Leaders 'must act swiftly on crisis'
2 February 2009
Leaders of the G20 countries must move quickly to develop a coordinated policy response to the most serious global recession since the 1930s, Maria Ramos, co-chair of the World Economic Forum's (WEF's) annual meeting in Davos, Switzerland, told delegates on Sunday.
Participants at the closing plenary session of this year's WEF meeting warned that, if global business and governmental leaders failed to develop effective solutions to the current economic crisis, they faced a destructive social backlash that could foment political instability, revive protectionism and reverse the trend towards globalization.
"This is the time to see courageous leadership on the part of the G20," Ramos, group chief executive of South African state company Transnet, told delegates.
"The time for words is over; this is the time for implementation and action. If we come back in six months or a year and are still talking about the same things, we will have failed. And the social unrest we will have to deal with will be absolutely dramatic."
The next G20 meeting is in London in April.
WEF participants on Sunday painted a sobering picture of a rapidly darkening economic landscape, in which the pain of rising unemployment, home foreclosures, bankruptcies and poverty were only beginning to be felt.
"When the economic malaise really begins to affect families and people don't have jobs, that will have huge political repercussions," said Moisés Naím, editor-in-chief of Foreign Policy Magazine in the US.
Policy pitfalls
Participants cited numerous signs of policy responses that were in danger of going badly off course, including protectionist measures by developed countries, such as directing fiscal stimulus funds to national producers through domestic content requirements; the withdrawal of state-supported lenders from emerging financial markets; and a reluctance to recapitalize the IMF and other multilateral lending institutions on the scale required by the crisis.
Such developments posed a particular threat to the developing countries, said Ricardo Hausmann, director of Harvard University's Center for International Development. "If we are going to have a global response to the crisis, we need to give all the countries of the world the capacity for fiscal expansion," Hausmann said.
In terms of remedies for the current crisis, participants urged governments and firms to do everything in their power to preserve employment and avoid mass layoffs, which would further ravage consumer and business confidence. Voluntary salary reduction and job-sharing schemes could help achieve this, while still giving firms latitude to cope with sharply declining revenues.
'Accelerate Doha Round negotiations'
Earlier, at a Saturday session of the WEF meeting, trade officials and academic experts urged G20 countries to finish the long-stalled Doha Round of multilateral trade talks, saying this was the single most valuable step global leaders could take to keep the current economic crisis from triggering a destructive protectionist backlash.
Progress on trade was particularly critical now, they warned, because there was a real risk that national efforts to combat the crisis - such as support for troubled automakers, or public lending programmes that favoured local borrowers - could contribute to the alarming contraction in world trade volumes.
"We see more and more signs that these protectionist measures in developed countries ... fall within some sort of ideology of economic nationalism," said Brazilian Foreign Minister Celso Amorim. "This could bring us back to the 1930s again."
By closing out the Doha negotiations and committing to shepherd an agreement through their respective national parliaments, the G20 countries could provide a concrete demonstration that their commitment to cooperation and coordination to fight the crisis is more than just an empty promise, participants said.
"It would send the right signal of confidence that people have realized that this is something they need to do together as part of their reaction to the crisis," said Pascal Lamy, director-general of the World Trade Organization.
Lamy expressed optimism that the talks could be concluded quickly if the political will to do so existed. He estimated that 80% of the terms of an agreement had been settled, although highly contentious issues such as agricultural subsidies in the developed world and anti-dumping rules still needed to be resolved.
All indications he had received, Lamy added, suggested that the G20 leaders were serious about their commitment to Doha.
SAinfo reporter
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