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Posts Tagged ‘global financial crisis

In Dakar, a call to ‘clear away invaders’

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Ringing statements from Bolivian president Evo Morales and former Brazilian president Luiz Inácio Lula da Silva have been made at the World Social Forum 2011. Addressing tens of thousands who marched through Dakar, the Senegalese capital, to mark the start of the World Social Forum 2011, Morales called for a programme of social struggle to build a new world. “There must be awareness and a mobilisation to put an end to capitalism and clear away invaders, neocolonialists and imperialists […] I support the popular uprisings in Tunisia and in Egypt. These are signs of change.”

Lula told delegates that economic doctrines imposed on the world’s poorest countries no longer have a place in modern societies. “In South America, but above all in the streets of Tunis and Cairo and many other African cities, a new hope is being born. Millions of people are rising up against the poverty to which they are subjected, against the domination of tyrants, against the submission of their countries to the policies of the big powers,” said Lula.

Marching in the streets of Dakar. Photo: Abdullah Vawda/IPS

Marching in the streets of Dakar. Photo: Abdullah Vawda/IPS

In its eleventh year, the Forum remains a space for open and honest debate. Senegalese President Abdoulaye Wade did not hesitate to declare himself a supporter of the market economy which most here reject, and threw down a challenge to participants regarding their engagement with established global institutions such as the United Nations. “If you who are here, if you had supported the idea, then Africa would already be on the Security Council. Since 2000, I have followed your movement and I still – excuse my frankness – ask myself this question: have you succeeded in changing the world at the global level?”

IPS news has reported that this is a challenge participants in the WSF take very seriously. Kenyan social justice activist Onyango Oloo was a key organiser of the 2007 edition of the Forum in Nairobi; he was unable to attend this year, but he suggested that the building of another world is already begun, away from the fleeting attention of the media. The WSF is a place where those builders can meet each other directly. Organisers said 75,000 people from 132 countries attended, to share their experiences of injustice and resistance, to test each others’ analyses and return home newly-inspired.

Eurodad has reported that a new international debt justice campaign has launched at the World Social Forum in Dakar. Several civil society organisations are launching a global campaign for a new international debt court. The campaign, “Defuse the Debt Crisis,” calls upon French President Nicolas Sarkozy (G20 Chair in 2011) and the international community to establish new rules for debt justice. These rules must ensure fair settlement of debt disputes when a country struggles to repay its loans or when the legitimacy of a debt is in question.

Countries all over the globe are experiencing worryingly high levels of sovereign debt, much of which has been caused by reckless private lending which triggered the global financial crisis. Unsustainable and illegitimate debt impedes development and prevents poverty reduction in developing countries. A fair and lasting solution to the debt problem is urgently needed.

European activists on stilts carry a banner reading "For a world without borders" as they walk in a march on the opening day. Photo: Rebecca Blackwell/AP

European activists on stilts carry a banner reading "For a world without borders" as they walk in a march on the opening day. Photo: Rebecca Blackwell/AP

“The European approach to the current debt crisis repeats the errors that helped turn the sovereign debt crisis of Southern countries in the 1980s into what was later called “a lost decade for development,” says Oygunn Brynildsen Policy Officer at Eurodad. “Rather than holding investors responsible for the risks of their investments, public funds are being used at the expense of tax payers to bail-out the private sector,” she added.

However, “there are alternatives to handle such protracted crises in ways which do not put the burden on the poor,” says Nuria Molina, Eurodad Director. “Rather than condemning debtor countries to protracted adjustments, while securing profits from risky investments, governments must put in place fair and transparent debt workout mechanisms based on well-tested insolvency principles.”

The Guardian reported that migration and movements of people are a key theme of this year’s World Social Forum, along with the growing role of the countries of the “south” and the evolving geopolitics of south-south relations. The city’s Cheikh Anta Diop University, which is hosting the forum, has seen its population explode overnight. The expansive campus – if you get lost, allow three-quarters of an hour to find your way – is home to around 80,000 students: a city within a city. The forum brings another 75,000 participants weaving in, out and among the university’s daily crowds.

“The mobilisation here at Dakar is beyond any expectation,” said one of the forum’s organisers on Wednesday. The overwhelming size of the forum shows both the momentum of the claim that “another world is possible” and brings the limitations of the current structure into sharp relief, she adds. More local and regional forums are needed, interjects another organiser, to complement the world edition and deepen the movement against “globalisation under the interests of capital”.

Food inflation in Asia and India, and a word about price indexes

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Vendors in Mapusa, Goa

Vendors in Mapusa, Goa. The middle basket contains 'nachne', local millet

 

The question in Asia again is food inflation. Entering the last quarter of 2010, news reports from South and South-East Asia cite continuing high food inflation as a persistent worry for consumers. The food weighting in Asia’s consumer price indexes is mostly high. China, India, Indonesia and Thailand have CPI weightings of 33%-46% for food.

