Towards an inclusive global economy

This time last year, the global economy had reached the nadir of the financial and economic crisis. Since then, a succession of optimistic commentators, economists and others has been pointing to the strength of the recovery: the resurgence in stock markets, the restoration of bank balances, and the reversals in growth rates. At the same time, data have emerged describing the full impact and cost of the crisis, particularly for developing countries, including an increase in unemployment, an additional 53 million people falling below the poverty line and over 100 million more going hungry.

The debt crisis in Greece, which is threatening the entire euro zone, is indicative of the continuing malaise in parts of the world economy. In the Least Developed Countries (LDCs) and other developing nations, progress towards the Millennium Development Goals (MDGs) has been reversed, and it is now unlikely that all of the goals will be achieved by 2015.

Moreover, what momentum there was for the reform of international economic governance has stalled. Apart from macro-prudential regulation and some action on bankers’ bonuses and taxation, there have been no fundamental changes to the institutional architecture of economic governance. Indeed, currently some of the most significant changes are taking place at the regional level, involving increased South-South cooperation and integration.

Multilateral initiatives
In addition, changes in policy at the national level in both developing and developed countries for example, from tight macroeconomic policies to a loose countercyclical stance- need to be recognised by multilateral initiatives, such as the MDGs and World Trade Organisation trade talks.

The scale of the financial and economic crisis has made it imperative that we forge a more balanced and inclusive global economy through two channels: measured government intervention in markets and strategic policy action at the national level, and better coordinated and more inclusive economic decision-making at the international level.
For African and other LDCs, which have limited financial resources to mount national stimulus packages or mobilise domestic resources, economic and trade growth needs to be supported by the global community. Such external support should include better market access and entry conditions at the multilateral and regional levels. India is one of the large emerging economies to have granted LDCs duty-free and quota-free market access.

The challenge for African LDCs is to utilise the trade preferences available to them. But market access is only one element in a successful development strategy for LDCs: building a strong productive base in agriculture, manufacturing, and services that can compete internationally is another essential ingredient.

Internationally competitive industries and markets do not establish themselves automatically: they require government investment to support strategic infant industries, and government intervention to correct market imperfections.

As we have seen during the current economic crisis, the market does not always get the prices right, nor does it always provide a level playing field for firms to compete. Governments must create fair markets through the prudent use of macroeconomic policy as well as other regulatory mechanisms, laws, and policies that maintain a healthy environment in which enterprise and economic development can flourish. Competition law and policy is one such area that governments need to get right.

Inspired by our successful experiences in Latin America, UNCTAD decided to set up a Regional Programme on Competition Law and Policy for African Countries — called Africomp — to assist African countries in formulating and enforcing sound competition law and policy.

With generous financial and human resources from Norway, Sweden, Switzerland, and Germany, Unctad has been able to launch Africomp for five African countries. In addition, other cooperating partners, including France, UNDP, and the UN Development Account, are funding Unctad technical assistance projects for African countries. These projects will be brought together under Africomp.

However, trade is not sufficient in itself to create the levels of growth and economic development that LDCs are so in need of. Establishing a strong productive sector, which can operate in fair and competitive domestic, regional, and international markets, will also be essential for LDCs. Hope our partnerships with LDCs can be strengthened through Africomp and that African LDCs and India can build on their preferential trade scheme.
IPS