Africa Progress Panel (Geneva)
Gilbert Houngbo
27 March 2009
opinion
No debate has animated policy makers and academics since the severity of the economic downturn became clear than the need for a new global standard to regulate the international finance system.
A multitude of proposals have been presented, but an attractive model exists in the European Union's Stability and Growth Pact.
The rules adopted by the Eurozone in 1997 aim to promote financial discipline within the bloc while setting out sanctions for member states which breach guidelines on deficits and other key benchmarks.
A similar model could be adopted to govern the international finance system with a broader reach than the EU pact, which covers only public finances.
Whatever system is adopted will nevertheless have little chance of success if clear rules of enforcement are not set out and rigorously applied.
On this score, the weaknesses of the EU stability pact are salutary.
Major member states of the Eurozone have repeatedly flouted the rule on deficits, for example, and have not paid the hefty fine set out in the pact as punishment for this.
And in an apt metaphor of the problems that currently afflict multilateral organisations' treatment of member states, smaller nations such as Portugal and Austria have seen the rules on deficits applied far more stringently on them than on bigger nations. This is a key weakness that any changes to the global financial architecture must address.
The G20 meeting in London represents an important opportunity to discuss ideas of how best to deal with the crisis. In the short term, political leaders must acknowledge the need for a more cooperative response. It is regrettable that the initial reaction of many nations in the West was unilateral, although that approach is beginning to change. In the medium term, focus should be trained on structural reform to prevent the failure of regulatory policy that has had such a far-reaching effect.
For Africa, the challenge is to emphasise that sharp cutbacks in development assistance will imperil most of the gains made in the last few years. A good number of development partners have not lived up to commitments made at the G8 summit in Gleneagles in 2005, and the temptation in the current economic climate will be for further reduction in development assistance. That would be a mistake.
At the same time, African political leaders have a responsibility to ensure they stick to the path of fiscal responsibility that has yielded the gains witnessed so far. They must also resist the temptation to enhance the role of the state in business. The global financial crisis notwithstanding, it remains a fact the best way for the continent to achieve its vast potential is for the state to play an aggressive role in facilitating a good environment for business while letting the private sector drive growth.
Gilbert Houngbo is the Prime Minister of Togo.
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Perhaps Mr. Annan could learn from a non-African - President Lula of Brazil who spoke more candidly on behalf of all the poorer people of our world, standing next to Gordon Brown this morning. Enough of this cap-in-hand pleading for more aid instead of fairer trade. Is that too much to ask for? For Mr. Lula’s comment, see: http://news.bbc.co.uk/2/hi/uk_news/politics/7964910.stm.
For the ordinary african in 'subsaharan Africa, live has never been easy even before the economic recession from the 'north' does he have a good road, good health care for his family, water and nutrition, free and quality education for his kids, good shelter instead of live in slums and secure future, who is thinking about him, what are the goals of leaders in sub-saharan africa anyway, where are they when countries like, Indonesia, Malasia, etc, where developing. He has not known any better so the recession means nothing to him, excepts the leaders who's windwall from the north will dry up as a result.
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