- The Observer, Sunday 29 March 2009
- Article history
The small town of Jwaneng - which means "place of small stones" - in the Kalahari desert has helped to make Botswana one of the most stable countries in southern Africa. It is the home of the world's richest diamond mine.
But last month the diamond company De Beers shut down production at Jwaneng and at its three other mines in Botswana. Demand for precious stones - which made up 70% of the country's exports - has collapsed in the wake of the recession. Mines also lie mothballed in Namibia, while workers have been laid off in the Democratic Republic of Congo.
It is a stark illustration of how wealthy westerners tightening their belts can hurt the vulnerable who scrape a living producing their now unwanted luxuries - from the sparkle in an earring to the coffee in a latte. While the recession threatens redundancy and repossession in Britain, in Africa it means life or death.
The struggle of the world's poorest to survive a crisis minted by the richest is shooting up the agenda of this week's G20 summit in London, the largest gathering of world leaders here for 46 years. And Lord Malloch Brown, the Foreign Office minister, fears the economic storm buffeting a fragile continent may have violent consequences.
"If you look at the Democratic Republic of Congo, 200,000 miners have lost their jobs: in Katanga [the mining province] it is living hand to mouth with a few days' worth of foreign exchange, waiting to get an IMF loan," he said.
"The effort to integrate rebels in the national army, all that peacebuilding, is being incredibly affected by the fact they can't afford to pay the army. There have been four coups in Africa in the past 12 months, not all of them solely as a consequence of this, but I have a sense of a creeping tide of instability coming back.
"This is not to belittle people here losing their homes and their jobs, but in Africa I heard Bob Zellick, chairman of the World Bank, say that 400,000-500,000 infant deaths could occur as a result. People are dropping back into poverty, with a real risk to life."
Last autumn in Washington, the G20 concluded that the developing world would be largely untouched by the banking crisis. Ten days ago, African leaders, including Botswana's PM, met Gordon Brown to convince him otherwise.
Now ministers are working frantically on a package of aid, credit and trade boosts for Africa to unveil this week. But will that be enough to bridge the dangerous rift opening in the G20 - not between America and Europe, but between the developed countries who wrecked their own economies and the emerging nations suffering as a result?
The attack last week by Brazil's president, Luis da Silva, on "white blue-eyed bankers" revealed a new anger among some of the world's most populous countries at being dragged into a mess not of their making - and a determination to hold the west to account.
India's prime minister will use the summit to challenge what it says is creeping protectionism costing Asian jobs. China will exact more influence over the IMF in return for bailing it out. Chile's Michele Bachelet used a joint appearance with Brown to stress how, unlike Britain, her country saved vast revenues "during the good times" - which it is now having to spend.
Even George Soros, the currency speculator and major Africa donor, yesterday warned that the G20 must insulate developing countries "against a calamity that is not of their making".
So will a new world order emerge from this clash of nations? And if so, will it be one in which Britain - the City neutered, its seats on international institutions from the UN to the IMF under pressure, and its military prowess threatened by tightening budgets - must accept it can no longer be a first-rank power?
In London's Docklands, at the waterfront ExCeL Centre, they have spent the week preparing for war. Volunteers have role-played battles, debated military tactics and scrutinised conflict scenarios.
Fortunately, the war-gaming exhibition being staged at the G20 summit venue will have been dismantled by the time Barack Obama arrives on Tuesday night. But the predominant mood swirling around this summit remains one of anger, from the corridors of power to the streets of London where protesters threaten to hang effigies of bankers from the lampposts.
The emergence of such hardliners worries Malloch Brown, who hopes the anger "can get channelled towards strong outcomes and not towards an atavistic rage". But will there be a genuine breakthrough? After weeks of hyping the summit as the answer to Brown's prayers, ministers are now lowering expectations. Asked about it last week, the education secretary, Ed Balls, retorted: "Are they in one weekend going to solve the problems of the world? Of course not."
Brown has given up on a worldwide financial stimulus: climate change has dropped off the agenda, although the communiqué will commit to make a success of December's global warming summit in Copenhagen.
Ominously, Germany's Angela Merkel predicted yesterday that there would not be a final deal on banking regulation or trade, and the summit "will naturally not solve the economic crisis either", adding they would need a second meeting.
Malloch Brown, however, is upbeat about the chances of a "big package" to boost Africa and a return of confidence to the financial markets. But the sheer logistics of getting agreement from a group that may control 85% of the world's GDP but also spans huge differences of opinion and vested interests are daunting.
"There are 20 of them and they are in a room for maybe 10 hours. So they've got 30 minutes each, in effect," says Tony Dolphin, chief economist at the IPPR, a think tank. "Even if there were only six issues, that's five minutes per person per issue: what can they say in that time?"
Which is why Brown has spent five days travelling, seeking to nail down a deal before the summit begins. But the risk of last-minute hiccups is still real.
"It's a Rubik's cube, and if just one person objects to one piece there's a risk that other pieces get pulled out and the whole thing doesn't hang together," admits Malloch Brown. "This is a much bigger group of people than the typical summit and the final negotiations are much more complex."
As a result, many Labour MPs fear it may not produce results the public understands, thus widening a gulf between ordinary families anxious about their prospects and politicians seen as out of touch. Ministers are now belatedly trying to humanise a potentially dry and technical debate.
