G20 Lets Banks Off The Hook, Austerity Measures mean Hard Times Ahead for the World's Poor

June 27, 2010

The G20’s emphasis on dealing with budget deficits through austerity measures rather than bringing in a financial transaction tax means the global financial sector will not have to contribute to a global recovery effort.

By urging cutbacks to government services, the G20’s actions could further harm the poor in their own countries and the poorest and most vulnerable people in the developing world, who have already suffered most from a financial and economic crisis that they did nothing to cause.

"The Canadian government’s own plan to reduce its deficit relies for 25% of its over-all reduction on freezing its aid budget over the next 5 years," says Gerry Barr, Chair of Make Poverty History and CEO of the Canadian Council for International Cooperation."If other governments follow a similar path, the poor could be victims again."

Indeed the modest $5 billion amount G8 governments were able to contribute to the signature Maternal and Child Health Initiative, raises concern on the part of the country’s largest anti-poverty coalition, that aid flows may be on the verge of falling again.

Relying on austerity alone to reduce deficits also risks increasing unemployment and poverty in the developed world as well.This could in turn reduce tax revenues thereby undermining the chances of restoring fiscal balances.

"It is a kind of anti-tax madness," said Dennis Howlett, National Coordinator of Make Poverty History. "The financial sector is growing exponentially, and is increasingly unproductive.Yet the G20, led by Canada’s obstinance, is afraid to make them pay their fair share."

An innovative financing measure such as the Financial Transaction Tax could raise hundreds of billions of dollars that could be used to reduce deficits in developed countries as well as provide financing for poverty reduction and climate change adaptation which donor countries seem increasingly hard pressed to come up with.

Also known as the Robin Hood Tax, the FTT has the added advantage of helping to curb destabilizing speculation.

The group remains confident that the FTT will come to the fore again in South Korea this November and especially in 2011 when France hosts the G20.  President Sarkozy, along with Chancellor Merkel are strong supporters of the FTT.

Some comfort can be taken as well from the G20’s announcement that they will establish a Working Group on Development to report to the Seoul Summit.  "With more emerging and developing countries at the table," says Howlett, "the G20 may be able to do a better job of addressing the poverty crisis than the G8 has done at this Summit."