The global crisis: Now is not the time to turn our backs to the poor

Transcription

1 The global crisis: Now is not the time to turn our backs to the poor A Dóchas Position Paper March 2009 Global crises require global solutions. Ireland must play its part, by investing in international cooperation. Overseas aid is needed now, more than ever. Ireland is experiencing one of the most serious economic crises in its history. The sharp downturn has put unprecedented pressure on the public purse and uncertainty has brought about a spiral of job losses and spending cuts in all sectors of the economy. The crisis has prompted an urgent reassessment of our nation s priorities. In this document, Ireland's Development NGOs present a summary analysis of the impact of the crisis on the world s poorest people. It shows that the crisis has lead to dramatic increases in global poverty, and argues that it is not too late for remedial action. This document contends that rich countries have the prime responsibility to resolve the crises that are pushing millions of people across the globe into destitution. The multiple global crises economic, food and climate were all caused by rich countries, and are all hitting the world s poorest people hardest. Ireland s Development NGOs feel that, as a matter of utmost urgency, rich countries like Ireland must put in place measures to protect the most vulnerable from the impact of the economic turmoil. Millions of people have already fallen into a poverty trap from which it will take them decades to get out, if they manage to do so at all. A concerted effort now can stop poverty from running out of control and put in place the key ingredients for sustained and sustainable human development. The current crisis is a severe test of all of humanity. The crises have highlighted that all of humanity shares one single economic system, and one single planet. And it is a severe test of Ireland's future a future that we have always sought and found in a global community of nations. That community requires constant investment, in good times, as in bad times. Aid Works. Aid Makes Sense. Aid Is Good For All Of Us.

2 Introduction The financial crisis, which started in US and European banks, has turned into a deep, global economic crisis that is hurting those least able to defend themselves: the poor. In the months since the collapse of Lehman Brothers bank in the US in September 2008, rich countries have spent over 20 billion to save their banking sectors. The Irish government has contributed its share, with a 7 billion bank re-capitalisation programme. It is right that governments across the world have pulled out all the stops to help people and financial institutions weather the economic storms. And encouragingly, there are many examples of rich country governments acknowledging that the global crisis has global causes and consequences, and demonstrating a willingness to resist domestic pressures to turn their backs on the world. The current economic crisis has already lead to dramatic increases in global poverty levels. The multiple crises that are hitting the world's poorest countries and communities - the climate crisis, food crisis and the economic crisis - threaten to undo much of the progress made since world leaders agreed the Millennium Development Goals (MDGs) nine years ago. Rich countries must take urgent measures to protect the poor and vulnerable, as they have solemnly and repeatedly agreed to do. In the current climate, it is imperative that rich countries, including Ireland, resist the temptation to cut their budgets for overseas aid. It would be wrong and short-sighted to ignore the suffering that the current crises are causing the world's poorest people. The unregulated greed and speculation of banks, hedge funds, property speculators and other western groups caused the economic chaos that is now having such a dreadful impact on our most vulnerable fellow humans. The excessive use and dependence on fossil fuels has caused the climate chaos that is increasing the severity of drought and floods, increasing pressure on arable land, reducing harvests in Asia and Africa, and increasing hunger and food insecurity. Our economic models, consumption patterns and lifestyles not those in developing countries have helped bring about these crises and we must help solve them. In this paper, the members of Dóchas present their analysis of the impact of the economic crisis on the world s poorest people and set out their priorities for remedial action. Key among these is the need for Ireland to look outward, to its place in the wider world, and continue to invest in international cooperation and overseas aid. Ireland must maintain its commitment to global human development while continually improving the quality of its overseas aid.

3 1. Dramatic impact on the world s poorest people The current crisis has hit people across the globe. As with any crisis, those who are most vulnerable to shock, whether in Ireland or abroad, are those hardest hit. Poor and marginalised people often lack the buffers that protect and insulate richer people, communities and countries. The current economic crisis has come at a time when the reserves of many poor people, and poor countries, have already been eroded by other events. Recent years have seen unprecedented increases in the prices of food and fuels, and although they have come down from their dizzying heights, they are still higher than even a couple of years ago and have left poor people and communities less able to cope with further shocks. This combined food and fuel crisis has pushed million people below the $1.25 a day poverty line, according to the World Bank. The global economic crisis, which began in the credit-fuelled boom and bust in the US and Europe, is now tipping many people and communities in the developing world into deeper poverty. Less growth, more poverty The IMF predicts that economic growth in Sub-Saharan Africa, which had reached a healthy 6.9% in 2007, is set to decrease to 3.25% as demand for poor countries' exports (mainly raw materials) plummets. Economic output from the countries of Sub-Saharan Africa is set to fall by 40 billion, and the figure for all developing countries together is a staggering 600 billion. Private capital flows to the world's emerging markets are expected to drop from 732 billion in 2007 to 130 billion in The economic crisis is fast wiping out recent progress towards the achievement of the Millennium Development Goals. UNESCO estimates that the economic downturn will cost the 390 million people living in Sub-Sahara Africa 20% of their income. An additional 46 million people will fall below the internationally agreed poverty line, as a direct result of the global crisis. In just one shocking example, an estimated 200,000 to 400,000 extra children are expected to die each year, which would mean the death of somewhere between 1.4 and 2.8 million children between now and More unemployment Up to 30 million jobs could be lost between 2007 and the end of 2009, according to the International Labour Organisation. A less optimistic scenario puts that number closer to 50 million. This is excluding unemployment in the informal sector, which is biggest in the poorest countries. The number of working poor (people earning less that US$ 2 or 1.6 a day) is expected to rise by up to 1.4 billion. Rising unemployment hits women hardest, as they are more likely to lose their jobs. Fragile states under pressure Economic recession seriously increases the probability of fragile states falling back into violent conflict. And it is precisely those same fragile states that lack the economic and political buffers to weather the storm of global economic downturn. The income of the government of South Sudan, for instance, has reduced by 98% as a consequence of the fall in oil prices. Government salaries are no longer being paid and

