23-24 November 2009
THE CHALLENGES OF GLOBAL DEVELOPMENT AT THE END OF 2009 AND THE PERSPECTIVES FOR 2010 – THE ECONOMIC, SOCIAL, ENVIRONMENTAL AND CULTURAL DIMENSIONS
The year 2009 – like no year before – was and still is characterised by global problems and challenges. In most states there exist no more doubts that global development must be managed by global politics – be it in highly populated states like China and India, in militarily powerful states like the USA, in strong economies like the EU or Japan, or in a raw material rich state like Russia. In addition, global management requires a global political order in which all people and their political representatives – rich or poor – have the right of influence through participation. That would correspond to the political human rights that are binding international law. Only sustainable global development corresponds to the needs of the overwhelming majority of people and the natural conditions of the earth, sustainability of the world society in its economic, ecologic, social and cultural dimensions. The year 2009 also confirms that neoliberal policies and casino capitalism are not effective and do not meet the needs of the people. The real alternative to these policies is the social democratic approach of economic development, protection and social justice, and environmental protection. The policy of social protection is not against competiveness of business, this is an unavoidable part of modern business and modern competitiveness. The Socialist International, at its XXII Congress 2003 in Sao Paolo, had concluded a “Social Democratic Approach” to “Global Governance” which is a comprehensive approach providing the basis for formulating action-oriented positions to manage the new challenges and events of 2009. The Report of the Socialist International Commission for a Sustainable World Society, chaired by Ricardo Lagos and Göran Persson, confirmed this approach and further developed it. The decision of the Socialist International Council on 6-7 November in Santiago, Chile, to call the commission “Commission for a Sustainable World Society,” follows the recognition that all people of the world form one society and that exclusionary societies no longer reflect the actual reality and their common political requirements.
2009 was determined by the impact of the global financial crisis in all states of the world. At the end of 2009 billions of people around the world are still suffering from the global crisis triggered by unregulated financial markets. The outbreak originated in the USA and the more developed states, but in 2009 it has spread quickly to the less developed countries. Also, states with a solid banking system, not participating in risky financial transactions, are affected by the reduction of foreign investments and by a decrease of the remittances of their emigrants. This is true for Eastern Europe, including Russia, Africa and states in Latin America. Since September, the Gross World Product has risen again, but unemployment is not yet declining – in many states, indeed, it continues to grow.
The Socialist International has moved into the causes of the global financial crisis, took position and made proposals for a better global financial order. They are based on the work of the Socialist International Commission on Global Financial Issues, chaired by Joseph Stiglitz. The Socialist International adopted guidelines, entitled “Towards a New Financial Architecture” at its Mexico Council on 17-18 November 2008. On 31 March the Commission sent a message to the London G 20 Summit, on 23 September 2009 the Presidium of the SI concluded a statement on “The Global Financial Crisis and the Pittsburgh Summit”.
For 2010 the SI focuses on new economic and social strategies of coordinated global policy to tackle the crisis and its consequences. These strategies include social needs and the need to overcome global inequality. They must satisfy the huge demand for global goods. Green growth is the prospect for the future. States should invest in high-return energy-saving activities as well as in education.
The world society is expecting the results of the United Nations Climate Change Conference in Copenhagen in December 2009. Therefore, the Socialist International Commission for a Sustainable World Society has in September 2009 presented the Report “From a High Carbon Economy to a Low Carbon Society”.
China and India have overcome the global economic crisis better than states in North America and Europe. North America and Europe contribute more per capita of population to greenhouse gas emissions resulting in climate change than any other state in the world. It is clear that the better developed states must agree on new and deeper targets for cutting emissions, while less developed states, particularly China and India, must also commit to reductions, even if the targets are numerically lower. By 2008 the current structures of global economic policy, especially the G-8, do not do justice to the realities. Establishing the G20 is an important step to involve the majority of people in global political decision-making. But quite rightly, the General Assembly of the United Nations thus called for the participation of all states and all people – a “G192”. Smaller states can increase their influence if they integrate regionally modelled after the European Union. The Socialist International supports regionalisation.
As a consequence of the global economic crisis, global inequality has increased. Intolerable social differences between states previously existed and still do. They were and are unacceptable. The global financial crisis has become interlinked with a succession of crises, such of food, fuel, pandemics, etc. Of the ten most populous states in the world, Brazil, the United States and China, Nigeria and Russia – measured by the Gini index – have a particularly unfair distribution of income.
The global financial crisis has its impact on all aspects of human security and sustainable development. Conflicts that stem from economic factors continue to be justified by differences in cultures and values. This makes resolution of conflicts more difficult. Global security policy should be committed to the protection of universal human rights. A strategy of humanitarian intervention must be based on a UN mandate and inclusion of conflicting parties to deescalate and solve the conflicts.
