgets as a result of the economic crisis.
 
Oxfam is pressing the G20 to agree to a package of specific measures to help poor countries, including:
• A tax on the major OECD financial centers to fund development. A financial transaction tax could raise $400bn per year;
• Rich countries to deliver on their aid promises. Investment in people  is essential to economic development;
• Action to curb unregulated and unprecedented speculation on commodity markets that has contributed to food price inflation that drove the number of hungry people over 1 billion;
• Regulation to protect poor people from the adverse effects of ‘land-grabs’, a growing trend  which is displacing poor people from accessing the basic means of livelihood and survival;  ;
• A real say for poor countries in the global economic decisions that affect them – at least 3 full seats at the G20 and root and branch reform of the IMF.
 
“The G20 should learn from member nations’ own experience of what works, instead of continuing the failed policy prescriptions of the past,” said Kripke. “Ironically, some crucial policies that allowed South Korea and other Asian ‘tigers’ to roar are missing from those now being prescribed by the G20.”

Oxfam highlighted the example of the G20 host country, South Korea, to challenge leaders’ categorical support for economic liberalism and free trade. Half a century ago, South Korea’s annual per capita income was just $82, less than half that of Ghana at the time. Today, however, it stands at $19,000 – an astonishing 200-fold increase. South Korea’s success is a story of self-determination. The South Korean government forcefully controlled their own development agenda, including foreign assistance. Often at odds with donors, the South Korean government diverted funding towards programs they felt could assist them, like capacity building and infrastructure. The model was certainly not without limitations:  Korea focused on economic growth to the detriment of democracy. But the main lesson to take away from the South Korean model is that countries need the policy space to create their own solutions, and the role of donors is to strengthen the link between active citizens and effective governments.

“Rich countries must not use the economic crisis or the G20’s focus on growth to wriggle out of their commitments to the world’s poorest at a time when they need help more than ever,” said Kripke. “Aid to poor countries, where it is directed toward country priorities, can be a valuable tool in the development process.”

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