Development 2.0 – The crisis as an opportunity

Dialogue forum “World in flux – The forgotten billions” on 29 April 2010

However bad it may be, the economic crisis offers a unique opportunity to bring about change. But precisely what form should future development and climate policy take? This was the topic of discussion at the final dialogue forum in the series “World in flux – The forgotten billions”, held on 29 April and entitled “Development 2.0 – The crisis as an opportunity”.

The financial crisis has raised hopes that the political and economic decision-makers will cast a more critical eye on the market’s shortcomings, the increasing cost to the environment and models for development. “For a long time, development policy has been based on the standards of modern industrial society, which means participating in consumption, realising individual visions of what constitutes a good, peaceful existence, safeguarding basic rights and having access to education and healthcare”, Dr. Imme Scholz, Deputy Director of the German Development Institute (DIE), explained. According to these criteria, although many countries in Asia, Africa and Latin America have achieved remarkable success, others have failed in their attempts to modernise.
 
Globalisation has altered the basic parameters. “Liberalising the goods and financial markets has created new dependencies as well as opportunities. The asymmetrical distribution of political and economic power directly affects negotiations on the global rules of the WTO and other organisations, and puts the developing countries at a disadvantage”, according to Dr. Scholz. Increased consumption of environmental resources is the most serious consequence of faster global growth. “We now face shortages in key areas, which makes Development 2.0 radically different from Development 1.0.” We need growth that conserves our natural resources. Scholz: “Development is no longer the concern of individual states; it is also a matter of cooperation. We need a paradigm shift in technological development, which has to be based on scarcity of resources. We also need a paradigm shift in the way we see prosperity, so that individual development is less regarded as equivalent to increased opportunities to consume.”
 
Dr. Axel Berg, Chairman of EUROSOLAR Deutschland, firmly believes that “development policy has failed because it is not sustainable and is even to some extent destructive”. There is no way we can simply go back to business as usual. He intimated that an integrated approach was needed to get the three crises areas of energy, growth and climate under control.
 
Berg does not believe that the Group of Twenty leading industrialised and developing economies (G-20) can provide the necessary impulses. “Basically, that is only a shoddy bridging construction because global institutions like the UNO and the World Trade Organization have failed”, he criticised. The industrialised countries are pulling out all the stops to ensure that the game which has brought t  hem wealth will carry on indefinitely.
Berg recommends a strategy consisting of three equal-ranking parts. First, we as a nation should set a good example. Secondly, we should further develop global institutions but not rely on them because they are highly cumbersome. Thirdly, we should seek a coalition of the willing and forge partnerships with countries that are in a similar position to ourselves. Berg believes that “we can achieve our aim by pulling on all three strings at the same time.” 
 
Dr. Michael Menhart, Munich Re’s Chief Economist, referred to the dangers inherent in rapid, bubble-driven growth. He accepts that the economic boom has helped promote emerging countries to the major league of leading economies. However, “the extent to which the so-called BRIC countries (Brazil, Russia, India and China) may be considered shining examples of today’s forgotten billions in the developing world remains to be seen. History will decide.” A rethink is also essential in order to offer other countries a guiding principle for sustainable development. “The way large parts of the financial system operated prior to the outbreak of the crisis cannot be taken as a role model.”
 
Menhart agrees that the G-20 is not the ideal forum for airing global issues because many developing countries are not represented. In his view “it may be a makeshift solution but there’s no alternative”. From an economic perspective, it would be disastrous to wait for an equitably constituted global body to be set up because the crisis calls for urgent action.
 
Development expert Scholz was also under no illusions: “The G-20 has failed to live up to hopes that it would pave the way to reach an understanding on a scheme for sharing the burden, which would then be submitted to the wider forum of the UN.” This is because the industrialised nations are bent on defending their lines and the major developing countries tend to follow suit. “Global governance means giving up some degree of sovereignty. That isn’t working, and there are no ready-made solutions.”
 
Private companies can do much to boost the developing nations’ confidence in the industrialised world. In this context, Scholz welcomed the fact that the United Nations Framework Convention on Climate Change refers to insurance in the Copenhagen process as a weapon for combating the effects of climate change. “It is very important that the Munich Re Foundation maintain its efforts and that work continue on developing insurance models to eradicate poverty, such as crop failure covers for farmers in Mali.”
 
At the end of a fruitful evening’s discussion, it was clear that the path to the development models of the future was still strewn with obstacles. Not enough use has been made of the global economic crisis to change course. Aid policies alone will not suffice. Other areas of politics and the private sector will have to help solve the problems.