The G20`s pledge of $ 1.1 trillion to help tackle the global financial crisis as well as its recognition of the human dimension of the economic downturn has lifted the spirits of the countries in despair. These funds are expected to be mainly channelled through the IMF.
But, the problem with pledges or promises is that they are like the pie crust made to be broken. An aid package of $ 4.5 billion that the Tokyo donor co-chairs pledged to Sri Lanka way back in 2003 has remained a pie in the sky ever since. Today, the co-chairs are vocal on everything about Sri Lanka except the aid they promised!
UN chief Ban Ki Moon struck a responsive chord with the developing world when he, while welcoming the G20 package, said, `But it will be critical that the share of this going to the poorer countries is delivered.` He also stressed that `a commitment of $ 300 billion in aid to the poorest countries over the next two years would be crucial`, cautioning the world leaders: `The world is watching.`
It is a matter for happiness that the G20 leaders had the wisdom to take on board the key principles proposed by the Social Summit and the London Jobs Conference. They have stated they `will support employment by stimulating growth, investing in education and training and through active labour market policies, focusing on the most vulnerable`.
Indian Prime Minister Dr. Manmohan Sigh, an eminent economist, who is not a blind follower of neo-liberal economic policies, is reported to have told a home truth: A gap between the rich and poor produces social unrest and for an unemployed youth a nine per cent growth did not mean anything!
The G20`s aid pledge and the UN chief`s concern need to be viewed against the current global economic reality vis- -vis the situation of aid dependent nations and the world`s poor. The World Development Report (WDR) 2009 authored by the World Bank (WB) reveals that foreign aid constitutes less than 0.5 per cent of the GDP of the donor nations and not even a large faction of the GDP of countries home to the so-called bottom billion, which have 12 per cent of the world`s population but less than 1 per cent of its GDP. The WDR says, `A billion slum dwellers in the developing world`s cities, a billion people in fragile lagging areas within countries, a billion at the bottom of the global hierarchy of nations these overlapping populations pose today`s biggest development challenges. Seemingly disparate, they share a fundamental feature: at different spatial scales, they are the most visible manifestation of economic geography`s importance for development.`
The WB proposes to overcome those challenges by means of inclusive development to be achieved through spatial connectivity and spatial intervention while promoting unbalanced (spatially blind) economic growth.
However, global poverty poses not only development challenges but also huge security threats. Afghanistan is a case in point. The West would have been free from the scourge of footloose Al Qaeda terror, if the US had not left Afghanistan in the lurch after the exit of Russians. The US action enabled a m lange of guerrilla outfits to emerge and control the destiny of that volatile nation. Taliban exploited abject poverty and attendant unrest to further their macabre interests.
Former WB President James Wolfensohn, whose critical views on the development strategies of the international lending institutions found resonance with the developing world, laid emphasis on social welfare in no small measure. Addressing the Symposium on Global Finance and Development in Tokyo on March 1, 1999, he said a stable financial architecture could not be achieved without the proper structural, institutional, social and human foundations needed to make a modern market economy work.
In addition to creating governmental structures that allowed business to flourish while protecting citizens, Wolfensohn stressed that effective health, educational and welfare systems were crucial. He was disturbed by the fact that privatisation in developing countries had eliminated inefficient state corporations which nonetheless had provided social safety nets. `This,` he said, `creates extreme vulnerabilities which can lead to political disturbance and a dangerous sense of disillusion among those left in the cold we have seen elements of a backlash against globalization and there are real and deeply human reasons why people feel this way.`
Over the years, international lending institutions seem to have come to terms with the irrefutable fact that economic growth and social welfare must go hand in hand for development to be meaningful. On Friday we quoted Minister of Public Administration and Home Affairs Dr. Sarath Amunugama as saying that though it was traditionally believed that the IMF was averse to social welfare, it had urged Sri Lanka to maintain its social welfare network.
However, the IMF, through such advocacy, is doing no one any favour as such because in the final analysis social expenditure which was once erroneously considered detrimental to capitalism is, in fact, supportive of capital accumulation. That social expenses create an environment conducive to the growth of capital found expression in the works such as The Fiscal Crisis of the State by James O`Connor. The State, they have argued, seeks to achieve this objective through two kinds of expenditure. They are social expenses necessary for law and order purposes, social security, rehabilitation etc to maintain social order and legitimacy yet unproductive and inimical to profitability and social capital essential for the promotion of capital accumulation either directly in the form of social investment designed to lower the cost of constant capital such as spending on economic infrastructure or indirectly in the form of social consumption such as spending on housing, healthcare etc.
Contrary to Dr. Amunugama`s claim that the IMF promotes social welfare, an award winning health columnist points out in this newspaper today that analysts from Cambridge and Yale Universities have reported that in July 2008 tuberculosis (TB) recorded a steep rise in countries with IMF loans constricting conditions attached to IMF loans were blamed for thousands of extra TB deaths in Eastern Europe and former Soviet republics. The IMF has rejected the charge.
Proof of the pudding, it is said, is in the eating. Whether the IMF really means what it says about social welfare or whether it will deliver the G20 financial package to the satisfaction as well as the benefit of the developing nations remains to be seen.
The urgent need is for the world leaders to translate their aid pledges into hard cash and for the lending institutions to take cognisance of social development and other pressing human needs of the developing nations in disbursing funds.
The world is watching, as the UN chief says.