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Op-eds and articles by the Executive Secretary |
| An Opportunity to Change the Development Model
As of 2003, Latin American nations were growing at rates without precedent in the past 40 years (an average of over 3% per capita GDP). Between 2003 and 2007, employment and wages rose (unemployment dropped from 11% to 7.4%), poverty decreased significantly (from 44% to 34%) and inequality diminished moderately. However, in mid-2008, the international financial crisis began taking its toll in the region, and this year we will suffer the harshest effects of the economic slowdown of developed countries, which is looking more and more like a global recession. The negative effects of the crisis are spreading throughout the region through five main channels. The first is financial contagion, which has derived in more costly external financing, scarcity of credit and lack of liquidity. Second, the price of basic commodities, which dropped due to receding speculation in financial instruments. Third, lower remittances from migrant workers in developed countries. Fourth, lower demand for regional exports. Fifth, diminishing flows of foreign direct investment. To mitigate the impact of this crisis on the more vulnerable population it is important to maintain social spending through clearly countercyclical fiscal policies, prevent protectionism in international trade, promote measures to stimulate aggregate demand and maintain, at all costs, the commitment to support the most vulnerable countries and Official Development Assistance. Developed countries and emerging economies have adopted a series of measures to counteract the effects of the crisis through monetary, fiscal and exchange rate policies, and have increased public investment in specific social areas (housing, support for SMEs) so as to prop up employment. Our region is applying policies geared at public investment, flexibilizing fiscal goals, reducing consumer taxes, encouraging private investment and consumption and developing risk coverage strategies related to fiscal revenues and in support of social spending. So far, some countries are making the most of their available fiscal space, tapping into the reserves they were able to save in times of economic boom while barely resorting to external debt. But if the crisis is protracted, which is likely, they will have to resort to international financial bodies, especially the smallest economies. The world is facing at least two unprecedented crises that link the present with the future: the financial crisis and climate change. Two global public goods that are vital for the survival of society as we know it are in peril: world climate security and the credibility of the financial system. Let there be no mistake. Both global crises are the legacy of an economy dominated by the market, with a shrunken State and citizens sunk in consumerism. It is clear that self-regulation has failed, reasserting the need to open more space for politics and revise the role of the State, under the perspective of sustainable development. This is the beginning of a new era. If we don't take decisive action now, with a long-term perspective, it could be called the Era of the Decline of Humanity. However, we have the opportunity of making it an Era of Responsibility, as Barack Obama and, more recently, the president of the World Bank, Robert Zoellick, have said. It is true that the current situation poses enormous risks but it also provides us with a window of opportunity to revise our development model and start looking at ways to strike a balance between economic prosperity, social justice, full enforcement of freedoms and democracy, with new modes of production and of organization, without harming environmental sustainability. To think about a more inclusive model and a productive structure that incorporates more knowledge and gives priority to innovation. All of this with a stronger and more modern State. Our region should participate in the construction of a new international financial architecture that may recover symmetry and change the rules of the game to give more space to developing economies. One that may avoid, at all costs, the protectionism and nationalisms that gave rise to totalitarian regimes: two shadows that emerged after the Great Depression in the 1930s. Lastly, the current situation should be regarded as an opportunity to increase and strengthen regional integration, remain more united than ever as a continent and act in this shaken world scenario with one voice that can be listened to and respected. Alicia Bárcena, |