Our Programmes



Sign up to our newsletter.

Follow ODI

G-20 -- a starting gun for recovery

Written by Simon Maxwell


The G-20 Communiqué was published yesterday. Probably fewer than a dozen people in the world fully understand the numbers, but the words and numbers together secure gains for development and for the poor. The text provides a plan of attack, but also the standard by which leaders will be judged, particularly when the G-20 meets again later this year.

The text says that ‘prosperity is indivisible’ and that the recovery plan must safeguard the needs and jobs of hard-working families in all the countries of the world. It identifies a ‘collective responsibility’ to mitigate the social impact of the crisis. It reaffirms commitment to the Millennium Development Goals and ‘to achieving our respective ODA pledges, including commitments on Aid for Trade, debt relief, and the Gleneagles commitments, especially to sub-Saharan Africa’. Social protection is in, and food security, and jobs, and climate change. And underpinning the package is a commitment to new rules and institutions, from bank regulation and tax havens, to a trade deal and open competition for top posts at the World Bank and the International Monetary Fund (IMF).

Underpinning all this are the numbers: $1.1 trillion in total, including $750 billion for the IMF, $250 billion for trade credit, and gold sales to support concessional finance for the poorest countries. In total, $50 billion is earmarked for this group of countries. Don’t ask whether this is all new money, or additional to aid pledges, or available quickly enough to make a difference. Some of it is new, for example through a Chinese commitment of $40 billion to the IMF, or through gold sales. Some of it, I expect we’ll find, is not.

To help make sense of the proposals, the Overseas Development Institute (ODI) has published its own Charter for the G-20, which was profiled on Canadian TV. This was not an institutional manifesto, but did reflect broad consensus among ODI researchers on the main priorities: better monitoring of the effect of the crisis on the poor; opposition to protectionism, including with respect to labour migration; a share of the fiscal stimulus to be spent in Africa; a commitment to social protection; a big push on green growth; and a programme of governance reform, to further open the club of big economies to the voice and votes of the 172 countries not invited to London. How well did the G-20 match these aspirations?
The communiqué has many of the right words and some of the right measures:

  • First, the renewed commitment to the MDGs, to social protection, to food security, and to aid – well, words are words, but it was by no means a foregone conclusion that development issues would feature with any prominence in the communiqué. That they did reflects the presence of developing country members of the core G-20, but also Gordon Brown’s personal commitment to the topic, and his decision to invite key developing country organisations like the African Union to attend.
  • Second, if the rich country stimulus works, poor countries will benefit. Remember that the transmission belts from rich to poor involve trade in goods and services, foreign direct investment and portfolio flows, remittances and aid: any measures that boost demand for developing country exports, encourage investment, and create jobs for migrants will be of direct benefit to poor countries.
  • Third, the $50 billion for poor countries is not enough to compensate for the $750 billion of lost growth in 2009 alone -- $50 billion of that in Africa. It is important that the money be additional to aid already promised, including Aid for Trade. And we should be careful that money given as grants by donor countries to the international institutions does not turn into loans by them that then set up a new debt crisis. That said, new money makes it more likely that social protection measures will actually happen, and that new investments can be made to help Africa trade.
  • Fourth, the ritual commitment to conclude the Doha Round probably should not be taken too seriously – and how small the benefit of $150 billion now looks, in a world of multi-trillion dollar stimuli. However, a strong stand against protectionism is important, especially if it actually changes behaviour.
  • Fifth, climate change gets a mention, but with too little detail to be able to judge whether the political will is strong enough to match the need. The test will be in Copenhagen.
  • Sixth, the measures on financial regulation, early warning and tax havens will doubtless help to stabilise the world’s financial system and that will be of benefit to poor countries.
  • Seventh, the modest moves on global governance are definitely less than needed, but may create momentum for further change, especially moves to make the G-20 itself more democratic and accountable. Bringing the whole circus into the orbit of the United Nations remains the long-term goal, as many of us have argued in recent work on global governance.
  • Eighth, the communiqué demands rigorous monitoring of the crisis itself, and, very importantly, the response.

It took longer than it should have done for the full impact of the crisis on the poorest countries and people to be appreciated. The number of lost livelihoods and damaged lives will continue to grow before the recovery begins. That’s why speedy implementation of the measures agreed is now the top priority. Gordon Brown and the other leaders have fired the starting gun. Now the race must be run.

P.S. Interesting to hear some African voices on this. I did a one hour phone in yesterday on Africa Have Your Say, with Donald Kaberuka, President of the African Development Bank, and Dev Chamroo , Mauritius Director of Investment Promotion.