Dear Ali Sakti,
The Group of Seven richest (supposedly) nations met last weekend to work a way out of the global economic crisis but, as expected, came up with the same, worn-out clichés and no solutions. The summit simply reiterated calls for further stimulus and bank bailout packages of the kind that have already failed to halt the recession.
The handful of nations which had dictated how the world’s financial system should be run has simply run out of ideas on how to rescue it from the ongoing crisis. Rather ironic, since it is their insistence on unfettered liberalization and deregulation that had allowed events to spiral into a recession that is fast spreading throughout the world.
These once-powerful states have now passed the buck to others. One is the G20 Summit on Financial Markets and the World Economy. Its composition is interesting as the “Big” Seven are dwarfed in terms of numbers by countries as disparate as Argentina, Australia, China, India, Indonesia, Saudi Arabia, South Africa, South Korea and Turkey. It has formed a task force to see how to lift the world out of the financial mire.
The G20 countries, which represent 85% of the world economy, committed themselves to three principles — stimulus efforts, reform of financial regulation and global governance changes — and the task force’s plan is to be unveiled in April. That is also when the United Nations General Assembly’s Commission of Experts on Reforms of the International Monetary and Financial System comes out with its report.
Can we expect any viable proposals come April? There is cause for optimism, especially since the UN panel is not only being chaired by Nobel laureate Professor Joseph Stiglitz but also has on board Malaysian central bank governor Zeti Akhtar Aziz, the driving force behind the country emerging as a major Islamic finance hub. So, one can expect the principles and governance practices of ethical finance, plus a strong regulatory framework, to feature prominently.
And that couldn’t come any sooner, as statistics highlight the social catastrophe being caused by the deepening crisis. Up to 53 million more people around the world could fall into poverty in 2009 as a result of the global economic slump. This is on top of the 130 million to 155 million pushed into poverty in 2008 because of soaring food and fuel prices. And up to 400,000 more children could die each year as a result of rising infant mortality.
The World Bank says almost 40% of 107 developing countries are “highly exposed” to the poverty and hardship effects of the crisis and the remainder are “moderately exposed”. The bank warns that three-quarters of these countries will be unable to raise funds domestically or internationally to finance job creation, the delivery of basic infrastructure and essential services — including health, education and core public administration — and safety net programs for the vulnerable.
It was only to be expected that G7 ministers last weekend gave short shrift to this, saying in effect that these hundreds of millions should rely on the same financial system and “private capital flows” that have broken down, producing the worst global collapse since the 1930s.