Many of the poorest and most vulnerable people in the world are being badly hit by the global economic crisis and the long term effects are likely to be severe.
Considerable progress has been made against world poverty during the last ten years. If this is not to be lost – with the cost counted in human lives – the needs of the world’s poorest countries must be made a central part of the strategy to kick start the global economy.
At April’s G20 summit in London, leaders agreed collective action to stabilise the world economy and secure recovery. That collective approach is vital not just for the developed world, where the financial crisis began, but also for the world’s poorest countries in the world that have, if anything, proven more vulnerable to the subsequent economic downturn. For the least developed countries, this is a crisis upon crisis. Last year’s spike in oil prices pushed around 25m people into poverty, and higher food prices ensured that as many as 130m people remained trapped in poverty, and up to 40m children suffered lasting effects from malnutrition.
Now, the impact of the global recession means that the people in these poorest countries are finding every source of financing is being hit. Private capital flows to developing countries are expected to shrink by a catastrophic four-fifths; they are thought likely to fall from $1 trillion two years ago to less than $200bn this year. And the remittances that emigrants from many developing countries send home – globally worth some $280bn or more every year – are starting to fall. Workers who migrated to the West are among the first to suffer from the recession, and are finding it much tougher to send money home.
World trade is forecast to shrink this year for the first time in more than 25 years. That means job losses in rich and poor countries alike; an example of how devastating this may be is that in countries that depend on exporting raw materials like the Democratic Republic of Congo as many as 200,000 miners have already lost their jobs.
The human cost of this global recession will be that by the end of next year we could see 90m more people living in extreme poverty. Economists in the Department for International Development suggest that is equivalent to losing up to three years of the progress we have made towards meeting the UN’s Millennium Development Goals (MDGs) – the eight ambitious targets due to be met by 2015 that include halving the billion or so people who live on $1,25 a day as well as dramatic improvements in education and healthcare.
To this enormous challenge there now has to be added the daunting task of restoring global growth in the short term, and reshaping the financial system, preserving the world trading system and laying the foundations for a sustainable recovery in industrialised and developing countries alike. The outcome of the London G20 summit – shared actions along with the measures that each nation has taken nationally – represent a global recovery plan on an unprecedented scale, amounting to as much as $5 trillion by the end of 2010.
It’s worth reminding ourselves of the plan’s five main thrusts. First, to restore credit, growth and jobs, a $1.1 trillion programme of support for the world economy was announced, mostly to be provided through the international financial institutions. Second, the financial system is to be strengthened by a better and more credible system of surveillance and regulation that will include hedge funds and credit rating agencies. Third, means to fund and reform international financial institutions to overcome this crisis and avoid future crises from happening have been identified. This includes additional resources through the IMF, World Bank and other multilateral development banks to support growth in emerging markets and developing countries. Fourth, a transparent monitoring mechanism is being created to combat both direct and indirect protectionism, and $250bn will be available to halt the slowdown in the trade financing that facilitates up to 90% of world trade. And fifth, as part of this plan for an inclusive, green and sustainable recovery, the G20 leaders reaffirmed their commitment to the MDGs and to their development aid pledges. Some $50bn is being made available to low-income countries, thanks in part to agreed IMF gold sales, and the UN is to monitor the impact of the crisis on the poorest and most vulnerable.
“In these times of turmoil, the European Union can help to create the necessary momentum to get the MDGs back on track before it is too late”
The challenge now is to make real not only the G20 commitments in London but also to live up to the summit’s declarations that ‘prosperity is indivisible’ and that ‘growth, to be sustained, has to be shared’. And the European Union is going to have a key role to play in this. But to do so it must start by reforming its approach to development assistance.
Europe’s importance in the effort to tackle global poverty is unquestioned: it is by far the world’s largest aid donor. In 2006, EU member countries provided £32bn in aid – more than half of total global development assistance. The crisis means it is more vital than ever that EU countries should stand by their commitments to increase aid so that the MDGs can be met.
It is not just the amount of money spent by Europe on aid that matters. The international influence that Europe exerts through its collective effort is crucial too. I saw this influence at first hand last year when I worked alongside EU Development Commissioner Louis Michel at the Accra conference on aid effectiveness. There, the strong and coordinated EU position on aid effectiveness enabled a global agreement to be reached that will dramatically improve the way that donors deliver aid, and that partner countries receive it.
As well as the EU’s leadership in terms of both quantity and quality of aid, it is in policies beyond aid that Europe has a clear comparative advantage as a global development actor. Because the EU is itself the world’s largest single market, and is also the main trading partner of so many developing countries, it has the potential to develop new trading relationships with developing countries that will do much to stimulate their economies. And on climate change, the EU has led through example in its commitments to reducing emissions, while also being the largest provider of finance for tackling climate change. Also, because peace is so essential to prosperity, Europe is also very conscious of its security responsibilities. It is well placed to help prevent conflict and build peace, particularly in many of the fragile states where the EU works
But these European actions, and therefore the EU’s influence, are not always well coordinated. Much should be improved if the Lisbon Treaty comes into force. It will enable the EU to overhaul and streamline the relationships between its foreign, security and development policies, and that would give a major boost to European efforts to help the developing world.
The innovations that Lisbon would bring are well known, but worth recalling; a High Representative to implement external policies agreed by the Council of Ministers while also being Vice-President of the Commission should make decision-making more effective. And the EU’s own External Action Service should mean greater coherence in all countries, including the poorest.
These new arrangements should mark a considerable step forward in the fight against global poverty. But to capitalise on them, the European Commission must have a stronger development voice. The current fragmentation across regions, and between policy making and policy implementation, prevents Europe from having as powerful voice as it could. It also means that the programmes it undertakes with partner countries do not always benefit from the full range of expertise that would otherwise be possible.
When the new Commission takes office in the autumn, this should be addressed if responsibility for programmes in Latin America and Asia is brought together with that for programmes in Africa, Caribbean and Pacific under the auspices of the EU Development Commissioner. The incoming Commissioner who holds that portfolio will also need to play a strong role in ensuring the policies of the Commission as a whole are in future made more coherent with Europe’s development objectives.
The EU’s new Development Commissioner should accelerate the decentralisation of decision-making to European Commission offices in developing countries. This will ensure that decisions on development programmes are based on the needs of those countries, and are well- coordinated with other actors on the ground.
The London summit in April helped to create the momentum to get the MDGs back on track. At a recent meeting that DFID hosted with the UK’s Overseas Development Institute, colleagues from across Europe and beyond agreed there was a real sense of urgency to take the opportunities offered for institutional change in 2009 to put in place real improvements in EU development for the long term.
In these times of turmoil, the European Union can help to create the necessary momentum to get the MDGs back on track before it is too late. These are global problems that require global solutions. That is why the United Kingdom is committed with working with the European Union for the benefit of all our futures.