ActionAid welcomes Sarkozy’s stance on financial reform

ActionAid welcomed French President Nicolas Sarkozy’s announcement that France plans to use its presidency of the G20 next year to create a new international monetary system. In a new report, Fruits of the Crisis: Leveraging the Financial & Economic Crisis of 2008-2009 to Secure New Resources for Development and Reform the Global Reserve System, ActionAid and Third World Network note that the IMF’s Special Drawing Rights (SDRs) could be used as an innovative financing tool to meet developing countries’ urgent requirements for development, climate adaptation, and counter the impacts of the global financial crisis.

Creative use of SDRs could complement measures such as the proposed financial transaction tax and levies on bunker fuels and aviation to raise the sums urgently needed. With international co-operation, SDRs would mobilise more resources than existing proposals for innovative financing. The report includes recommendations to build on the G20’s innovative use of SDRs to address the global crisis. It calls for mobilising the resources represented by the idle SDRs allocated to rich governments, and for easing the conversion of and use of SDR proceeds by developing countries.

In line with Sarkozy's speech to business leaders at the World Economic Forum in Davos, the report concludes that SDRs could also be a key part of reform measures that would address the causes of the global financial and economic crisis. In a climate of financial reform, with increasing volatility in the US dollar’s value and level of trust, SDRs may be the best option as an international reserve currency.

The new report analyses proposals for reform to the global monetary system from the United Nations and a range of economists and has been authored by Soren Ambrose of ActionAid and Bhumika Muchhala of Third World Network and is available >>> here.

Aid agencies sound the alarm on the militarization of aid in Afghanistan

As Foreign Ministers gather in London for a major conference on Afghanistan, leading aid agencies warn that the international militaries' use of aid as a “non-lethal” weapon of war may even be putting Afghans at greater risk. A US army manual for commanders in Afghanistan and in Iraq defines aid as a non-lethal weapon designed “to win the hearts and minds of the indigenous population to facilitate defeating the insurgents”. The Afghan government estimates international forces have already spent $1.7bn on “aid” in Afghanistan. The US military alone has budgeted an additional $1bn for the coming year – more than Afghanistan’s state budget for agriculture, health and education combined.

In their new report, Quick Impact, Quick Collapse, the eight international agencies show their concern that the militarization of aid is putting ordinary people on the frontlines of the conflict. Afghans say that the military places them at greater risk when they build schools and clinics which then become targets of armed opposition groups. The agencies say that “quick impact” projects provide a quick fix rather than sustainable development. Military-led humanitarian and development activities are driven by donors’ political interests and short-term security objectives and are often ineffective, wasteful and potentially harmful to Afghans. International guidelines agreed by ISAF and the UN state that “the military is primarily responsible for providing security, and if necessary, basic infrastructure and urgent reconstruction assistance limited to gap-filling measures until civilian organizations are able to take over.”

The agencies call on the 70 countries participating in tomorrow’s London Conference to rethink the militarized approach to aid and shift their focus towards a long-term aid strategy based on meeting the real needs of Afghans. The agencies say that the distribution of aid is heavily biased in favor of areas where the troop presence is strongest rather than distributed according to need. The needs of people in more secure areas and vulnerable populations, particularly Afghans displaced by the conflict and other factors as well as returnees are being overlooked.

The agencies say that over the last eight years there have been many places where significant progress has been made in health, education and rural infrastructure, but these have been driven by Afghans’ needs, carefully planned by development experts and implemented in partnership with communities and local government. The excessive influence of short-term military goals over aid policy is part of a larger flaw in the US-led strategy. “Troop-contributing countries overemphasize military issues and sideline the critical challenge of promoting genuine development and good governance,” says Farhana Faruqi-Stocker, managing director of Afghanaid. “This imbalance matters, not only because of the resulting human cost, but also because poverty and weak, corrupt government are key drivers of conflict, and must be effectively addressed if there is to be sustainable peace and development.”

* The paper, Quick Impact, Quick Collapse, can be downloaded >>> here.

Obama bank reforms: Major step in the right direction, trade unions say

US President Barack Obama’s announcement of plans to restructure banks as a key component of comprehensive financial regulatory reform is a major step in the right direction, which other governments must rapidly commit to match through similar laws, according to the international trade union movement. Linking the banking sector’s “binge of irresponsibility” to the deepening unemployment crisis, Obama has proposed a series of urgently-needed reforms, including an end to the practice of banks using depositors’ money to engage in the kind of high-risk speculative operations, such as hedge funds and private equity, which helped plunge the world into recession.

“While tens of millions of people are losing their jobs, the very same bankers and financiers who poisoned the global economy with their greed and arrogance are once again playing their dangerous game of financial roulette. They show no interest in helping solve the crisis, only in lining their own pockets with even bigger bonuses than before. This has to stop, and other governments must also move to take them on quickly and with the same determination as President Obama is showing,” said ITUC General Secretary Guy Ryder. News of multi-billion dollar bonuses, even in banks which had to be rescued by taxpayers, is a particularly ugly feature of the financial economy and has caused widespread outrage. On top of this, the “leveraged buyout”, where corporate takeovers are financed through massive debt, and employees often lose their jobs as a result, remains a feature of the world economy.

The US proposals are aimed at tackling one of the key causes of the world recession, and need to be implemented quickly and as a central pillar of overall reform, including action on bonuses and measures to limit purely speculative practices across the finance sector. “We need a clear and globally coherent regulatory framework to make sure that banking practices serve the real economy. A financial transactions tax to reduce speculation and provide funds to help pay the costs of the crisis and generate sustainable and decent jobs and development must also be part of the package,” said John Evans, general secretary of the Trade Union Advisory Committee to the OECD.