This report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s
Globe and Mail web site, has
strategic implications:
http://www.reportonbusiness.com/servlet/story/RTGAM.20081108.wzoellick1108/BNStory/Business/home
World Bank head warns financial crisis could drive up number of poor
HEATHER SCOFFIELD
Globe and Mail Update
November 8, 2008 at 5:54 PM EST
SAO PAULO, BRAZIL — The global financial crisis threatens to radically drive up the number of poor people around the world unless countries work together to control the contagion, says the head of the World Bank.
“We need to make sure the financial crisis doesn't become a human crisis,” Robert Zoellick told reporters after the first day of a two-day meeting of the Group of 20 finance ministers and central bankers.
“All countries are moving into a danger zone,” he warned – a zone where frozen credit is preventing global trade, hurting countries' balance of payments, and slowing down remittances from foreign countries that many families in developing countries depend on to make ends meet.
G20 countries are increasingly looking to fiscal policy and government stimulus as a key way to fix the global financial crisis and prevent it from undermining the global economy, Mr. Zoellick said.
But he pointed out that stimulus packages can work for the United States, China and European economies, but not all emerging markets are in a position to afford big spending, since it may provoke inflation.
G20 countries are also becoming more worried about the “second order effects” of the financial crisis, he said. Advanced countries have taken such extreme measures to buoy up their banking systems that countries who can't afford to buy their banks' commercial paper or guarantee loans are now being penalized.
He was referring mainly to emerging markets, but that phenomenon is happening in Canada as well. The federal government has guaranteed wholesale loans, but for a high price, and it has not taken many of the other measures adopted by the United States or the European Union, where the banking system is in tatters.
Now, Canadian banks complain that they can't compete internationally because they don't have a government-backed guarantee for everything they do.
So the pressure is on the United States, the United Kingdom and Europe to put a quick end to their bank subsidy plans.
“You need to think of exit strategies,” Mr. Zoellick said.
Talks at the G20 have turned into a showdown between advanced countries – who caused the financial crisis – and emerging countries, who are feeling the effects but lack the global power to do much about it.
Brazil's president, Luis Inacio Lula da Silva, kicked off the day's meetings casting all the blame on rich countries, and telling them to take a lead in fixing them, while also giving emerging markets a much bigger say in international organizations.
But the discussion in Sao Paulo on Saturday focused on finding a conciliatory route that would see the expansion of the Financial Stability Forum to include more countries, as well as a bigger role for the International Monetary Fund in overseeing stricter banking regulations.
Eventually, all financial institutions and their leveraged activities will face some form of regulation, be it light or heavy, Mr. Zoellick said.
But not all countries will not agree to cede authority for such regulation to an international body, he added, and so the FSF and IMF will advice, set standards and conduct surveillance rather than enforce.
The advanced countries do not disagree that emerging markets need a bigger voice in the world's decision-making organizations, Mr. Zoellick said.
“A lot of the discussion is how it will happen.”
First:
Robert Zoellick is not some kind of left-wing bleeding heart; he is a hard-nosed lawyer/negotiator with special expertise in trade; he is a Republican and a free trader.
Second, and parenthetically, in saying
“You [the US, UK and Europe]
need to think of exit strategies [from the bank subsidy programmes],” Zoellick has zeroed in on an issue of great importance to Canada. The American and European bank subsidy programmes are hurting well managed, high quality Canadian banks and we want them gone ASAP. They constitute
illegal subsidies and if they are not gone soon we, Canada and a few others, will need to haul the US and Europe into the WTO and seek big, damaging sanctions.
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However, the
BIG issue is poverty and its strategic implications.
The
”Bottom Billion” is already the home of many of the world’s
troublemakers, allowing it to get even poorer is not a good idea, not good at all.
Poverty breeds despair – especially in our age of instant, mass communications. Young men and women in the world’s poorest countries can see, they can
almost feel and taste the ‘good life’ in the West (and East Asia – China, Japan, Singapore, South Korea, etc). These are not stupid people, nor are they lazy. Because they are not stupid they can see that no matter how hard they work their chances to ‘grab the brass ring’ and live our ‘good life’ are almost non-existent.