There is a pressing need for developing cultural dialogue and cultural cooperation addressing existing misunderstandings and misrepresentations. This dialogue should aim inter alia at the defence of universal human rights. This cultural dialogue has been undermined by the attempt to portray social conflicts, military occupations and military interventions as a result of differences in cultures and values.
1. The economic dimension of sustainable global development
1.1 The economic situation at the end of 2009
Since September 2009 the world faces a rebound of the Gross World Product (GWP)- as also noted by the International Monetary Fund. But the 2010 forecast values of 2.5 to 3 percent are still well below the long-term average for the ten years before the outbreak of the crisis, which was above 4 percent. For 2009, there is still a decline of the Gross World Product by 2 to 1 percent.
The increase of GWP is the result of the coordinated policy of states world-wide. Since September 2008 massive amounts of public funding – 18 trillion US$ or almost 30 per cent of GWP – are made available to recapitalise banks, taking part or full government ownership of ailing financial institutions and providing ample guarantees on bank deposits. Many states have also adopted fiscal stimulus plans – 2.6 trillion or about 4 per cent of GWP – to be spent in the 2009-2011 period.
The most severe financial and economic crisis since the early 1930s has caused a high cost worldwide. After the short time effects of the crisis in the financial sector are overcome, the costs can be calculated. They are about 10,500 trillion US $ or US $ 1,500 for every human being. These funds are lacking for the fight against poverty and for the commitment to social justice. It would be a perverse triumph of neo-liberal redistribution in favour of the rich. They definitely are not in favour of the great majority of the people if the costs of the crisis are now charged by budget cuts at the expense of the most vulnerable groups.
The shrinkage of GWP in 2009 and the slow growth in 2010 remain linked to rising unemployment. The rise in unemployment is further expected at 50 million over the next two years or more.
Important differences can be identified between the various regions and states. These differences stem from the still horrifying disparities in levels of development, as seen in pro capita GDP. In this context it is important to note that less developed regions and states need higher growth rates, whilst more developed regions and states with insufficient employment require an employment policy with a focus on re-distributing work and qualifications for the workforce.
4,500 million people live in the ten most populous states and in the European Union, making up two-thirds of the world’s population of 6,700 million. In China and India population figures are 1.330 and 1,140 million respectively; together these two states make up 37 per cent of the world’s population. The continued high growth rates in these two states – estimates for 2009 put the figures more than 8 per cent and more than 5 per cent – make a considerable contribution to ensuring that globally development in these states, benefiting the poor, does not grind to a standstill.
China’s high growth rate over the last few decades are based on intensive export promotion. Currency policy measures have been deployed too, which contributed to the imbalance on the financial markets. The drop in exports due to weak demand from the USA and Europe has increased unemployment levels in China too and exacerbated social problems. It would serve the interests of crisis-free global economic development if China were to use its substantial savings for pump-priming of domestic demand and improvements to its social security systems. China’s massive 450 billion US $ fiscal stimulus package contributes to this process of restructuring whilst focusing on social issues and is helping the global economy to recover.
China and India must assume more responsibility for global economic development; the more developed states in North America and the EU must recognise this. It will only be possible to stabilize the global financial order if China continues to participate in this undertaking. A constructive approach should be adapted to proposals from China’s Central Bank for a new currency reserve; these are similar to the recommendations from the Commission of Experts of the President of the United Nations General Assembly.
The prospects for other Asian states, Africa and the Middle East – 2010 the growth of GDP will be more than 4 per cent – are also higher than for Europe and the United States – and for Latin America, its states need an acceleration of economic growth, especially to diminish the social inequality of their citizens.
1.2 Design of a Strategy for 2010
The key challenges in 2010 will be the design of a new strategy of coordinated global policy. Uncoordinated removal of bank guarantees could lead to unstable movements of capital from states no longer having such guarantees to states still offering them. Reducing stimulus packages acts as a “negative shock” to the economy, and unbalanced, sudden, and especially premature reductions in these stimulus packages could lead to an interruption in the recovery process.
Many states have taken on large amounts of debt in order to prevent the crisis from becoming worse. Even without such countervailing actions, deficits would have grown, simply because downturns lead to lower tax revenues and greater expenditures. The way that the bailouts were handled in several states has especially contributed to the size of the long run public debt.
While it is natural that governments respond to these mounting deficits by a cutback in expenditures, it is imperative that the services to the poor and basic investments such as those in infrastructure, education and technology be maintained. To do otherwise would increase the long run costs of the crisis and impose additional costs on the innocent victims of this crisis. Governments should eschew deficit fetishism.
