No Time to Slacken
PITTSBURGH – Almost six months ago, at a moment of great alarm about the global financial and economic crisis, G-20 leaders met for a historic summit in London. Their collective commitments to stimulate, regulate and restructure global economic activity helped to calm nerves around the world.
Many of the problems that spurred the London summit remain real. Anxiety levels may have come down, in board rooms and stock markets, but the daily drama for survival continues. Indeed, for many people it has deepened, in the villages and streets of the world’s least-developed countries – particularly in Africa.
The United Nations and the World Bank predict that the direct and indirect effects of the economic meltdown will be felt in the developing world for a long time to come. Jobs have gone, incomes have been lost and opportunities foregone. Tens of millions of people have been added to the hundreds of millions already below the poverty line, reversing progress toward attaining the world’s Millennium Development Goals.
The London G-20 meeting recognized that the world’s poorest countries and people should not be penalized by a crisis for which they were not responsible. With this in mind, the G-20 leaders set out an ambitious agenda for an inclusive and wide-ranging response. If the Pittsburgh summit is not to be an anticlimactic end to the G-20’s ascendancy as a forum for decisive action, the momentum generated must be maintained. Four issues provide the opportunity to do so.
First, G-20 leaders need to follow through with the commitments they’ve made to a Global Plan for Recovery and Reform. Having recognized its “collective responsibility to mitigate the social impact of the crisis and minimize long-lasting damage to global potential,” the group now needs to review how much support has reached or become accessible to developing countries.
There are some encouraging signs. For example, in July, the International Monetary Fund commendably announced a substantial increase in concessional lending to least-developed countries. Several of them, including Ethiopia, Malawi and South Africa, have already been allocated Special Drawing Rights to help them cope with the economic crisis. But some vulnerable countries are still struggling to finance countercyclical investment and expanded social protection services. It raises questions about the stringencies of the World Bank’s eligibility criteria and allocation models which can prevent support of the most needy.
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This underscores the case for a second area of action – ensuring that developing countries, including least-developed countries, have a greater say in global financial institutions, and strengthening regional bodies such as the African Development Bank. An equitable and fair global architecture means not only giving a greater say to the major emerging economies. It also means systematically including other developing countries.
The Bretton Woods Institutions such as the World Bank and IMF themselves recognize that becoming more inclusive would make them more relevant to the reality and diversity of today’s global community and more effective as vehicles for addressing climate change adaptation and poverty reduction. But the pace of change needs to be speeded up, ensuring that the IMF in particular is able to adapt to post-crisis challenges.
This calls for a broadening of the IMF’s surveillance mandate beyond macroeconomic and monetary policies so that it can deal with wider financial and regulatory issues. It means establishing a very high-level political council to take strategic decisions critical to global stability. And it also requires reforming the voting system to ensure decisions command the support of the majority of members.
Architectural and institutional reform has to be complemented by a third achievement: agreement on a timetable for tackling the variety of biased trade rules, bloated subsidy regimes, intellectual property rules and other forms of market distortion which heavily disadvantage the developing world. Here the G-20 could play a particularly constructive role, especially when it comes to the revival of the Doha Trade Round, the reduction of duties, tariffs and quotas on exports from the least-developed countries, and the gradual elimination of domestic subsidies.
Lastly, the G-20 could also help drive momentum on climate change. Its members represent the vast majority of global greenhouse gas emissions; agreement among them at Pittsburgh would go a long way towards ensuring that December’s international Climate Change Conference in Copenhagen does not end in hot air.
Progress is needed on emission-reduction targets and on sharing knowledge and technology more widely. We also have to find a way to provide funding for adaptation and mitigation – to protect people from the impact of climate change and enable economies to grow while holding down pollution levels – while guarding against trade protection in the name of climate change mitigation.
The challenges of our time are many, complex and intertwined. The G-20 in London was responsive to the concerns and special circumstances of the developing world, which resulted in some big thinking. Sceptics fear that now that the collective financial threat is perceived, rightly or wrongly, to be manageable, the Pittsburgh Summit will result in a weak compromise that reflects divergent national interests rather than a sense of urgency about tackling climate change, chronic poverty and ineffective global governance. G-20 leaders need again to manage difficult domestic pressures, overcome narrow agendas and resist populist temptations – and prove the sceptics wrong.