Despair makes one easy prey for those with a
siren song that combines
desire for what we (the West and East Asia) have with
hatred for us because we have it. Like the original siren song in Homer’s
Odyssey, the new one leads those who listen to their doom - but it is so seductive that they cannot resist.
The ‘message’ of the new
sirens is compelling, especially when, as is so often the case, it is wrapped in the cloak of Islam. The West (and East Asia), poor Muslims are told, stole the knowledge that allowed them to create their great wealth from the Muslims back in the 15th century. The Muslims of old, the story goes, used the knowledge for the benefit of all believers, but the
kafirs used it only to advance our secular, anti-Muslim goals – in so doing we provide our people with
baubles and ‘bread and circuses’ in order to keep them placid.
(There is a lot in the message that would be familiar to Karl Marx, his modern acolytes like
Sandra L. Smith, and (former)
Trotskyites like
Judy Rebick. In fact, a very similar ‘message’ was propagated in Africa and around the world in the 1950s – on orders from Moscow. The Communist
party line was assiduously toed, here in Canada, by very ‘respectable’ people like
Stanley Brehaut Ryerson. There were equally ‘respectable’ versions of Ryerson all over the world – including Australia, Britain and the USA.)
With the message firmly implanted, thanks to e.g.
Saudi/global Wahabi funded madrassahs, the poor and desperate are only a very short, even easy step away from taking up arms (or bombs) against the
kafirs.
Why not? It’s been a long time since I was in Accra or Kinshasa (Leopoldville when I was there!) but I’m told (by people who go there often) that the situation is worse than it was 30 or 40 years ago – the
only places in the whole world where, over about a half century, things have gotten measurably worse for the people who live there. Why bother working and struggling against hopeless odds when
something good might be had with a gun?
To a potent mix of poverty, despair and radical Islam we can add
AIDS which is killing Africans, especially, at such a rate that soon – within a decade - we will se societies bereft of adult leadership. In other words we will have big, poor, desperate, indeed hopeless
children (for all practical purposes) with equally big guns.
An explosion is just a very tightly spaced series of individual little fires. What we are seeing in Africa and West Asia (and parts of the Caribbean, too) are those fires – in Rwanda, Afghanistan, Darfur and Congo – growing increasingly close together. Soon they will not be individual fires – each amenable to some sort of
solution; soon they will be so close together – in time and space – that they will be a literal
explosion – right in our faces.
I can argue that the West (and East Asia) can and should do nothing. We should wait out the chaos and enter, with massive humanitarian aid when the Africans, West Asians and Haitians have exhausted their murderous rage against whatever and are ready and able to accept our help and guidance. I can ague that, but I will not because I am convinced that our own basic humanity will not allow such a course of action. Faced with a humanitarian crisis of proportions equalled only by he Holocaust we will be morally compelled to act.
I would prefer that when we decide to confront the crisis of the bottom billion that we, in the American led West, ante up the money (many, many hundreds of billions of dollars – more than we will spend buying our way out of the current credit crisis) and let others, especially India, do the ’work’. India is an ally and a democracy but it has a fundamental geographic problem: no hinterland – defined as essential for geopolitical success by e.g. Mackinder. There are many, many reasons – one or two even good reasons – why this is unlikely to happen. Reason one is that China will not allow it.
That leaves option three: the West, the OECD, really, plus China and India will have to form a coalition of the willing and able nations to send expeditionary forces to Africa (and keep them in West Asia) to rescue the Bottom Billion from the fate to which we, through inaction, have consigned it. There is no point in sending militarily incapable nations to do the sort of heavy lifting that will be required when, inevitably, the Bottom Billion move from problem to threat.
And, we’ll you’ll have to do that while the defence budget is under attack because Canadians want whatever money there is spent on them.