It is also imperative that the financial sector be made to bear the costs of the crisis. To do otherwise would be neither fair nor efficient. The repeated bailouts are subsidies to the financial sector, and such subsidies contribute to an over-bloated sector and undermine incentives.
As the SI Presidium has stated, increasing the progressivity of the income tax system will not only increase the sense of social justice, but also help stabilise the economy – such taxes act as automatic stabilisers.
Measures to boost growth can create jobs and thus reduce unemployment. However this must be combined with a sustainable labour market policy. Without such policies, government stimulus packages could generate jobless economic growth. For less developed states it signifies transferring non-protected informal jobs into the formal labour market in order to create a state based on principles of social solidarity, which can provide long-term protection against poverty. The Socialist International Committee of Economy Policy, Labour and Natural Resources is dealing with the issue of linking labour with social integration and social protection globally. The Committee will prepare proposals for the first SI Council of 2010.
The volume of world trade has also dropped; for 2009 a decrease of 12 per cent is to be expected for world trade, after the slow increase of 3 per cent in 2008, whereas prior to the crisis, average annual growth during 2004-2007 was 8 per cent. The current drop is the largest decline year-on-year since the 1930s. For 2010 an increase only of 2 per cent is prospected.
Protectionist measures adopted by more developed states constitute the greatest danger, reducing export opportunities for less developed states still further. Africa, South East Europe and Mexico, among others, will be hit by these policies. Some of the stimulus packages that have been adopted involve unfair trading practices by providing subsidies and incentives to domestic firms. This constrains the recovery of less developed states, which do not have the resources to implement fiscal stimulus measures and provide support to their domestic industries.
The SI welcomes the G20 summits in London and Pittsburgh commitments to refrain from raising new barriers to investment or trade in goods and services, imposing new export restrictions, or implementing non-WTO-compatible measures to stimulate exports. However, the SI urges G20 member states to comply by implementing this commitment.
The SI calls for less developed states to be given greater access to markets in more developed states and for a reduction of government agricultural subsidies in the developed states. The WTO’s Doha Round must be concluded in 2010 as a real development round and thus contribute to a coordinated global policy. The guiding principle must be “Fair Trade”.
1.5 Global commodities policy
The price of many commodities has dropped in the first two years of the crisis. This could have had advantages for consumers, particularly in more developed states, but in any event it had disadvantages for producers, as can be seen in the Commonwealth of Independent States, in South America and in the Middle East. This is particularly problematic if producer states fall into the category of less developed states.
In many cases the links between speculation on financial markets and speculation on commodities markets became more influential. Measures to contain this tendency are until now not included in new rules for a viable global economic order. The SI repeats its proposals for state funds to secure long-term revenue from commodities, helping to enhance development in the states in question and augment global distribution equity. The creation of a World Fund for commodities should be considered.
During the financial crisis oil and other natural resource states had strong incentives for precautionary savings, which also undermines global aggregate demand. Speculation may play some role in this volatility. If so, a coordinated global tax on capital gains may dampen such speculative activity. It would be imprudent, however, of states with highly volatile incomes not to engage in precautionary savings.
The most important commodities are agricultural commodities. The SI supports the decision of the G8 Summit to assist small farmers’ funds of 15 Billion US $.
Industrial states’ subsidies to farms exports into developing states must be ended. The purchase of agricultural land in less developed states by more developed states is a major cause for concern. This can only exacerbate the inequitable distribution of food resources. There is a need for global rules to ensure that providing food for people in crop-growing regions takes precedence over trade in agricultural products.
It is vital to combat the illegal seizing of land and natural resources in the context of a military occupation. People’s right to benefit from their own natural resources should be guaranteed and products originating from the exploitation of illegally seized land in an occupied territory should be banned.
2. The social dimension of sustainable global development
In September the International Monetary Fund described a global social crisis following the financial crisis. An increase of unemployment would be unavoidable. A sustainable labour market policy in all states is indispensable. But in addition to the global employment problems there are other deeply rooted social imbalances. The global financial crisis has gender specific consequences as well as consequences for young people.
Poverty is a shame for a world society which includes Millions of millionaires. In 2000 all states agreed on the Millennium Development Goals to fight hunger and poverty. The financial crisis and its impacts jeopardize attainment of the Millennium Development Goals. As many as 100 million more people could remain poor or fall into poverty. The Socialist International appeals to governments and parliaments of the states to do everything possible to implement the MDG.