4 investments in basic services has been discontinued. Tensions and resentment are mounting in a region which has only forged an uneasy peace in 2005 after a 21-year civil war. Remittances decreasing Many families in developing countries are dependent on money sent home by relatives working abroad. Such remittances to developing countries are estimated to be worth 235 million, or nearly three times as much as developing countries receive in foreign aid. As a result of the global economic crisis, the flow of remittances is dropping rapidly, as millions of workers are losing their jobs in industrialised countries, or returning home. Increasing debt burden Many countries are facing an increasing debt burden, as their currencies have dropped in value compared to the hard currencies of international loans. In addition, falling exports mean developing countries are now earning less in hard currencies, making it extremely difficult to keep up debt repayments. 2. The need for development assistance Ireland currently spends between 0.53% and 0.56% of its gross national income (GNI) on aid. The government has promised to increase that percentage to 0.6 by 2010, and 0.7% of GNI by Because Ireland s pledges on overseas aid are made as a percentage of national income, the sum of money involved reduces automatically as the economy shrinks. However, the government has gone beyond this built-in, automatic reduction, and in February cut the aid budget by a whopping 95 million, or roughly 10% of the total aid programme. And that came on top of previous reductions of 45 million in July and 2008 and 15 million in October 2008, meaning that the overseas aid programme has been disproportionately hit, time and again, through the current economic crisis. There are six reasons why Dóchas believes this cut and talk of further cuts in aid to the world s poorest people - is unacceptable: 1. Overseas aid is not a matter of charity, but of justice. Every person has a human right to work, income, education, healthcare, participation and security. These rights are universal and indivisible, and Ireland has committed itself to their promotion and protection. These rights form the basis of the Millennium Development Goals that world leaders agreed as the framework for international cooperation to make world poverty history. Those MDGs are the blueprint for a strategy to halve global poverty; a blueprint that Ireland has bought into, including our responsibility to provide our fair share of the resources required. Therefore our promise to spend 0.7% of GNI on overseas aid is part of a global compact, a contract between us and the world s poor. We cannot break the

5 contract simply because we are experiencing hard times. 2. Aid is needed now, more than ever. Falling economic growth in 2009 means that 46 million more people will have to make ends meet with less than 1.25 dollars per day. As in rich countries, developing country governments will need all their resources to respond to the crisis but their resources are fast drying up, as income from trade, private sector investment and remittances are decreasing. On top of all this, long-promised aid is being cut. As with poor families and communities, poor countries are feeling the crisis acutely, but they have few options in the face of adversity as they have neither the reserves nor the fiscal space to respond. It would be wrong to rob them of one of their main sources of income, now that they need every available cent of overseas aid. 3. Rich countries are responsible for the global crisis. The food crisis, the climate crisis, the banking crisis and the economic crisis: each of these has been caused by the world s richest countries -- and each impacts most severely on the world s poor. The unprecedented increases in the prices of food and fuel caused an estimated 130 to 150 million people to fall into poverty. That is more than 28 times the total number of people living in Ireland. The financial crisis, brought about by greed and irresponsible behaviour by huge multinational banks and financial institutions, is set to add millions more to the ranks of destitute people. It is unacceptable for rich countries to do so much damage and then seek to wash their hands of its consequences. 4. Discontinuing aid is bad business. Over the past years, the international community has made huge strides towards halving poverty levels and attaining the other MDGs. Thanks to aid, 40 million more children are in school today than at the start of the decade. In many developing countries, fewer women die in childbirth, and many more people have access to primary health care or safe drinking water. Economists state that the best way for developing countries to respond to the economic crisis is through further investment in programmes that create jobs, ensure the delivery of core services and infrastructure, and provide safety nets. They tend to agree that what is needed is the creation of vast and rapid additional resources to countries that lack the economic space for fiscal stimulus packages. The aim of these new resources would be to stop countries sliding into a deep economic crisis that would hurt the poor and vulnerable. In other words: aid is needed now, to protect recent development gains. 5. Aid is a sensible investment. In poor countries, one Euro can go a long way. While at first sight it may be tempting to cut Ireland s aid budget, the freed up millions will not solve Ireland s crisis. At the same time, that same money would have a big multiplier effect in the smaller economies of developing countries. In developing countries, relatively small investments in education, health care, infrastructure and agriculture can lead to direct benefits for poor people and poor communities. Their numbers are vast, which is why development cooperation requires

