By Glenn Ashton · 27 Jun 2009
One of the crude features of the inequity in our global economic order is that just eight countries, the G8, make the rules by which an entire planet comprising 192 countries have to live by. The G8 have appropriated this privilege because they are the richest countries in the world.
There's something terribly antiquated about the system. If one were to make an objective call on the global economic order, one would have to acknowledge that archaic remnants of 'empire' still permeate its architecture today.
Countries who are not part of the G8 understand this. They are not content with either the G8 or the G20's handling of the global financial crisis and have called for a UN conference to examine "The World Financial and Economic Crisis and its Impact on Development." The event scheduled between 24-26 June 2009, is winding up at the time of writing this article.
In preparation for the conference, the president of the UN General Assembly, the Reverend Miguel d'Escoto Brockmann, appointed Nobel laureate, Joseph Stiglitz, to chair a commission tasked with offering solutions to the global financial crisis.
According to Nick Dearden of the Jubilee Debt Campaign, "the Stiglitz commission recommends a powerful global economic co-ordination council at the UN to bring the World Bank and IMF to heel, an end to the practice of forcing economic policies on developing countries, an international debt work-out process which would allow for far greater and fairer debt cancellation and a new reserve currency to replace the dollar."
Industrialised nations are extremely uncomfortable about having their exclusive privileges over the global economy challenged; and according to the Public Citizen's Global Trade Watch (GTW), a US-based public interest organisation, "rich countries have worked behind the scenes to ensure the UN summit does not focus on the role of existing global economic governance structures in causing the crisis nor issue a call for reforms to these institutions and policies. Yet to remedy the current crisis and avoid future meltdowns will require significant changes to the existing system of global financial governance, including the WTO’s Financial Services Agreement (FSA), which explicitly requires radical deregulation."
Rich countries are going a step further to avoid dealing with the root causes of the crisis. In the run up to the forthcoming G8 meeting, which will be held from 8-10 July 2009 in Italy. The key message being spread is an acknowledgement that the global economy will shrink as a result of the recession, but that their economies - rich economies - are starting to show signs of recovery.
Thus, advancing the agenda that the measures taken by industrialised nations are sufficient, both with respect to the global as well as their respective domestic economies.
But, apart from pumping obscene amounts of money into their financial sectors to restore confidence in a broken system, what exactly have industrialised nations done to contain the global financial crisis and make sure it doesn’t happen again?
The recently held G20 summit, which at least included the inputs of some developing countries, failed to deliver on the expected far reaching reforms of the global financial system and its institutional instruments, choosing instead to prop up the IMF, which many regard as a discredited institution that has been revived from its death throes.
Country specific responses to the crisis have also been criticised for being weak. For example, analysts argue that financial sector reforms proposed by the Obama administration are indulgent and will allow the banks to carry on with their business as usual exploits.
Oxfam's Duncan Green, author of the book and the blog, From Poverty to Power, reports that globally, but particularly in advanced economies, "as of January 2009, banks and other financial service firms had already digested at least $8.7 trillion of state sponsored financing."
Let's put this enormous amount of money into perspective. A trillion dollars = $1,000,000,000,000. That's the number one followed by 12 zeros. A trillion is a million times a million.
For a more graphic picture of this gargantuan amount of money, some trivia sourced on the net really drives home the reality of the kind of money at stake with these bank bailouts. It's been said that it would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills.
More than eight times this amount has been handed over to bankers from public coffers in the aftermath of the global financial crisis.
Clearly, who you are and where you come from makes a big difference to what you can get away with.
The Wall Street bankers who steered the global economy to financial ruin belong to a charmed aristocratic circle at the epicentre of global economic power. Seemingly untouchable, they’re getting away with the crime of the century.
And they’re doing it while laughing all the way to the bank. Goldman Sachs has announced, just nine months after the crisis emerged, that it will be paying out the biggest bonuses in its 140-year history. Goldman Sachs is one of the kingpins of the financial crisis and a major recipient of bailout money.
In the meantime, industrialised nations appear comfortably aloof to the suffering unleashed on the developing world by their corporate citizens.
But the extent of Wall Street’s damage is just beginning to emerge. Green presents some sobering statistics revealing the real extent of the impact of the financial crisis and global recession on poverty and development.
"Between 73 and 103 million more people will remain poor or fall into extreme poverty in comparison with a situation in which pre-crisis growth would have continued. Most of this setback will be felt in East and South Asia, with between 56 and 80 million likely to be affected, of whom about half are in India."
We are repeatedly told that Africa is relatively shielded from the financial crisis because the continent is not so hooked into the global economy. But Africa will not walk away from this wreckage uninjured. Pre-crisis economic growth is slowing down and development gains are being reversed.
Green reports, "the crisis could keep 12 to 16 million more people in poverty in Africa and another 4 million in Latin America and the Caribbean."
Green singles out South Africa along with Russia, Malaysia and India for being especially vulnerable to the rolling economic crisis in relation to South-South remittances. "In 2009, remittances to developing countries are expected to fall by 5.0 per cent to $290 billion or 1.8 per cent of developing countries’ GDP."
Of course, official communication from the G8 is that they are deeply concerned about poverty in Africa.
Africa is indeed a special agenda item at the forthcoming G8 summit in Italy. One might predict further pledges of aid support from the G8. But whether or not these pledges will translate into anything tangible is anyone’s guess.
Kevin Watkins of the Guardian newspaper makes a grim assessment of the G8’s commitment to Africa in the run up to the summit in Italy, accusing G8 leaders of being "committed to complacency."
"G8 leaders appear to see African poverty more as a political branding opportunity. After four years of doing nothing, Italy recently announced deep aid cuts. Japan is also under-performing. More worryingly, there are signs that France, already lagging on its commitments, is set to cut aid to Africa."
The hypocrisy of rich nations is not lost on its own citizens. Celebrity activist Bono of U2 famously said at a press conference in September last year that he did not understand how it was possible to find $700 billion in 48 hours to bail out Wall Street, but that we couldn't find $25 billion from the US and the entire assembly of G8 countries to meet the aid commitments that had been made at the Gleneagles Summit in July of 2005.
But, of course Africa and the rest of the developing world don’t only need 'aid' to overcome poverty and underdevelopment. What is needed is a complete overhaul of the global trade and financial system. The missing ingredient is 'political will', not only from industrialized nations, but also from elite groups in the South.