Transcript Proyecto C-23 Estrategia de Comercialización

FINANCIAL CRISIS AND POVERTY
“Speaking Frankly – Challenges for Latin America”
Peter Koenig
December 3, 2008
The Financial Crisis
• “you know what the big difference is between
the Big Depression of 1929 and the onset of
the one of today?”
• “In
1929 the bankers jumped from the
windows committing suicide. Today they get a
Golden Parachute for a soft landing.”
• This crisis is man-made. It is in no way a natural
catastrophe – like a hurricane.
• Why?
We are living in an economic system that is driven by
debt, speculation and greed.
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Debt…
• Today the world is run by a deregulated
dollar. It has become ‘Fiat Money’
•
It is just paper money. It turns into
debt, since it has no longer the backing
of gold, silver or commodities –
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Specualtion…
• How serious can such a system be, if it
is possible that the stock exchange
wipes out almost $25 trillion in
corporate values – almost twice the
US GDP – in less than a month ?
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Greed…
• Speculation leads to billions of dollars in
profit for the rich and powerful
• ExxonMobile 3rd Q record profits ever
$14.8billion – 15% above previous
record profit
• Yet Government gives it further tax
breaks
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The Government Debt…
• According to the US General Accounting
Office, the Government debt – is about $56
trillion (expected to increase to about 60
trillion by the end of 2008 calendar year)
• 4 x the US GDP of $ 13.5 trillion
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Why does the world get pneumonia
when the US coughs?
• The dollar is still reserve currency for most countries,
especially developing countries – and the US debt is
globalized - it is distributed around the world
(China – US# 1 trillion, Japan – US$ 1 trillion ….)
• If the dollar collapses other countries’ reserves will be
partially wiped out
• But - how long will the world continue to honor the dollar as
its reserve currency?
• This question is for you to reflect on.
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How does the crisis affect poverty at home
and abroad?
Poverty at home
• New Homeless people - tent cities
• Destitution / poverty - 15% - 20% hovering on poverty
• Wiped out pension funds, saving - for average citizen
• Rapidly growing unemployment - possibly up to 30%
• Food shortages – affordable food scarcer (1/3 US corn used
for ethanol)
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How does the crisis affect poverty at home
and abroad?
Poverty Abroad – Impact on Developing
Countries
• Decline of remittances - could be > 50%
– 2007 $180 billion to developing countries
– 2007 ODA $92 billion
– 2007 totla debt service of dev. countries
billion
– Negative flow $50 billion
$142
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Here is where the debt comes from….
• There is a lasting impact from long-term debtpromoting activities by WB, IMF, IDB and
others
• The slogan at the entrance of the World Bank “… A World without Poverty is our Dream”…
• But these agencies are producing poverty to
keep it a dream
• In Africa, the average per capita income declined by
US$ 200 between 1974 and 2000. (World Economic
Forum)
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Instruments of WB, IMF, IDB…
•
•
- others…
….plus Leverage effect with private banks
Indebting: WB, IFM, IDB
• Privatization of public sector
• Free Trade
–
–
Exports (take away the best of a country, cheap)
Growth (In Peru 70% of the revered growth of 4%-6% goes to 1% of the population)
• Genetically Modified Organisms -GMO (don’t yield seeds)
–
–
–
Famine-Starvation - leading to 7.000 farmer suicides in India
75% of increased famine due to agrofuel, acc. to WB and FAO
1/3 of US grain stocks used for more profitable ethanol production
• Socio – Environment
• Global Warming
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Consequences for Developing Countries
• Less western Money available…
probably a good thing…
• Less dependence and more autonomy
• Wrangling for favors – West (moslty US)
vs. East (China and Russia)
• Creating new dependencies – for
exploitation of natural resources
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For Hydrocarbon Producers…
• Faltering Western Economies need less
energy
• Falling oil & gas prices (currently under
US$ 50/barrel – 4 months ago US$
150!)
• Fewer revenues for producers; and
• Revenues in a falling currency – the
UDS Dollar….
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What can developing countries do?
• Urgent
Satisfy local markets
• Important
Education, education & education
• Third
Identify comparative advantages (niche markets) for
export – but NEVER at cost of local markets
• Most important
Be careful in selecting money lenders
(so-called ‘development assistance’) – Beware of world
Bank, IMF, IDB – ‘don’t send fox to guard chicken coop’
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What can developing countries do? – Cont’d
• Developing countries, should call shots; they decide
for what the loans are used and what lending
conditions are acceptable – not the money lenders –
Watch out for ‘strings attached’!
• Fourth – promote slow but independent and
equitable growth – better than the traditional
neoliberal dogma of rapid export growth – the gains
of which are usually channeled to local elite and
foreign lenders – with little or no benefits to the
working poor.
• And finally - - Create alliances (economic and
political) among developing countries – see South
America (MercoSur, UnionSur, Banco sur – new
political alliance of South America) – and other
South-South alliances – G77…. etc.
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IMF New Emergency Rescue Fund
• Beware of new IMF, WB Rescue instruments:
 Collapse of economic system = Golden Nest Egg
for IMF, WB
 Special G20 Meeting in Washington midNovember 08 called to re-activate IMF Emergency
Fund
 Fund currently US$200 billion – but IMF estimates
requirements > US$ 1 trillion
 Call on China, oil producers and other rich nations
to replenish Emergency Fund
 World Bank also will help with emergency loans
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IMF New Emergency Rescue Fund – Cont’d.
• IMF already granted / negotiating:





Iceland - $ 2.1 billion
Ukraine - $ 16.5 billion
Hungary - $ 10 billion
Pakistan - $ 7.6 billion… and
… more to come….
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IMF New Emergency Rescue Fund –
Con’t.
• IMF usual loan conditions:
 cutting government spending (in some
cases as much as 1% of GDP)
 Rising interest rates
 Result in further downturn of recipient
government’s economies
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IMF New Emergency Rescue Fund –
Con’t.
• Put this in Context of US and other G8
economic stimulus which are exactly
opposite:
 rise public spending
slashing interest rates - lessening impact of
recession
• Unequal standards favoring rich over
poor – the norm for neoliberal
economics
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Alternative Economic Systems
• > Keynesian capitalism – allowing some form of
government intervention when needed
• > Social democratic capitalism (Western
European Model) – government controls certain
sectors, mostly social – government interventions in
markets accepted when necessary – and
• > Neoliberal approach – free-for-all market dogma
– no government intervention, no market regulations
– current US dogma being spread around the world –
and what brought about the current crisis
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Alternative Economic Systems – Cont’d.
• Given the collapse of the capitalist system as we
know it – isn’t it high time to start thinking about
possible alternatives to the current scheme?
• Inequity (income and asset distribution) in
industrialized and developing countries is rampant –
and growing
• The growth fetish: how much happier does a dollar
more in the pockets of the rich make? – but in pocket
of the poor it may make a difference…
• World societies have vital interest in more equitable
world – less poverty = more peaceful world
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• Closing on positive note:
There is hope – a light at the end of the tunnel:
The only place in the Western World that has built
up resistance to the neoliberal doctrine over last
10-15 years – by democratically electing
governments by the people for the people – who
are increasingly united in solidarity in South
America.
CONGRATULATIONS !
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Thank you !!!
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