Developed countries have now been motivated to accept the growth of less developed countries as an important goal and to help in its realisation for humanitarian, political and economic reasons. BRICS (Brazil, Russia, India, China and South Africa) deserves credit for the high level they have been striving to arrive at. A similar trend is being noticed in case of other upcoming economies like Vietnam, Ethiopia, Latvia and the like.
At this juncture, the developed block, to serve their own interests, should see that the laggards are coming up -- they get the market, park the fund, and get the places to bolster international business ventures. But then the question that looms large is -- is it still not the fact that a vast majority of the world's population is living close to the perilous borders of bare subsistence?
World population is at 6.8 billion which is increasing by 770 million or 1.2 per cent each year. Eighty two per cent of them live in developing countries where the population increases by 1.4 per cent per year. More than one billion people do not have adequate food; at least 1.4 billion live on less than $1.25 a day; almost half the world population live on less than $2.50 a day. Moreover the price of food has risen dramatically -- rice costs 28 per cent more in 2008 than in 2006; 642 million people are suffering from chronic hunger in Asia and the Pacific; 265 million in Sub-Saharan Africa; 53 million in Latin America and the Caribbean; 42 million in the Near East and North Africa and 15 million in developed countries. Asia is home to two-thirds of the world's poor. Every fifth person lives on less than $1 a day. In India, Bangladesh and Cambodia, more than 30 per cent people live on less than $1 a day and most poor people live in areas where the land is marginal and ecosystems are fragile. This, no doubt, has been the case for a long time but only recently has it attracted the interest and attention it deserves.
Today, the poverty in which the great masses of people live stands at the very top and world economic problems demand a lasting solution. Though the impoverished countries themselves place economic development first on the priority list, yet it has come to be widely believed that half of the world's population is suffering from deprivation and seething with discontent, while the remainder of the world lives in relative affluence. Higher commodity prices have been hampering further growth of these economies in particular.
A special point to note is that developed countries, individually and collectively through various international organisations, have joined the battle and declared the intention to help raise the standard of living of the poorer countries. In fact, the world's current crises have forced their way on to the agenda of the Group of Eight whose importance has diminished with the rise of emerging economies like China and India: yet the pace of world growth could further affect the developing countries. The important fact remains that economic development has become a major concern of the contemporary world.
Developed countries have been motivated to accept the growth of less developed countries as an important goal and to help in its realisation for humanitarian, political and economic reasons - the political motivation has probably been dominant. The interest of the United States in Latin America, of France in parts of Africa, is some of the glaring examples. The global business scenario has been undergoing changes at a speedier rate than ever before. The reality is that this transformation itself has also been causing turbulences.
A global-friendly-environment encompassing bold leadership, good governance and disciplined multilateral trade framework is yet to emerge, though of crucial immediate requirement. It is thus to be agreed upon that health of the global economy hinges too heavily on how these emerging economies perform in the days to come, especially when a number of European economies are still limping and the US economy has a lot still to do to weather the possible storm of recession recurrence.
Actually, the recent financial crisis stems from the growing disruptions of the order established after the Second World War. The World Trade Organisation (WTO) has rightly been calling for reform in the entire global economic governance system. After 60 years of erosion of coherence and governance, a number of major deficiencies occurred both within the international system and between national systems and the global system. The former WTO chief Pascal Lamy underlay full employment of human resources, development, social progress, stable monetary system, open trade and environmental sustainability to be the shared objectives for the new order. Instruments designed to ensure transparency, legitimacy, coherence and efficiency is also of vital importance to the new global governance.
Huge tasks remain ahead. A lot depends on to what extent global cooperation could forge. Massive international support would be required for economies of the nations of the popular uprisings against long-serving authoritarian leaders, where even tourism in particular has been hard hit.
In a very recent report the IMF said the external financing needs of oil-importing countries in the Middle East and North Africa would top $160 billion over the next three years. Also, the G8 leaders promised $20 billion in aid to Tunisia and Egypt and held out the prospect of billions more to foster the Arab Spring and the new democracies emerging from popular uprisings. Though the G8 recently issued a special declaration saying it stood side-by-side with Africa, yet the actual need is to intensify its efforts to achieve peace and stability, economic development and growth, regional trade and investment.
The silver lining is that the BRICS economies (Brazil, Russia, India, China, and South Africa) plus other emerging market economies have been of late leading from the front as far as economic growth has been concerned. Some scholars compare the ongoing situation with that of the 1930s, the Great Depression, after which the US's return to growth was a key driver for the rest of the world.
Despite the shift in the share of global growth away from the US, few commentators now expect a return to robust GDP (gross domestic product) expansion in the medium-term, as developed-world consumption can not be expected to return to pre-crisis levels, at least until consumers have sufficiently delivered.
Short-term policy should therefore focus on expanding fiscal space, rehabilitating physical infrastructure using labour-intensive techniques, and providing social safety nets such as employment protection. The challenge for the developing world should not consist simply of ensuring that national economies return to the pre-crisis commodity export-led type of growth; but that the drivers of growth switch to a more value chain-based and intra-regional trade-driven pattern. Addressing the challenges of post-crisis development requires policies that strengthen the resilience of economies to external shocks, by investing massively in infrastructure.
Dr B K Mukhopadhyay is a Management Economist and an International Commentator on Business and Economy.