Global Financial Crisis? – Nothing new for people in developing countries

The most newsworthy item of 2008 was undoubtedly the collapse of the financial markets. Though beginning in the USA , the crisis quickly spread through the industrialized world, and then on to key developing countries.

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Here in Australia, we may be concerned about the drop in the share market, how that might affect our superannuation savings, and whether this economic slowdown will flow through to jobs and cause rising unemployment.

For people in developing countries, however, the implications are much greater.

For the first time in history, prior to the financial crisis, almost all nations in the world were working in a cooperative and coordinated manner to counter the two great crises facing people in developing countries - global poverty and global warming. Suddenly, both these crucial issues have been pushed aside to make way for the industrial world's problem - the global financial crisis.

Working through the United Nation's Millennium Development Goals, impressive gains were being made to halve world poverty by the year 2015. Eight issues were benchmarked such as primary education (especially for the girl child), reducing infant mortality, improving maternal health, combating HIV, malaria and other major diseases, and halving by 2015 the number of people without access to safe drinking water. Steady progress was being made in all of these eight areas between 2000 and 2007, the halfway mark to 2015.

Working through the Kyoto process and the United Nations Framework Convention on Climate Change, steps were also well underway in many nations to limit carbon pollution which is impacting hardest on the poorest. Changing rainfall patterns are lowering food production, and rising sea levels threaten farmers and urban dwellers in low-lying regions of South and South East Asia, as well as many Pacific islands.

Now, because of the global financial crisis, focus has swung away from these twin problems of global poverty and global warming, and instead, protecting western banks is now paramount. The Institute for Policy Studies estimates that the US and European governments are now spending 45 times more on bank bailouts than on poverty and climate change combined. To put our priorities in perspective, in 2008 the US government spent $23 billion on overseas aid - far less than the $29 billion on bailing out just one bank, Bear Stearns, and just 15% of the amount used to bail out the American insurance giant AIG.

Response of the global union movement
Trade union leaders for the G20 countries (the wealthiest 20 nations in the world) put forward a comprehensive plan to turn around the global economy when they met with world leaders in Washington on the eve of the financial crisis summit hosted by the US Government on 15th November, 2008.

In this declaration by the International Trade Union Confederation (dubbed the 'Washington Declaration'), they have called for a number of changes to the way the global economy worked, including:-

• Reverse the extreme deregulation of financial systems of the past three decades to ensure a similar economic crisis never happens again. Most importantly, we need a regulation of hedge funds, transparency in public supervision of banking systems, a limit for executive salaries and the ending of offshore tax havens

• A new structure of economic governance for the global economy.

• Combat the explosive inequality in income distribution. Distributive justice through a decent wage for all working people is essential if they are to afford to pay their mortgages and meet their families' basic requirements.

• Get economies working again through cuts to interest rates and increased government spending especially on infrastructure which will assist the poor and also combat global warming. Job creation programs which emphasise green jobs should be a priority.

"Immediate action is needed to get the world economy moving and boost employment. Governments need to be prepared to make further, coordinated, cuts in interest rates and to front-load investment in infrastructure, education and health to help stimulate demand growth and reinforce public services. This needs to be accompanied by tax and spending measures to support the purchasing power of low- and middle-income earners, and concrete steps to launch investment in green goods and services, to help address climate change", said John Evans, General Secretary of the Trade Union Advisory Committee (TUAC).

The full Washington Declaration can be found on the Union Aid Abroad - APHEDA website at www.apheda.org.au

Every analysis of post-war economic history shows an economic downturn every 8-10 years in industrialized countries, which quickly passes, then economies resume their growth trend. While this downturn is larger than any other previous recessions, it too will pass. However, for the 40% of the world's population, 2.2 billion people, who try to survive on less than US $2 a day, life has been a permanent recession with very little hope of recovery. When seen in perspective, the current economic crisis will cause suffering, but nowhere near the hardship caused by the two truly global crises facing the world - global poverty and global warming.

© Union Aid Abroad - APHEDA 2003.

Last Modified: Monday, 02-Feb-2009 16:52:23 EST
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