The global economic crisis will give way to a more robust and more enduring era of economic development in Africa and the developing world than hitherto contemplated, Finance Minister Trevor Manuel said on Monday.
”Stronger economic development in the countries of the South is not a new event,” he said.
”It has roots that go back a decade or two, and it has several inter-connected strands,” he said in an address to the Helen Suzman Foundation at the Gordon Institute of Business Science (Gibs) in Johannesburg.
These strands included the extraordinary economic growth of China and India and the sharp decline in the number of people living in poverty worldwide; the sustained rise in commodity prices, reflecting much more broad-based industrialisation and modernisation, and associated demand for infrastructure and traded goods and services.
They also included the rapid increase in the use of new, lower cost and efficiency-enhancing information and telecommunications technologies; the rise in urbanisation rates and mega-cities across the developing world, and rapid increases in education and technology adoption and greater macroeconomic stability in much of the developing world, including several leading African economies.
”Although growth may be interrupted for a period, these are powerful dynamics and they are not going to be reversed,” Manuel said.
In some respects the structural imbalances that underlie the present crisis were constraints to broader development, and so the resolution of these imbalances was a condition for more sustainable growth and prosperity.
”These are not just economic dynamics, or changing trade and financial relations. Structural change is also about the evolution of institutions,”
Manuel said there was, worldwide, a welcome yet sometimes troublesome decline in political timidity, a strengthening of people-centered democracy, and a willingness to pursue reforms within developing countries.
”There is also an opportunity now to re-shape the international financial and developmental architecture to bring about both greater transparency and better resource flows to support the developing world and alongside the restructuring of trade and financial relationships we will begin to see better management of earnings disparities and, over time, greater fairness in labour market outcomes across the world.”
These trends would complement other economic transitions, like South-South economic links, and in Africa a renewed impetus to reform intra-African economic barriers and commitment to cross-border public infrastructure would assist in supporting growth of markets.
While the raw statistics could not capture the magnitude of these adjustments, the numbers were nonetheless startling, he said.
The World Bank estimated that 53-million more people would fall below the level of extreme poverty in 2009 and an additional 32-million people would lose their jobs in emerging countries in 2009.
The ILO estimated that the global number of unemployed would increase from 190-million in 2007 to 210-million in 2009.
Returning from the G20 meeting in London last week, Manuel said there were tentative indications of a recovery in the global economy.
”But this is not just about a new direction in financial market trends; there are also deep-rooted structural imbalances and massively distressed institutions which will take considerable time to be resolved,” he said.
”We are fortunate in that there have not been major shocks to our banking system, and the institutional implementation of our fiscal response very largely builds on plans and capacity that is in place, and infrastructure projects that are in progress.”
To respond to the crisis, Manuel said that global macroeconomic imbalances needed to decline in size, and toxic assets needed to be written-off.
”The first requires a rise in saving in debtor countries and a decline in saving in creditor countries, and higher world interest rates for some years.
”The G20 has focused on stabilising the global financial system; countering the economic downturn; ensuring resources and means of preventing a collapse in developing economies, and securing an open and fair trade and finance system for the long-term,” Manuel said. – Sapa