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Financial Crisis and the Poor

The financial market crisis has long spilled over on the real economy. Therefore politics is called to do everything to get the economy started again and prevent unemployment. Without strong pressure, frauds will continue in the global financial casino.

By Attac Austria

[This article published 10/27/2008 is translated from the German on the World Wide Web,  http://www.attac.at/index.php?id=6828&type=98.]

The Attac poverty conference and the global responsibility study group demand new financial rules of the game and economic packages to fight poverty.

While the state bails out banks with guarantees of billions, the poorest of society are threatened most grievously by the financial crisis. Poverty and unemployment increase worldwide because of the weakening economy. Financial management should not be the only sector to profit, the poverty conference declared.

"Politics triggered the global financial crisis through the deregulations and liberalizations of the last decades," says Attac co-founder Karin Kublbock. "To prevent future crises, a new global financial architecture must set financing the real economy in the foreground, not speculative trading. Attac urges a global financial market oversight under the purview of the UN, a system of currency cooperation, taxes on financial transactions, closing tax havens and strict rules for financial market actors. "The bailout of degenerate banks may not happen at the expense of the general public. Therefore conditions regarding public controls, transparency, awarding credits and restricted manager salaries are necessary. The Austrian bank package is completely unacceptable, Kublbock explains. Investment strategies and money streams in tax havens should be explained. The funds parked there could be used to overcome the crisis. Those who immoderately enriched themselves in the system of liberalized financial markets could help the public budgets through higher taxes on profits and capital gains."

For developing countries, the financial crisis means reduced export possibilities, more costly credits and fewer investments and jobs. "The poorest countries are already massively afflicted by climate change and the hunger crisis. Any further deterioration can mean the difference between life and death for people who live with less than one dollar a day, warns Ruth Picker, coordinator of Attac's global responsibility study group. "The financial crisis shows that hundreds of billions in tax funds can be mobilized with political will. We desire this engagement in combating global poverty." The global responsibility study group urges:

Observance of international obligations to achieve the UN millennium goals (0.51% of gross national income in 2010 and 0.7% in 2015);
Introduction of a global finance transactions tax to check speculation and finance assistance to developing countries,
Closure of tax havens to dam up the dramatic tax flight from developing countries,
Austria's assumption of more responsibility for peace and security worldwide in the UN Security Council. The next Austrian government must lead the way with a good example and provide more relief funds for people in developing countries," Picker pleads.

In view of the current financial and economic crisis, the poverty conference urges greater investments in social security. "Increased poverty can be expected. Funds must be invested in effective measures to combat poverty. Building the social network by introducing a comprehensive minimum security, investments in the social infrastructure and improvements in labor market policy help avoid poverty and contribute to restoring public trust. The political goal of "guaranteeing security" may not be limited to banks and investors," Michaela Moser of the poverty conference explained. 460,000 people in Austria now live in blatant poverty. Over a million (including 250,000) children are endangered by poverty.

"The financial market crisis has long spilled over on the real economy. Therefore politics is called to take measures in the capital markets so the economy starts up again and unemployment is prevented. Austria needs an economic package. Investments are required in housing redevelopment. Wage taxes should be reduced in 2009. The tax system must be changed to be future-friendly. Assets must be taxed more vigorously. The public authority urgently needs revenues to finance the great projects and guarantee the Public Health system and nursing care. Abandoning the goal of zero-deficit is also absolutely vital, the chairperson of the private employees union Wolfgang Katzian declared.

There is a great danger that politics will act only in the interest of financial management as often happened in the last decades, Kublbock, Picker, Moser and Katzian agree. Without strong political and public pressure, frauds will continue unchanged in the global financial casino after all losses are socialized.


International financial crisis increases the number of the starving

By Norbert Glaser

[This article published in: Neues Deutschland, 12/2/2008 is translated from the German on the World Wide Web,  http://www.neues-deutschland.de.]

[The worldwide financial crisis strikes the poor most severely. Oliver de Schutter, the UN special ambassador for the right to food, expect the number of hungry and malnourished to surpass the billion-mark in 2009.]

Unlike the banks, hungry children are not responsible in their plight, warns the outgoing chairperson of German World Hunger relief, Ingeborg Schauble. The financial crisis may not lead to the needs of the growing number of hungry persons worldwide taking a back seat. Nearly a billion hungry and malnourished persons is "a disgrace for humanity." A universal rethinking of the role of the state and the international community that started through the financial crisis must also extend to the hunger crisis. The world needs a bailout package against world hunger.

According to the UN special ambassador for the right to food, Oliver de Schutter, the number of hungry persons has already climbed to 970 million because of the rapidly increasing food prices in 2007/2008. At least another 100 million lived in extreme poverty. They constantly run the risk of going to bed hungry, de Schutter explained at a meeting of the Society for Technical Cooperation in Frankfurt. The crisis will plunge more millions in precarious conditions.

In the global recession, de Schutter expects food prices to decline slightly on account of rising demand (population growth, meat consumption, bio-fuels and climate change). "The number of hungry will surpass the billion-mark in 2009."

Cancelled incomes as a result of the financial crisis will aggravate the food situation of many poor families. In Ouagadougou, the capitol of Burkina Faso, women can earn some money by sweeping the roads two days a week. They receive 1.20 euro a day, much too little to feed their large families. They cannot keep up with the runaway food prices. However the entremets are at least certain. The women from the Green Brigade are in a better position than most residents of the city of millions who must fight their way somehow everyday.

Many inhabitants have had to reduce their meals to one a day as a consequence of the food crisis. The women eat last after the male family members and the children. Some families in Ouagadougou spend 75 percent or more of their income for food. Little is left for health, school and clothing. Savings are first made with women and girls. Girls are always the first to be taken out of school.

Oliver de Schutter expects considerable repercussions for health, food and child mortality through the food crisis and the international financial crisis. In the 1997/98 East Asian crises, the UN special ambassador reports, child mortality in Indonesia rose three percent and the number of school-withdrawals climbed from six to twelve percent. Statistics from Brazil show that 50 percent more maidens leave school when the head of the household loses his job.

Struggling in the past for funds to combat poverty and hunger, industrial countries and international money institutes now quickly spend many times more to bail out the banks, human rights advocates and development experts criticize. "We must prev3ent those suffering the most under the crisis who contributed the least to the breakdown of the financial markets," German development minister Heidemann Wieczorek-Zeul emphasizes. She urges "solutions with development perspectives." After the markets, the rights and protection of people must also be globalized. This requires clear and binding international mechanisms.

The poor in developing countries will be the real losers. Investments will not be made; the transfers of immigrants that ensure the survival of many will be imperiled. Exports will collapse. Credits will not be granted any more. No social security net will cushion the malaise for individuals. No economic program will stimulate the economy. Reaching the millennium goal will be impossible.

Joachim von Braun, director of the research institute for food policy in Washington, pleads for a rescue package to attain the first millennium goal of cutting world hunger in half. 500 billion euro will not be necessary for this. "$14 billion a year would be enough to achieve a significant worldwide agricultural growth."

De Schutter regards increased production as indispensable. However he warns against making this the exclusive goal. "Food must reach those whose supplies are very uncertain: small farmers, shepherds, fishers, the landless and the urban poor. This will only be possible if their incomes increase." In the meantime, support comes from the World Bank that not long ago held state engagement for infernal stuff. The World Bank recommends communal projects and public relief works. "Every percent of declining growth in developing countries casts another 20 million people into poverty," de Schutter warns.

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