COMMENTARY: The G20 summit - what does it mean for the poor?

Posted: 6 April 2009

Author: John Madeley

A 29 point communiqué, including US$1.1 trillion for global economic recovery, but weak on trade issues and almost non-existent on climate change. And little for the world's poor from G20 leaders.

Leaders of 20 developed and developing countries - the G20 - met in London on 2 April 2009, saying that the world faces "the greatest challenge to the world economy in modern times; a crisis... which affects the lives of women, men, and children in every country". They ended the meeting with a 29 point communiqué, including US$1.1 trillion for global economic recovery. But will it mean anything for the world's poor? Will it contribute to reaching the Millennium Development Goals?

Child Poverty© UNICEF
Child Poverty© UNICEF
Over one billion children suffer from the severe effects of poverty and 674 million are living in conditions of absolute poverty.© UNICEF
Leaders recognised the need for more regulation of the banking sector, and for a clampdown on tax havens. But it seems doubtful if there is any real shift of priorities.

The G20 leaders "have missed an historic opportunity to launch a global recovery plan that will benefit poor people and tackle the climate crisis", commented the World Development Movement, (WDM) the UK-based anti-poverty group.

And the Bretton Woods Project, which monitors the IMF and World Bank, commented: "To great fanfare, the G20 announced a $1.1 trillion global package, which will actually deliver less than half that amount in new or guaranteed resources. Meanwhile issues of fundamental economic reform were left off the agenda".

One of the G20's main decisions was to increase the resources of the International Monetary Fund (IMF) from US$250 billion to US $700 billion. "to support growth in emerging market and developing countries".

IMF - controversial choice

But the IMF is one of the world's most controversial organisations. In the 1980s it insisted that developing countries adopt Structural Adjustment Programmes if they wanted aid and debt relief. These programmes often involved swingeing cuts in government expenditure, for example on health and education, and reducing subsidies for the poor. More money for the IMF could strengthen it to do more of the same. Hardly good news for the poor.

According to economist Noreena Hertz: "worrying is the choice of the IMF to oversee this ideological shift. That institution was the embodiment of laissez faire neoliberalism. It seems inconceivable that the institution that was the main cheerleader of the Washington consensus is now charged with overseeing its dismantling".

The Washington consensus - belief in the unbridled free play of market forces - has served the poor badly and deserves to be dismantled. If the poor are to benefit, the G20 will need to insist on reforms in the IMF. The G20 did commit to reform of the governance structure of the IMF, with more representation from developing countries, but it's reform in practices that is also needed.

Tax havens mean tax dodging, and are estimated to cost developing countries at least $160 billion a year - more than they receive in aid. Tackling the havens has the potential to unlock massive benefits for the poor.

The G20 communiqué says that the era of banking secrecy is over. But will there really be tough action on tax dodging?

"We are left with a huge question mark on how far the (G20's) tax haven commitments really go and how much difference they will make to poor countries which lose hundreds of billions of dollars every year in tax revenues. The G20 communiqué claims the era of bank secrecy is over. Now they need to prove it," said Duncan Green of Oxfam.

Special Drawing Rights

On funding for development, the leaders announced US$100 billion of additional lending by the multilateral development banks, and a Special Drawing Rights (SDRs) allocation of $250 billion.

SDRs are not new. First introduced in the early 1970s, SDRs are a kind of bank deposit in a country's favour that can be used to buy goods from abroad.

But the poorest countries may see only a little of the SDR allocation. Christian Aid expressed concerned about the G20's apparent failure to target the new resources specifically at the world's poorest countries, whose needs are most urgent,' said Charles Abugre, the agency's head of policy.

The G20 communiqué uses words like fair and sustainable. "We are determined not only to restore growth but to lay the foundation for a fair and sustainable world economy", said the 20 leaders. This implies fairness in world trade, plus action on the environment, especially to cut carbon emissions. But there was neither.

On trade, the leaders made a commitment to to restart the World Trade Organisation's Doha round of trade talks. These have been dragging on since 2001.

The UK-based Trade Justice Movement called the "commitment" misguided. The Doha Round was supposed to be a development round, but any "development" has been negotiated away.

"The G20 are absolutely right that trade is important to developing countries, but they seem hell-bent on maintaining the rigged rules that favour multi-national companies and not people in developing countries", said Julian Oram of the WDM. "Developing countries must not be locked into unfair free trade deals that bring little advantage to people and reduces governments' ability to choose their own economic policies. In particular, developing countries must not be pressured into signing up to a deal at the World Trade Organisation that will not work for them".

Climate change missing

Climate change was hardly the subject of any serious discussion among G20 leaders. Missing from the communiqué "was a global green new deal that puts the interests of poor people and the environment at the heart of international trade and finance", said Oram. "It's absolutely astounding that the G20 communiqué merely paid lip service to climate change and the need for a low carbon economy...The economic crisis and the climate crisis are intrinsically interlinked and must be addressed as such through a global green new deal."

It seems doubtful if the G20 is the most appropriate forum for taming the beast it helped to create. Another 170 plus countries are outside the G20 and could reasonably expect a say in the changes that would bring in a fairer and a more sustainable world order.

For while it is good that countries in the G20 like Argentina, Brazil, China, India, Indonesia and South Africa, are recognised as being necessary parties to global economic discussions, the question is why not every country.

"A much more democratic and participatory international process must now be launched to rewrite the rules of the global economy in favour of ordinary people and the environment, instead of the corporate elite", believes Julian Oram.