From Crisis Management to Long-term Prosperity: the Role of the Commonwealth
From Crisis Management to Long-term Prosperity: the Role of the Commonwealth, paper and presentation prepared for the Commonwealth Secretariat
As the recession caused by the global financial crisis slowly comes to an end – at very different speeds in different Commonwealth settings – countries will be left differently equipped to handle the next wave of challenges appearing over the horizon. Some will emerge from recession or slowdown with unemployment and other social indicators returning rapidly to normal, and with macro-economic indicators in a healthy state. Others will have suffered irreversible damage to social or human capital and may find themselves with large domestic and foreign debt, large balance of payments deficits, and weakened currencies. Two companion papers trace the impact of the crisis and identify some key short-term policy responses which will be necessary to sustain recovery. The group of most vulnerable countries is likely to include the poorer Commonwealth countries, as well as smaller states. In the worst cases, and for the poorest countries, achievement of the Millennium Development Goals will have been put seriously at risk. The recession will be seen to have had long-term consequences for nutrition, health, education and welfare in the Commonwealth.
Commonwealth economies which were weak to start with and/or which have been weakened by the crisis will inevitably struggle to make the investments necessary to deal with future change. Strong leadership and higher levels of investment will be needed to take advantage of new opportunities, but probably even more to equip economies to deal with new challenges. Neither the ‘status quo’ nor ‘hunkering down’ set out in the paper look like feasible options, leaving the third available - ‘investing in change’ - as a necessary but difficult approach.
There are many opportunities for Commonwealth countries to prosper and achieve human development targets in the future, if the right investments can be made. It is good to balance a risk framework against an opportunities framework. At the same time, Commonwealth members will have to mange such challenges as: i. The repercussions of the food crisis; ii. Climate change and national resource stress; iii. Urbanisation; iv. Demographic changes; and v. Changes in the global economy.
Conditions vary very much as between Commonwealth members. It is possible to imagine some countries benefiting from some or a combination of new agricultural markets, improved climatic conditions, rapid reduction in transactions costs associated with urbanisation, the productive benefits of lower dependency ratios, and new opportunities to expand manufacturing and increase employment. On the other hand, many countries will be aware of their vulnerability to rising or volatile food prices, the mitigation and adaptation costs of climate change, the growth of urban slums, rising population, and exclusion from new cluster-based centres of manufacturing growth. Those most affected by the crisis may also be most vulnerable to the negative impact of future change – and therefore most in need of support from Commonwealth members.
Policy will be key to successful bridging from crisis to future growth. Commonwealth members are likely to seek a middle way between market fundamentalism and the extreme heterodox prescriptions. They will be aware, however, that overall policy debate has becomeparticularly sharp since the eruption of the global financial crisis, on the role of the state and on many specific policies related to the incentive and regulatory framework. A great deal of emphasis is placed on room for manoeuvre in public policy, especially on fiscal and more general ‘policy space’. The companion paper addressing short-term policy challenges highlights the relatively limited number of policy choices available currently.
These debates play out on practical topics that are central to building bridges and investing in change. For example, how important is it to build sustainable social protection systems which help build resilience to future shocks? How far should public expenditure ceilings be stretched in order to invest in education or research and development? And when the resources are hard to find domestically, how much can be expected in the way of support from the international community?
To summarise, Commonwealth Finance Ministers will be asking three questions and looking for Commonwealth support in answering them: i. What are the long-tem implications for national policy of the events of 2008-9 – not just the financial crisis and the synchronised global recession, but also the food and fuel crises? What should be done to build greater resilience at national level? ii. Will the economy emerge from the immediate crisis in a good position to withstand future challenges like climate change – and to exploit new opportunities? iii. What measures are needed internationally to build resilience and help all countries manage future challenges?
As these questions are discussed, there are three possible levels of Commonwealth engagement: a. Global advocacy, feeding into the G-20 and G-8, and into the Copenhagen negotiations, among others; b. Commonwealth Partnerships aimed at managing the crisis and making the transition to dealing with future challenges; and c. A work programme for the Commonwealth........For the full paper please follow the link in the title