Reflecting on the global financial meltdown in The Financial Times, Kofi Annan, Michel Camdessus and Robert Rubin argue that the response to the crisis must also address the needs of the world's poor.
There are two lessons that history and our personal experience teach us. One is that when crises occur, the least responsible are usually the worst affected and the least able to cope. The second is that crises can provide the momentum for reform and radical change. These moments are fleeting and need to be grasped to put arrangements in place that will prevent their recurrence. In today’s globalised world, that means new arrangements that are more effective, efficient and equitable.
So it is with the current financial meltdown. Its full impact has yet to be fathomed, but will include global economic slowdown, reduced trade, more competition for credit and a flight to safety among investors. Pressure will increase on public expenditure and aid levels, which may decrease. Right now, the political focus is on protecting consumers and taxpayers in industrialised countries. But poor people and poor countries could soon end up paying the heaviest price for a mess they have had no hand in creating.
A response to the crisis that does not take into account the needs of the world’s poor – or, worse, that results in reduced levels of engagement – would be grossly unfair. We all share responsibility for the persistence of poverty, hunger, disease and illiteracy on a vast scale. The sense of injustice they engender is a threat to economic and political security. The sense of responsibility that has galvanised western politicians into action to restore confidence in the financial system should, in a globalised world, also result in actions to accelerate achievement of the millennium development goals.
At mid-point to 2015, it is clear that the MDGs are off track, but also that they need not be so. The many individual success stories provide a good basis for scaling up and achieving a real breakthrough in human development, not in the next 50 years, but the next decade. More accountable and effective governance in African countries is essential. A combination of political commitment by leaders in the developing world and of increased levels of investment, and technical and financial assistance from richer countries can make it happen. And in relative terms, this is not a costly proposition.
The Group of Eight leading industrialised nations and Organisation for Economic Co-operation and Development countries must honour their existing commitments, particularly aid levels, to the developing world and not use the crisis as a pretext for abandoning them. These commitments have been hard won and are encouraging many African and other developing countries to plan around MDG achievement. Not honouring commitments would send a powerful negative message to them and undermine the fragile but growing sense of mutual accountability that is emerging between Africa and its traditional partners for addressing the continent’s many challenges.
The energy going into discussions to establish a new global system of financial governance is welcome. The past few months have shown how inadequate the current system has become: markets are global but our regulatory controls have remained local. The new system needs to involve all players, not just from Europe, the US and Japan but also Brazil, China, India, Saudi Arabia, South Africa and others. Poorer countries need a voice at the table, too.
The International Monetary Fund needs to be engaged in monitoring global markets and responding to crises, as well as being made more representative and participatory. Responsibility for major strategic decisions should be removed from the executive board and entrusted to a more representative and politically high-powered council that, inter alia, would replace the IMF committee, which has only a consultative role. These ideas are not new and were proposed after the Mexican and Asian crises in the 1990s. That moment of opportunity to put in place a robust global regulatory system was lost; let us not lose this one.
Another step should be to broaden the G8 annual meetings to reflect current economic and geopolitical realities. The needs of developing countries, particularly in Africa, could be more systemically addressed in discussions about global problems, whether relating to the economy, trade, migration, food security or climate change.
In four weeks, the Doha high-level meeting on financing for development will be the time to ensure that sufficient resources are available to meet the challenge set out at the turn of the millennium. And in two weeks’ time, the global financial summit will be taking place in Washington. Now is the moment to ensure that an inclusive approach is taken and the needs of the poor are not forgotten.
Big problems are the opportunity for big thinking. We know that globalisation can be a force for good. But if its benefits are to be shared, and the world not to be polarised between those who are in and those who are ever more marginalised, we need a new mindset and new global arrangements. We face a moment of risk and opportunity. We urge political leaders to summon the courage and vision to seize it.
The writers are members of the Africa Progress Panel.