Hence, persistently higher food prices pose a bigger risk of a rise in inflation expectations and wages in these countries as compared with higher per capita income economies on a relative basis, says the late September Global Economic Forum briefing from Morgan Stanley. “While job growth was affected by the latest global financial crisis, with GDP growth back to trend line and employment levels having recovered sharply, the risk of a rise in inflation expectations is significant. While employment statistics in the region are not very transparent, given the GDP growth trend, it appears that employment growth should have been strong.”

China, India and Indonesia together account for 40% of the global population. Any small increase in demand from these countries in the form of imports tends to push up global prices. The recent crop failure in India and its attempt to import sugar are a case in point. Moreover, there are some crops that are peculiar to local markets with very little global supply. For instance, in the case of India last year, the country fell short of pulses (lentils), and it was not really possible to import the crop even if the government had wanted to. Indeed, the top four (in terms of population) countries in the region (China, India, Indonesia and Thailand) are all net exporters of food items. All four countries tend to maintain inventories for staple items like rice and wheat, and have public distribution systems to ensure availability of these essential items at a reasonable price. Most countries in the region subsidise food for the poor.

Against this background, two recent speeches from senior figures in India’s central bank, the Reserve Bank of India, are worth examining closely. First, in ‘Managing the Growth-Inflation Balance in India: Current Considerations and Long-term Perspectives’ the deputy governor of the RBI Dr Subir Gokarn talks directly about food inflation (he gave the speech on 05 October 2010 at The Private Equity International India Forum).

“The inflation rate, which was briefly negative in the middle of 2009, began to accelerate rapidly later in the year. This upward momentum continued into the first half of 2010, with double-digit inflation persisting for a few months. The rapidity of the transition was surprising, given the fact that the recovery in growth was just getting under way and, importantly, the global situation was still very uncertain. However, the reason for the sharp increase was that all the possible drivers of inflation were simultaneously contributing. Each one by itself may not have resulted in the outcome that we saw, but all three working together resulted in a rather sharp acceleration. Food prices rose sharply because the monsoon of 2009 was deficient in most parts of the country, impacting agricultural production. However, there are, I believe, longer term forces at work on food prices, which are a matter of concern.”

 

UN Millennium Development Goals Report 2010 / UNICEF Photo

UN Millennium Development Goals Report 2010 / UNICEF Photo

 

Next, in a speech titled ‘Perspectives on Inflation in India’, executive director of the RBI, Deepak Mohanty (on 28 September 2010 at the Bankers Club, Chennai) said that the Reserve Bank is concerned over “the unacceptably high inflation rate”. Mohanty dwelt awhile on the Indian government’s new wholesale price index series.

“In the meanwhile, the Government has also released the new series on the Wholesale Price Index (WPI) changing the base year from 1993-94 to 2004-05. In terms of change in the relative weight of major commodity groups, the share of primary articles has gone down by 1.9 percentage points, which has been compensated by increase in the share of fuel group by about 0.7 percentage point and manufactured products by 1.2 percentage points. There has been a reduction in weightage of primary food articles and manufactured food products by 2.6 percentage points in the new series to 24.3 per cent from about 26.9 per cent in the old series.”

“Second, notwithstanding a significant reduction in weightage, the food inflation in the new series is higher than in the old series. This is because of change in the consumption basket in favour of protein-rich items such as egg, meat and fish where price rise has been high apart from milk and pulses. Third, the non-food manufactured products inflation is lower in the new series than in the old series. This is because of a substantial overhauling of the basket with the introduction of a number of new items. For example, the new series has 417 new commodities of which 406 are new manufactured products. Fourth, the new series has wider coverage. For example, the number of price quotations has increased from 1,918 in the old series to 5,482 in the new series. The new series, therefore, is better representative of overall commodity price inflation.”

What is curious is that these trends have taken place during a phase of rapid growth in India’s formal economy. Gokarn explained that what was most significant from the monetary policy perspective was the growing visibility of demand-side pressures. He examined the price dynamics of the manufacturing sector – overall and without the food processing component. The latter, he said, has been used by many analysts as a reasonable proxy of demand-side inflation, which is the phenomenon that monetary policy can and should influence. Both sectors he said, and particularly non-food manufacturing inflation, “show a tremendous acceleration from a significantly negative rate of inflation during 2009 to reach rather worrisome levels by the middle of 2010”.

Mohanty finds that the new series of WPI inflation marks a major change in terms of scope and coverage of commodities and is more representative of the underlying economic structure. As per the new series, the manufactured products inflation is lower than what was seen on the basis of the old series, he said. The food price inflation, on the other hand, is higher than what was seen on the basis of the old series. “The high level of food prices is The 100th postindeed a matter of concern as the prices of protein-based items, which have a higher share in the consumption basket, are showing larger increases”. Moreover, Mohanty said, there is continuing shortage of food items such as pulses and edible oils. “If the supply response doesn’t improve, there is a risk that food price inflation could acquire a structural character”.