News | The Independent UK - Hamish McRae: Here is a chance to reboot the world's development machine

News | The Independent UK - Hamish McRae: Here is a chance to reboot the world's development machine: "Hamish McRae: Here is a chance to reboot the world's development machine
Posted by The Independent

* Sunday, 19 July 2009 at 01:35 am

The first point to make is that the downturn has struck different countries is very different ways. The energy and raw material producers, by and large, have been able to sustain growth. The very poorest nations, however, which in many cases need to import food, have been devastated. Food prices soared last year, along with raw materials. It gets worse. The poorest people in those countries spend the highest proportion of their income on food, typically 60 per cent or more, so they are hit hardest of all.

You can catch a feeling for that from the surge in oil and minerals but also the surge in food and agricultural raw materials. For the first half of the past decade prices were pretty stable, then we had a gradual climb, then the astounding gyrations of the past year. But note, despite the recent declines we are not back to the pre-2005 period of calm. So it is not back to 'business as usual'.

Nor will it be. The main thrust of the UNCTAD report is that the effects of the current crisis are so severe that the world will have to re-think the whole approach to economic development. A number of things will have to happen. The least developed countries need to reduce their exposure to swings in commodity markets. They need to reduce their debt exposure. We have to figure out ways of increasing the flow of external finance, including non-governmental flows such as foreign direct investment and emigrants' remittances, both of which have been affected by the downturn. And we should be aware that while some progress has been made in aggregate by many least developed countries, often the benefits of such growth have failed to flow down to the poorest people within them."