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The G20, or the G200? A Commonwealth view on global development challenges

By Kamalesh Sharma, Commonwealth secretary general

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The G20 needs to think creatively if it is to help the developing world out of the difficulties into which it has been led.

With five members in the G20 – but many more outside it – the Commonwealth has always said the same thing to the group, from within and without. It is this: while 90 per cent of global gross domestic product (GDP) will be represented at the G20 table in Pittsburgh in September, 90 per cent of the world’s countries and their voices will be missing. Globalisation is the essential fact that all people’s fortunes are interlocking, and that all challenges can only be met together. So the G20 countries, when they meet in the United States, should always be conscious of their place in the global ‘G200’. They should be aware of the unseen and unrepresented guests at their table, who bear the consequences of their decisions and actions.

For the G20, the current global downturn can make them a little poorer. But for the developing world, embodied in the G172 not at the summit, the current global downturn is devastating. An estimated 44 million people worldwide have fallen into poverty in the last year alone, and 100 million people are now newly categorised as undernourished. In the same period, infant deaths worldwide have risen by at least 250,000. These people – for they are not statistics – are the reality of the downturn. We all are witnesses to the receding target of meeting the Millennium Development Goals (MDGs). Armed with the facts, we are responsible for ensuring that those with the capacity to make a positive and durable difference do exactly that.

The G20 should always remember that until these ill winds blew, the G172 had done many of the ‘right things’. But they had little of the built-in resilience of established institutions and robust economies to allow them to withstand being buffeted by a series of crises. The gains of decades were blown away in days. Turbulence in the skies of the developed world has unleashed hurricanes in the developing world.

There are now signs of growth in the world economy. The International Monetary Fund (IMF) recently declared itself more optimistic about 2010. The G20’s fiscal stimulus – including the trillion dollars it agreed on in London in April – has produced some of this momentum.

We prophesy at our peril as to when and how we emerge from the current economic darkness. But certain lessons are clear. One is the need for a global economic system that gives priority to stability and is built on the interests of all, not the few.

Hence there is a continuing Commonwealth initiative to reform and revitalise the global financial institutions, making them properly representative and inclusive. Unless the voices of all those on the receiving end are heard clearly and appreciated in all their individual nuances and needs, the recovery and reform proposals currently being pursued run the risk of missing their goals.

The Commonwealth also emphasises the need to reinforce development in tough times.

Development – as democracy’s twin – is the key not just to the emergence from the current darkness, but also to many poorer countries’ very existence. The MDGs of 2000 were the first universally adopted framework for ensuring that all countries could achieve their potential. They were agreed to by rich and poor countries alike, by donor and recipient. But all eight of the goals are now in danger of not being met. Without spectacular growth in China and India, the slippage in sub-Saharan Africa and other parts of Asia and Latin America would be even more serious than it already is. As development scientists start to look beyond the MDG deadline of 2015 – debating possible new targets in areas such as population growth and social protection – they also forecast that the world will not reach its targets by 2015.

The Commonwealth accounts for one third of humanity, and one quarter of the world’s governments. It is thus conscious that 14 of its members are least-developed countries, and half its members are expected to record negative GDP growth in 2009. Botswana – long seen as a model of macroeconomic stability and careful liberalisation – has swung from a 7 per cent surplus in 2008 to a 6 per cent deficit in 2009. The effects of the developmental downturn arise in the areas of social development that need funding the most: in 2009 Nigeria’s education spending is down by 19 per cent, and its health spending by 26 per cent.

To reverse the slide, the G20, first, can honour its own aid commitments – made as long ago as 1970 when richer countries first promised in the United Nations to reach a target of 0.7 per cent of GDP for overseas development assistance, and – more recently – by the G8 at Gleneagles in 2005, and by the G20 in London last April. Aid flows are at risk as the rich countries digest the staggering costs of bailing out their financial sectors, and aid promises are already badly broken. A still greater loss is the stalling of private sector investment into the developing world.

At the G20 summit in London in April, British prime minister and host Gordon Brown announced the end of the Washington Consensus of open markets, privatisation and liberalisation. At the centre of the recovery exercise were resources made available primarily through the IMF. The international financial institutions – especially the World Bank and the IMF – have since led a coherent, international response to the current crisis, in the form of billions of dollars released as liquidity for finance. They are to be congratulated for this.

But the World Bank itself estimates that the financing gap for developing countries may still rise to $700 billion – and the international community does not know where that funding will come from. The developing world may be retarded long after this crisis, with poorer countries especially hard hit by the end or the slowing of equity finance, bank lending and foreign direct investment. The nagging concern is that recovery could as easily mean relapse.

The G20 could also consider a new formula of economic development, already proven in Brazil, Japan and South Korea. The new approach can be true to the basic principles of the Washington Consensus, while considering tools such as moderate forms of government guarantees for long-term loans, partly nationalised development banks, managed exchange rates and flexibility on inflation. The G20 needs to think creatively if it is to help the developing world out of the difficulties into which it – the G20 – has led the world.

The G20 will mark its 10th anniversary in Pittsburgh in September. The Commonwealth will mark its 60th anniversary when its heads of government meet in Port-of-Spain in November. Both face difficult times. For the first time in a generation, both confront a confluence of crises that can only be met by joining efforts. Global challenges need global rules, which need global consent. The G20 must find a way to reach out to make this new partnership truly global. The Commonwealth stands ready to contribute fully and enthusiastically to such an approach.

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