This week's Group of 20 meeting already has a packed agenda: maintaining demand, repairing the global financial system and increasing the International Monetary Fund's resources. But the G20 must raise its sights; the effects of this worldwide recession extend far beyond the 20 states meeting in London. As Robert Zoellick, president of the World Bank, argued yesterday, the developing world needs more support.
The G20 is right to focus on reigniting world growth. Much of the misery in the developing world is the result of a lack of demand elsewhere. At the moment, Latin America and east Asia are suffering from collapses in demand in their export markets. Africa and central Asia are feeling the pain of falling commodity prices and rapidly thinning flows of remittances from expatriate migrant workers.
But some facets of the financial squeeze are hitting hardest those least able to cope. Disruption to trade finance means that developing world suppliers are having trouble getting goods to market. The World Bank has issued $3bn of guarantees, but has not overcome a liquidity problem. Mr Zoellick has proposed a $50bn liquidity programme to draw together existing and new money from public and private sources for trade finance. This should start immediately.
During a recession, ideally, public demand rises to offset contraction in the private sector. This is true for developing countries as well as their richer neighbours. Mr Zoellick suggests a 'Vulnerability Fund' - a mechanism to channel money from wealthy countries to poorer ones to help them to finance deficit spending during the recession. Again, an extremely wise idea. The last thing the world's poorest nations need is a dose of Hoovernomics.
Mr Zoellick wants the existing Bretton Woods institutions to administer these schemes. This is perhaps unsurprising. After all, he runs one of them. But he is right that the current set of organisations is better placed to act quickly than any proposed new bodies.
Beyond measures for financial and economic stability, the G20 must also consider humanitarian support. Last year, the World Food Programme assisted 100m people around the world. This year, food prices are still high while incomes and trade flows have wilted. More people are expected to need the WFP's help this year. It, however, remains short of funds. The world should not forgive politicians who, at a moment of crisis, find time to discuss tax havens and hedge funds, but stay silent on how they can help the poorest.
Copyright The Financial Times Limited 2009
