The forgotten billions - Development targets in the crisis?

Kick-off event for the 2009/2010 dialogue forums

The dramatic downturn in the global economy has overshadowed other important topics. How is development policy faring in these times of financial crisis? Will the climate targets be sacrificed to short-term economic activism? The aim of the 2009/2010 dialogue forums, the fifth to be hosted by the Munich Re Foundation, is to provide some answers to these questions. The opening event on 26 November 2009 was held with Prof. Franz Josef Radermacher, a globalisation specialist, and Prof. Ernst Ulrich von Weizsäcker, an expert on environmental policy and climate issues.

In his opening address, Dr. Nikolaus von Bomhard, Chairman of Munich Re’s Board of Management and member of the Board of Trustees, outlined the problem, stating that the millennium targets set by the United Nations had been ambitious even before the present economic crisis. He said that they now seemed further away than ever, since the emerging economies had been particularly hard hit by the crisis. “There has been a slump in exports and foreign exchange revenues. At the same time, the cost of credit and food imports is on the rise, and worldwide development aid is declining”, said von Bomhard. In his opinion, the battles against climate change and global poverty could only be won or lost together. “There are unlikely to be any patent solutions, but some promising approaches and ideas are going to be discussed at the dialogue forums.”

The two guest speakers at this opening event were in agreement that climate change called for rapid action. They said that whenever the discussion turned to possible restrictions and burdens, however, the developing countries generally pointed to the industrial nations which, in turn, did not want to be saddled with too much of the burden either. Radermacher regarded this as a typical scenario in a lopsided power equation: "The USA holds most of the power in the world, which is why, in cases of doubt, it tries to solve problems at the expense of others”, he criticised. In his view, the fact that the UN millennium targets were neither binding in international law nor equipped with a budget of their own obeyed a deeper logic. “The affluent countries would otherwise hardly have approved them.” There was no question about the causes of poverty, he said. And to emphasise his point, he quoted Muhammad Yunus, the "father” of microfinance: “Poverty is not created by the poor. It is created by the institutions that we have built around us. We need another global economic order.”

Ulrich von Weizsäcker, by contrast, was reluctant to go quite that far, but one thing was clear to him too: "We need a strong state in order to be able to achieve the UN’s millennium targets in the context of globalisation. That is the one good thing about the financial collapse: even the staunchest believers in the market have had to admit that markets can be damned dangerous.” He said the world was facing a historic opportunity to restore the balance between public concerns and private interests, between the state and the market, after 30 years of neoliberal hubris. The state could ensure a steady increase in energy prices to prevent resources from being wasted.

To Weizsäcker, there was no doubt that the only way to solve the climate problem was by putting our resources to more efficient use. “We are thinking too much in the short term”, he warned, adding that people could find great happiness, even without constantly striving for ever more material wealth.

The market believers' unwarranted claim to power from the state and their refusal to accept any form of regulation was a new phenomenon that had arisen with globalisation in the wake of the East-West conflict. Solutions to this intractable situation, von Weizsäcker said, were closely linked to strong global governance. “An important step towards a fairer world is to expand the G8 to a G20.” “If the 20 most important industrial nations and emerging countries sit down at the same table, the poorer countries will benefit as well.”

He explained that two approaches declared dead prior to 2008 were currently experiencing a revival: granting everyone the same rights to use natural resources and imposing a tax, also referred to as the Tobin tax, on financial transactions. “The rationale behind this is rooted in the nature of the system, and I find it compelling”. Von Weizsäcker explained that if we continued to tolerate the substantial market fluctuations so common nowadays, a system collapse was on the cards. But if we built in some restraints, such as the Tobin tax, the chances of sustainability were much greater. In addition, he added, the revenue generated by the tax could be used to encourage more climate protection projects in the emerging countries.

Nevertheless, von Weizsäcker cautioned against demonising the market in general: “I urgently recommend that we thoroughly examine the system in search of errors in reasoning.” It was imperative that we build a coalition of the willing against financial buccaneering and excesses likely to destabilise the system. “Then we stand a chance.”

For Radermacher, growth was key to success: “If we want to create a future of prosperity for ten billion people on the globe, we need to promote growth.” He also stressed that it was important to provide for distributive justice in the world and to price resources commensurately. If, for instance, the price of steak climbed disproportionately in the affluent countries, we would eat less meat. “We could then transfer a portion of the freed-up purchasing power to the poor countries as part of a commitment to global welfare and to enable the inhabitants of these countries to purchase the food that becomes available owing to the reduced production of meat.”

At the end of an inspiring evening, the participants came away with an important insight: to respect the dignity of all mankind, we must regulate the markets according to ecological and socially responsible principles. So far, however, the structures for implementing international solutions are lacking. The climate summit in Copenhagen in mid-December will show to what extent the states are capable of cooperating. Its outcome will be the focal topic of the next dialogue forum on 19 January 2010.

03 December 2009