At the G20 summit that concluded last week, the world’s leading economic powers made what looked like a generous commitment to poorer nations: $1 trillion to help the developing countries weather the economic crisis, which will drive an estimated 50 million more people into dire poverty. But as Robert Weissman writes on the Huffington Post today, the apparent largesse might not be all it seems.
To begin with, the $1 trillion figure is overstated, and much of the funding is in the form of loans. Even more importantly, Weissman argues:
The entire purpose of the G20’s assistance may be thwarted by the institution through which the G20 countries chose to channel most of the money: the International Monetary Fund (IMF). The logic of providing assistance to developing countries is to help them adopt expansionary policies in time of economic downturn. Yet the IMF is forcing countries in financial distress to pursue contractionary policies–exactly the opposite of the stimulative policies carried out by the rich countries (and supported by the IMF, for the rich countries).
For decades now critics have excoriated the IMF for lending policies that tie financing to a country’s willingness to tighten its belt by cutting social programs, and pursuing a program of financial deregulation, privatization, and foreign investment–precisely the sorts of policies that created the financial mess in the first place, and precisely the kinds of changes will make suffering in the developing world even worse. The IMF says it is changing its approach–but as Weissman points out, Congress can hold them to this dubious claim by attaching conditions to U.S. funding.
One eminently practical suggestion for how some of this funding might be used comes from HelpAge International, a grassroots organization focused on the needs of older peoples of the world. HelpAge argues that to be effective, development policy “must respond to the intergenerational nature of poverty and to rapid population ageing.” As the G20 meeting concluded, HelpAge urged that funds be provided “to build social security schemes that put money directly into the hands of the world’s poor and deliver long-term income security.’’
More than three quarters of the world’s population has no access to anything resembling social security. That includes 100 million people living on less than $1 a day. The economic downslide makes their survival even more tenuous. As HelpAge argues:
Providing a regular minimum income through social security schemes such as social pensions and child grants offers vulnerable groups predictability and protection against future shocks.
More importantly, putting cash directly into people’s hands will help to stimulate the economy. Thailand and Russia are just two of the latest countries to expand pension schemes as part of economic stimulus packages….In South Africa, the overall poverty gap has dropped by 20 per cent as a result of the introduction of a social pension.
For a fraction of what it costs to bail out the banks, a basic social safety net of this kind could be provided in the world’s poorest countries. The wealthy nations owe at least this to the developing world, considering the damage their economic policies have wrought.