What is economic recovery for all?
The economic crisis that began in 2008 has been felt around the world, but poor countries were the hardest hit – 46 million more people are living in poverty as a result. Developing countries are largely dependent on manufacturing and a strong global economy as well as financial support from G8 and G20 countries. While G8 and G20 governments are struggling to correct deficits and employment rates in their own countries, developing countries are being left behind. Economic recovery for all means G8 and G20 governments should ensure all economies recover by keeping up with development assistance.
How bad is it?
Developing countries with the most globally integrated financial sectors were the first to experience the effects of the economic crisis. In East Asia, for example, a drop in trade and labour markets resulted in mass layoffs in supply chains producing garments and electronics for the world’s consumers, who were no longer buying. Oxfam International research indicates that a third of countries cut education spending in 2009, and nearly half are planning to cut education in 2010. Only 13% cut health spending in 2009, but 43% are planning cuts in 2010.
How does this affect development?
The crisis threatens progress toward achieving the Millennium Development Goals (MDGs). The turbulence of the economic crisis has shifted the way we understand development. Poverty is not just about income; it is about vulnerability to unpredictable future crises. One of the lessons is that reducing vulnerability and building resilience is the central task of development.
What can the G8 and G20 do?
The international community can support the recovery of developing countries in two important ways: improve prevention; and help poor countries respond to and recover from those shocks that can’t be prevented.
The economic crisis prompted genuine calls to reform the financial system, which had become too big, too volatile and too resistant to government and public scrutiny. Discussions over reform continue and include improving baking supervision and regulation, ways to curb tax havens and volatile financial instruments, and the introduction of the financial transaction tax (FTT).
Help poor countries respond to and recover from shocks that can’t be prevented.
Much of the economic recovery that will take place in low-income countries will depend on aid donors sticking to their promises to increase aid, despite their own fiscal constraints. Low-income countries also need access to other forms of sustainable finance