Today, more than ever, it is necessary that the donating states keep and increase their commitments to aid for sustainabledevelopment. Under no circumstances they should refrain from misusing the international economic crisis as an excuse for decreasing international aid. It is necessary that, without delay, the obligation of donor states to contribute 0.7 of GDP by 2015 is fulfilled. In addition, global taxation (such as the financial transaction tax) is necessary and to use the revenues for development goals.
The effectiveness of development assistance is also depending on good and democratic governance in the less developed states and on well-coordinated cooperation between donors and receivers. However, a lack of effectiveness is no justification to decrease the amount of help. Without a more just distribution of the Gross World Product there will be no sustainable development – no matter how good governance may be.
The global financial crisis especially hit migrant workers. On average, in different states, more than a quarter of the newly unemployed workers are immigrants. In addition, migrant workers are always living under more difficult circumstances than the unemployed in the states of their residence because they lack the support of their families. For this reason, the SI is concerned with the consequences of circular immigration. It supports plans of voluntary return, as well as the rights of these citizens to social protection under equality of opportunities. The SI welcomes the Human Development Report of the United Nations Development Program 2009 addressing the issue of global migration. It supports the proposals of UNDP.
The SI is aware of Social Policy worldwide, but particularly in the highly populated states. In China and in the USA together, the two most powerful states are living more than 20 per cent of the world’s population. These two states have started reforms to improve social integration of their economically weaker citizens.
The efforts of US-President Barak Obama to introduce a more effective and more socially oriented Health system are a necessary step in this direction. These efforts improve the global need for social protection policy.
The Government of China used its substantial savings for pump-priming of domestic demand and improvements to its social security systems. That could be a beginning of focusing on social issues, of restructuring the social living conditions and of achieving a more just income distribution in China, a Chinese welfare statehood.
3. The ecological dimension of sustainable global development
At its Athens Congress in July 2008, the Socialist International declared the adoption of the 2 degrees Celsius target by the community of states to be the cornerstone for an all-encompassing agreement. It must be secured in the United Nations Climate Change Conference in Copenhagen in December 2009. Within the next 10 to 15 years, global green house gas emissions need to be shifted to a pathway consistent with the 2 degrees Celsius target. The Socialist International Commission for a Sustainable World Society in October 2009 presented the Report “From a High Carbon Economy to a Low Carbon Society”. Reducing global greenhouse gas emissions in energy consumption will be only achieved, if technology transfers and capacity building with regard to mitigation and adoption can be organised. The better developed states must do far more to provide the less developed with technical and financial support. Funding for technology transfers and capacity building is highly important.
4. The cultural dimension of sustainable global development
The cultural dimension of sustainable development is comprehensive education. All people in all regions and states – especially the younger generations – must receive basic knowledge, and knowledge of technologies and human values. The SI’s proposals to secure long-term revenue from commodities, helping to enhance development in the states in question and to improve global distribution equity can only be implemented if well educated and skilled people can do respective jobs. The SI will discuss ideas, in which way the global policy of using natural resources and the global education policy can be linked.
5. A More Democratic Political System of the World Society
Sustainable global development in its four dimensions will only be successful if the political system of the world society will be more democratically and effectively institutionalized.Democratic Global Governance is an urgent necessity. Global institutions – as part of the whole multilateral and multilevel global political system – must be given the capacity, flexibility and authority to meet the mounting expectations and demands of the world’s society citizens for a secure and viable future. But these institutions have to increase their democratic legitimacy and strengthen trust by becoming more representative, transparent and accountable.
Ongoing political conflicts impede global development in its different dimensions. Some of these conflicts have not only a local impact, but a regional and global one. Their root causes need to be addressed in order to allow for economic, social, environmental and cultural development. This requires upholding international law, ensuring respect for Human rights, addressing growing inequalities. A successful development strategy must include a strategy to end conflicts and to ensure people‘s rights.
The SI supports the Recommendations of the Commission of Experts of the President of the United Nations General Assembly on Reform of the International Monetary and Financial System.
The Recommendations demonstrate that institutional problems can be resolved at the same time as new rules are devised for global financial markets, particularly in respect of how the G20 relates to the UN system.
The G20 agreement in London on delivering new resources to less developed states demonstrates that the G20 constitutes a step towards organising global participation and responsibility for global economic development. The G7/8 is no longer able to shape global economic policy alone.
However, the G20 format excludes the poorest states. A world order committed to the Universal Declaration of Human Rights, and to civil and political rights, cannot function unless it foresees full participation of all regions – and thus of all citizens – around the world.
The proposals of the Socialist International Commission for a Sustainable World Society on “Redefining and Reforming Global Governance and International Institution Building” will contribute to the efforts to meet this crucial goal of a Democratic Political System of the World Society.