WASHINGTON, DC – 2008 will be remembered as a year of extraordinary turmoil. The financial crisis came on the heels of food and fuel crises. Now the world is in the midst of an economic crisis, which will lead to many job losses. Virtually no country has escaped. We are moving into a new danger zone, with heightened risks to exports and investment, to credit, banking systems, budgets, and balances of payments. In 2009, we may see the first decline in global trade since 1982.
As always, the poor are the most defenseless. For developing countries, tighter credit conditions and much weaker growth mean that governments are less able to meet education and health goals, and to invest in the infrastructure needed to sustain growth. Remittances are drying up. Already 100 million people have been driven into poverty as a result of high food and fuel prices, and current estimates suggest that every 1% decline in developing-country growth rates pushes an additional 20 million people into poverty.
Countries are trying to break the credit freeze, bolster financial institutions, ease interest rates, strengthen safety nets, and revive consumption and investment in order to boost business, enable people to work, and lay the foundation for future growth. These steps will be most effective if countries act in concert, in a mutually supportive way. Economic nationalism that seeks gains from the disadvantage of others will trigger ever more dangers. Global challenges require global solutions.
In October, I called for modernizing multilateralism and markets to better reflect the changing world economy and to enable countries to act in concert to address interconnected problems. Looking beyond the old G-7 system, we need a twenty-first-century approach to multilateralism through the dynamism of a flexible network, not new hierarchies of a fixed or static system. ampnbsp;