Declaration on the World Economy
ROME COUNCIL - For a More Equal Global Society, 20-21 January 2003
1. The Socialist International voices its serious concern at the state of the world economy at the beginning of 2003.
2. The SI urges all governments to act on their responsibility for global developments and global policy and to ward off dangers, avoid uncertainties and reduce risks that may threaten the world economy.
- The world economy in 2002 was characterised by several common features shared by a majority of countries to varying degrees: sluggish growth of output, benign inflation, stagnant employment, low interest rates, worsening fiscal balances, low and uneven growth in international trade, reduced international capital flows, lower prices for many non-fuel commodities, and depreciated equity prices.
- With some signs of stabilisation at the end of 2002, global economic growth is expected to improve in 2003 but the strength, breadth and sustainability of the recovery remain subject to many uncertainties. Risks associated with heightened geopolitical tensions, such as the possibility of higher oil prices and lower business and consumer confidence, are the key threats to global economic recovery in the short run. Moreover, such weaknesses as overcapacity, hesitant business capital spending and hiring of workers, and lower equity prices, may continue to inflict deflationary pressures on the world economy and prolong the period of slow global growth. In addition, the large external imbalances across countries, fragilities in the international financial system, as well as in the domestic corporate sector in some countries, and other structural problems portend substantial vulnerability for the world economy in the medium term.
3. The Socialist International is especially concerned at the impact of the Iraq crisis on global economic development.
- The crisis has already led to rising oil prices. Countries in the immediate Middle Eastern region, such as Turkey, as well as oil-importing countries generally, are beginning to experience disruptions to their economies.
- A war against Iraq could have incalculable economic consequences all over the world and especially in the Middle East region.
- Pinning hopes on war as a means of economic recovery constitutes an infringement of human rights and strikes at the very foundations of global political morality.
4. The Socialist International also sees opportunities for responsible economic action at the global level in 2003.
- The economically powerful states attending the G8 Summit in Evian must exercise their global responsibility. The Summit agenda, debt cancellation for the Less Developed Countries (LDCs), on condition that the latter promote democracy and respect the legal rights of the opposition to accede to government, financial crisis prevention, corporate governance and corporate social responsibility, education, sustainable development, the Africa Action Plan, cooperation with the developing countries and fighting terrorism can produce solutions that are capable of boosting the world economy in 2003.
- The policy pursued by the G8 will determine whether a reduction in the discrepancies relating to income and social situation will boost consumer demand.
- The increase in OPEC’s oil production is helping to stabilise oil prices. This policy must be continued, if need be, throughout the year.
- The efforts to draft a global insolvency law can be concluded in 2003 and generate an increase in investment in developing countries.
5. The Socialist International sees responsibility for global economic development in all parts of the world.
5.1 Special responsibility rests with the USA and Canada, the EU and Japan - the Triad. The state of their economies also affects the developing countries.
- To achieve the requisite long-term growth the USA and the EU need a macro-economic policy that fosters investment and effective demand.
- In Japan, where the national product declined in 2002, a stabilisation and structural reform of the banking sector and an easier monetary policy are needed.
The current account deficits of the USA have not contributed to a stabilisation of the global economy. The sudden and potentially disruptive change in exchange rates currently under way draws attention once again to the need for the better coordination of macroeconomic policies.
5.2 The EU’s economic development has a crucial positive influence on economic growth in the new or restored democracies in Central and Eastern Europe, the majority of which are advancing towards entry to the EU.
5.3 The economic situation in the regions outside the Triad is very varied. Over 5 per cent growth is expected in Southern and East Asia for 2002 and 2003, with China forecast to achieve 7 per cent. In Latin America the national product shrank around 1 per cent in 2002 and growth of no more than around 2 per cent is expected for 2003. The forecast growth for Russia is 4 per cent, for Western Asia 3 per cent and for Africa 4 per cent. Following 1.7 per cent in 2002, the gross world product is expected to grow by 2.75 per cent in 2003. These regional differences require different regional economic strategies.
Latin America needs to reduce its dependence on foreign capital. This requires increased export promotion. The trade policy pursued by the USA and the EU must make a contribution to this end. An integrated Latin American market can achieve rapid success in stimulating economic growth and reducing dependencies.
5.4 There are also differences within Latin America itself. While Brazil, Mexico and Chile are making good progress, Argentina and Venezuela are beset by problems. There is a lack of trust in the political system here. Good governance and the building of political confidence that goes with it are needed to overcome the economic crisis.
5.5 Southern and East Asia should continue their remarkable economic growth.
5.6 Economic developments in India and its neighbouring countries as well as in Indonesia are affected by intra-state and inter-state conflicts. The avoidance of violence is one of the conditions for sustainable economic development.
5.7 Africa is very strongly influenced by global economic trends and difficulties. Foreign direct investment, official development assistance, debt relief and access to markets are influenced by economic policies in the highly advanced countries. In Africa, too, it is very clear that democratic governance, stable political institutions and the prevention and management of conflict favour national economic development, while the absence of them causes extensive damage.
5.8 The political terror in Indonesia has had a negative impact on economic developments. This shows quite clearly that the fight against terrorism is a joint task of all states and not primarily of the USA or Europe. Muslim states, in particular, can be more directly affected by its economic impact.