Harriet Harman, the equalities minister, will tomorrow publish a report to the summit which warns that women losing their jobs may not show up in the unemployment figures, since some will stay at home to raise children. It cites anecdotal evidence that many taking voluntary redundancy are women on maternity leave who cannot face fighting for their jobs.
Ed Miliband, the climate secretary, yesterday entertained a delegation of American steelworkers, international union leaders and development charities for coffee and croissants at the Treasury to insist that their concerns over jobs, aid and climate change were not forgotten.
Aides say, however, that the financial system must be fixed before moves to protect homes and livelihoods can succeed. But that does not mean that the conclusions of this summit will not affect the millions of ordinary Britons. Far from it.
With Jamie Oliver preparing a summit dinner showcasing "budget British cooking", and world leaders offered a downgraded goodie bag including a tea-towel, the mood of the summit is studiedly austere. But it is not only VIPs who will have to adjust their expectations.
One key issue for debate on Thursday is what role the difference in saving and spending habits between the two economic powerhouses of America and China played in triggering the crisis.
While Americans love to shop, often on credit, Chinese households traditionally put money aside. For years, China used those savings to invest abroad, particularly in US bonds - thus pumping billions into the US economy and helping fund more cheap credit.
Many economists believe a recovery now requires bursting that artificial bubble and rebalancing the economy so that Chinese consumers are encouraged spend a little more - reducing America's trade deficit - and Americans a little less. Malloch Brown suggests Britons, too, will need to relearn the art of saving.
"There is the recognition that you are not going to go back to the world as it was before, and we must get a new balance between spending and saving and borrowing. You can't have the old model where it was the US consumer who was widely seen as driving growth through his or her spending and borrowing.
"You are going to see a situation where countries in Asia begin to spend and consume more at home and countries in the west have to move towards a more prudent lifestyle and live within their means." Consumers will also have to learn "within environmental limits", he said, which could also affect standards of living for those wedded to cars and cheap flights.
But the toughest set of negotiations this week are likely to centre on trade. The communiqué is expected to include pledges not to resort to protectionism, but is unlikely to specify what protectionism means - to the anger of emerging nations, who think it should forbid rich countries such as the US and UK forcing their bailed-out banks to prioritise domestic mortgage and business lending over overseas loans.
It may not, however, be only the economic world order that shifts this week: the banking crisis is starting to shake the kaleidoscope of foreign policy, too.
As MPs debated Iraq last week, three government departments slipped out a short joint statement to Parliament. Buried in it was the news that Britain is cutting its role in world peacekeeping and will be "unable to sustain funding levels to all regions".
The UK will withdraw from the UN mission to Kosovo, reduce activity in the Balkans, shift resources from west Africa and scrap programmes in Latin America.
The move was blamed on falls in sterling, making Britain's bills for the UN, EU and other international organisations that charge in dollars more expensive, as well as on new demands. But it underlines the other big question facing Britain this week: how long can it afford to remain a military world power?
This week sees the publication of a review of military reservists, which is expected to accept they should be better prepared to meet increasing demands to back up over-stretched regular forces. And once Thursday's summit is over, many of the same leaders will reassemble at Friday's Nato summit.
President Barack Obama's blunt message will be that Washington has shouldered too much of the burden in Afghanistan, and that Nato partners should do more. But amid a recession that threatens EU members' defence budgets, he risks an equally blunt response. Merkel has promised to "explain forcefully" why Germany's contribution to the war effort is already impressive - meaning Britain, which had resisted offering extra troops, may now do so.
The summit is expected to agree a strategic review of Nato's future role, but the elephant in the room - particularly given the absence of Obama's defence secretary, Robert Gates, who is finalising US defence spending cuts - will be how much members are prepared to pay for their armed forces in leaner times.
Senior Labour figures are already debating whether to advocate slashing defence spending after the election and joining a common European defence policy instead. "We need to be honest about what we can do," says one former cabinet minister.
Such thinking has broad consequences. Amid the pre-summit horse-trading last week, Britain endorsed Brazil's campaign for a permanent seat on the UN Security Council, although new members risk diluting British influence.
"A crisis forces decisions," notes Malloch Brown, who, as a former UN deputy secretary general, oversaw years of stalled talks on security council reform but who now argues it may be time to act.
So will Britain, as one former treasury minister suggests, find itself bumped a few rungs down the international pecking order once the recession is over? Malloch Brown admits we may take a "cut in our cloth" internationally, but insists Britain still punches above its weight in peacekeeping, overseas aid and institutional reform: similarly, the IPPR's Dolphin suggests Britain's boldness in experimenting with measures such as quantitative easing will ensure that others keep looking to the UK for leadership.
For now, however, Brown still faces a troubled few weeks finalising the 22 April budget.
Any dreams of a major package of tax cuts and spending to kickstart the economy died when the Bank of England governor, Mervyn King, publicly warned that Britain could not afford it. But the prime minister insisted in Chile that he could still take "targeted actions" to boost cashflow - which could include heeding pleas from Labour MPs to channel more money to the poor, who are most likely to spend it.
This week's summit may just be the start of a worldwide redistribution, however small, from the chastened rich towards the angry poor. And if it is not, the G20 leaders may suffer the conse
