| Economic Recovery: Green Shoots or Yellow Weeds? |
|
|
|
Claims of ‘green shoots' in the global economy are misleading and mask the severe impact of the downturn on poverty and food security in poor countries. Governments can counteract this unfolding humanitarian crisis by prioritising economic equality at this year's international summits. By STWR. 26th June 09 ~ STWR 'Green shoots' has been a favourite phrase amongst economists in recent months, as the slowing momentum of global economic decline raises hopes that recovery from the recession may be in sight. Reports of improved conditions from businesses around the world and small increases in consumer confidence have encouraged analysts’ predictions of a return to growth in the global economy in 2010. A new World Economic Outlook from the Organisation for Economic Co-operation and Development (OECD) also concluded this week that the global economic slide is nearing a bottom. But all the talk of economic recovery in the Global North masks the severe and long lasting consequences of the crisis for the world’s poor. In the first detailed analysis of how the global recession is hitting developing countries, the World Bank has released figures showing that the world’s poorest countries will see one trillion US dollars drain from their economies in 2009. The flow of money into the developing world has already halved this year, says the report. Regardless of any green shoots appearing in richer economies, the lack of international capital available will starve governments and businesses in poorer countries of investment, keeping these nations in recession for longer. As the UN’s World Economic Outlook and Prospects 2009 report explains, although the crisis did not begin in developing countries, their economies will be severely weakened by the downturn for a prolonged period of time. Describing the crisis as a synchronized downturn in rich and poor countries, the report dispels the widely held belief that growth in developing countries has been decoupled from that of the US and Europe. Developing countries have been disproportionally hit by the collapse in world trade, combined with the sharp decline in commodity prices. With their revenues from aid, taxes and borrowing falling, the governments of poor countries will be forced to cut social spending in areas such as health and social security, leading to worsening poverty. The flow of remittances to developed countries, which in 2008 amounted to 300 billion US dollars or three times official development assistance, has already decreased significantly and is expected to decline further in 2009. As scores of commentators have observed since the economic crisis worsened in 2008, the United States and European governments moved with lightning speed to mobilise over four trillion US dollars to aid struggling financial institutions, while hundreds of millions of the world’s poorest are falling even further into poverty. The number of hungry people in the world has risen by a further 100 million people since the onset of the economic recession in 2008, with 1,020 million people now going hungry every day according to the UN’s Food and Agriculture Organisation (FAO). The most recent increase in hunger is not the result of poor harvests, says the FAO, but a direct consequence of the world economic crisis that has resulted in lower incomes and increased unemployment. While the richest nations appear fixated almost entirely on the financial crisis, there is little chance that the world will reach the UN’s goal of halving by 2015 the world’s proportion of people living in extreme poverty. The World Bank’s Global Monitoring Report 2009 recently determined that the global recession has severely set back progress towards the poverty reduction targets set out in the Millennium Development Goals. Coming on the heels of the food and fuel crises, the impact of the downturn is rapidly unfolding into a humanitarian and development crisis in poor countries. The combination of spiked food prices and high unemployment is predicted to throw 55 million more people than previously expected into extreme poverty in 2009, says the report. A global response to include stabilisation of the markets in developed countries and immediate action to counteract the impact of the crisis in developing countries is urgently needed, the report concludes. Over the course of 2009, policymakers will have several key opportunities to reform the economic system to promote greater equality. The UN Conference on the Financial Crisis, the G8 summit, a G20 leaders' summit, a G20 finance ministers' summit, and the UN Framework Convention on Climate Change (UNFCCC) in Copenhagen will all give governments the chance to honour their previous commitments towards protecting the world's poor. Yet the disappointing outcome of the G20 summit in London in April showed that governments are still unwilling to prioritise the basic human needs of the majority world over the interests of business and finance. As leaders continue attempts to resurrect the existing financial system without undertaking necessary systemic reform, some analysts suggest that global governance is entering a crisis of legitimacy. Until governments are prepared to initiate changes in favour of a more inclusive and equitable model of development, it is hard to foresee stable economic recovery – and talk of green shoots will remain an expression of misguided optimism in the media. World Economic Outlook 2009 - Organisation for Economic Co-operation and Development (OECD) Further Resources: Link to STWR's key facts page of the Global Financial Crisis Beyond the London Summit - Put People First Crisis in The Real Economy - Pranav Bihari, Open Democracy United Nations Conference on the Financial Crisis and its Impact on Development official website |
The Issues
 |
Share The World's Resources |
Phone |
A not for profit organisation with Consultative Status at ECOSOC. |
|
|