6 big sums of money. Yet, per capita, overseas aid represents a small investment with major returns. 6. Providing aid is in our own interest. Overseas aid serves our own national interest in a number of ways: less poverty in the world means greater security for more people, and more future trading partners. Promoting sustainable and green development processes helps mitigate the effects of global climate change; effects that are sure to hit island nations like Ireland heavily in the not-too-distant future. We live in an interconnected world and leaving a majority of the world s population to sink or swim will inevitably come to impinge on our lives through economic chaos, violent conflict, environmental destruction, mass migration or other means. Our aid programme also helps cement our international reputation as a country. In the past year, we have damaged our standing as an economic powerhouse and a safe investment option, and our credibility as good Europeans has taken a knock through our rejection of the Lisbon Treaty. But our reputation as a caring nation - dedicated to the values of international cooperation, the rule of law and the principle of solidarity - is still intact. Ireland s overseas aid programme is our calling card to the world, and tangible proof that we keep our word. Cutting the aid programme is tantamount to breaking our promise to the world s poorest people. 3. The world needs More and Better Aid The Irish government s aid programme was created in 1974, partly as a response to the call by Dóchas member organisations for Ireland to fulfil its international obligations and spend 0.7% of gross national income on Official Development Assistance (ODA). Since the early 1970s, and during the recent Make Poverty History campaign, Irish Development NGOs have continued to emphasise the need for more and better aid. In 2005, the government accepted the logic of our arguments and committed to reaching the target of spending at least 0.7% of the country s annual gross national income on ODA by the year A year later, the government published its White Paper on Irish Aid, in which it promised to play an active role in the achievement of the Millennium Development Goals. The White Paper set out the many reasons why Ireland believes in international development assistance, and proclaimed that development aid formed a central plank in our foreign policy: Ireland believes profoundly in global solidarity. Ireland has received overwhelming praise internationally for its aid programme. By making development cooperation one of the corner stones of our foreign policy, Ireland has shown that small countries can have a significant impact on international politics. World leaders queued up to come to Dublin and Ireland was elected onto major EU and UN bodies, as a direct result of our leadership in the fight against global poverty. In recent years, we have built a very strong reputation internationally as a committed and progressive aid donor. When Ireland speaks about global development, others listen. Ireland

7 has played a lead role in the fight against HIV & AIDS, and in favour of effective emergency relief and greater donor coordination. For their part, Irish NGOs have, through the Dóchas network, led the way towards greater accountability and higher quality standards. In recent years, we have brought in codes of practice and professional standards for effective action against poverty. Aid from Ireland works, and NGO aid works, as has been proven time and again by independent assessments. 4. The Way Forward After initial hiccups, governments around the world have improved their responses to the global crises - by seeking global solutions. Although most governments are under severe pressure to present protectionist, beggar-thy-neighbour solutions to the crises, by and large the commitment to international cooperation and coordination is holding. This is a hugely positive development, and a good starting point for recovery. Dóchas members believe that a concerted effort now can stop poverty from running out of control and put in place the key ingredients for sustained and sustainable human development. Firstly, urgent measures must be taken to protect those most at risk. Millions of people have been pushed into absolute poverty by the crises and a huge effort will be required to avoid millions more being consigned to a human scrap heap. The growth of human poverty means not just human suffering, it also represents enormous destruction of capital: if we allow people to slide into poverty, we are undoing years of investment in human capital. Dóchas members are calling for continued and intensified investment in overseas aid. Unlike the bank bail-outs and other economic stimulus activities, we are not calling for massive new commitments; we are simply calling for the government to honour its commitment to existing policies and core values of Irish society. As part of a global effort to resolve the global crisis, Ireland must increase the quantity and the quality of our overseas aid, and we must put all our energy behind an agenda for reform that protects people, jobs and the environment. Secondly, Dóchas members urge that any response to the global financial, economic, food and climate crises must start by redressing the systemic flaws that caused the crises in the first place. Now that the unbridled and unregulated international finance and commercial activity has shown its destructive force, it is time to redress the balance between global markets and global governance. The current economic crisis is a severe test of humanity and a severe test of Ireland s principles. As a country we were very happy to reap international praise for both prosperity and our commitment to human development and international solidarity. Now that our resolve is being tested, we cannot just change our minds and forget about our promises to the bottom billion. Now is the chance for us to prove that we believe in our principles. --o0o--