Global Policy Forum

No "Bailout" for The World's Poorest

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By Thalif Deen

Inter Press Service
September 30, 2008

 

As a spreading financial crisis threatens to deepen the economic recession in the United States, the news of an unprecedented 700-billion-dollar bailout package reverberated through the corridors of the United Nations last week as over 100 world leaders gathered in New York for the annual talk-fest: the 63rd session of the General Assembly. At a time when the United Nations is seeking increased financial assistance from rich nations to help developing countries meet the faltering Millennium Development Goals (MDGs), including a 50-percent reduction on extreme poverty and hunger by 2015, the current U.S. economic crisis and its predictably negative fallout overseas is expected to be a major setback. Addressing delegates last week, U.N. Secretary-General Ban Ki-moon warned that the current gloomy outlook threatens the well-being of billions of people, "none more so than the poorest of the poor." "This only compounds the damage [already] being caused by much higher prices for food and fuel", he added.

Ban has called for 72 billion dollars per year in additional external financing to achieve the MDGs by 2015. As one Asian delegate put it: "The 72 billion is peanuts compared to the 700 billion the White House wants to dish out to save some of the Wall Street firms from going belly up." "And the urgent needs of developing nations will now be the least of the priorities of the United States and other Western donors," he predicted. Father Miguel d'Escoto Brockman of Nicaragua, the newly-elected president of the General Assembly, warned that the current financial crisis will have "very serious consequences" that will impede the significant progress, "if indeed any progress is made", towards the targets established by the MDGs, "which are themselves insufficient".

"It is always the poor who pay the price for the unbridled greed and irresponsibility of the powerful," he said, taking a passing shot at the staggering 700-billion-dollar bailout proposed by the administration of President George W. Bush to save the high-stakes investment banks of New York from bankruptcy and collapse. Norwegian Prime Minister Jens Stoltenberg told delegates that "money doesn't seem to be a problem, when the problem is money". "Let us look for a moment at what is happening on Wall Street and in financial markets around the world. There, unsound investment threatens the homes and jobs of the middle class," he added. There is something fundamentally wrong, he argued, "when money seems to be abundant, but funds for investment in people seem so short in supply".

Jamaican Prime Minister Bruce Golding told the General Assembly that the crisis currently rocking the world's financial markets reflects the inadequacy of the regulatory structures that are essential to the effective functioning of any market. But it is more than that. It represents the failure on the part of the international financial system to facilitate the flow of resources into areas where they can produce real wealth -- not paper wealth, he added. Golding said the world is not short of capital: "What it lacks are the mechanisms to ensure the efficient utilisation of that capital." As the economic meltdown in the United States continues, the casualties are piling up both among commercial and investment banks: Bear Stearns, Lehman Brothers and Washington Mutual (allowed to collapse with no government bailout); American International Group, Goldman Sachs and Morgan Stanley (allowed to survive with emergency financial assistance, including some from the government); Merrill Lynch has been folded into Bank of America and Citigroup has taken over Wachovia Bank.

The outrage against Wall Street, described as the world's financial capital, is also directed at the high salaried chief executive officers and the middle rung bosses who make multi-million-dollar salaries, with stock options and perks that set them up in a privileged class by themselves. According to one report, the lowest salary on Wall Street was around 280,000 dollars a year in a country where the average low or middle class employee would go home with a pay packet of 50,000 or 75,000 dollars per year. In 2007, the chief executive officer (CEO) of Goldman Sachs, Lloyd Blankfein, was paid 68.7 million dollars -- described as "the most ever for a Wall Street CEO." As the entire U.S. economic edifice is in danger of collapsing, the White House has been called upon to save some of the biggest financial institutions in the country and, at the same time, redress the excesses of Wall Street business tycoons who earned multi-million-dollar salaries and extravagant bonuses.

 

 

 

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