In last week’s column (July 26) I had urged the importance of the symbolism for developing countries, which the United Nations Conference on the Global Financial and Economic Crisis held in New York, last June represented. This should not be under-appreciated, as by and large, the conference represented for these countries a continuation of their collective efforts to have the United Nations assert its hegemony over global economic and financial matters. Such an assertion, it is hoped, would redound to the benefit of poor countries.
Despite the original intention at the time of the establishment of the Bretton Woods Twins (International Monetary Fund and World Bank) to have these institutions evolve, more or less, as part of the United Nations elaborate structure of inter-governmental bodies, this has not occurred. As I indicated, this has resulted largely because the rich industrialised nations did not want it to happen. Instead, the Bretton Woods institutions ended up as creatures and instrumentalities of the rich industrialized countries.
In the earlier context of the Cold War, this allowed them to exercise enormous control over the economic and financial policies of developing countries, and indirectly through this to exercise social and political control as well, which aided them in their struggles against the socialist bloc of countries.
In this week’s column I shall turn my attention towards evaluating the results of the UN conference.
Strategic
conference goals
Across the broad and varied range of developing countries there can be no doubt that there were numerous goals being pursued during the proceedings of the United Nations conference. With the benefit of hindsight and 20/20 vision, two of these now seem to form the strategic core, which drove the expectations of developing countries.
Undoubtedly, one was to keep a hard and continuous focus on mitigating and alleviating the devastating impact of the crisis on the poor and powerless. We have seen in recent columns that, as in the case of previous crises, a disproportionate share of the global pain and suffering has fallen on those countries least able to cope. Generally, developing countries have had the worst effects when measured by standard economic indicators, such as income, investment, export performance, unemployment, consumption, and social distress. At the same time, as a group, these countries have the least fiscal capacity to provide social protection and safety nets for their citizens.
The second strategic core goal, which seemed to have guided poor countries’ participation was to avoid, if possible, the seemingly interminable periodic recurrence of crises, which has befallen market capitalism. This goal of avoiding repeated crises speaks to the systemic contradictions in the reproduction and growth of the global economy and its financial mechanisms. These lead to spurts in economic activity, followed by declines of varying intensity. This is not, I believe, correctable in the framework of market capitalism.
Policy options
In the context of these two strategic core goals, the poor countries appropriately advocated certain policy options to meet their situations. In the course of the conference deliberations it became clear that one of these was to ensure that the global system and its regulation secured for them adequate “policy space.” By this is meant adequate opportunities for national policies to combat the crisis, which could be implemented without prejudice or sanction from the global community.
Several examples of this search for policy space were discussed at the conference. One was the right of poor countries to introduce trade measures, on a temporary basis, to cope with the fallout effects of the crisis on their import trade. It was suggested by several countries that this could be in the form of “temporary safeguards” that were made compatible with WTO rules.
Another example was the call for poor countries to be able to temporarily introduce capital controls in order to prevent capital flight and to have these sanctioned by the International Monetary Fund (IMF). There were, in addition, calls for a variety of other balance of payments safeguard measures and direct controls on foreign payments and receipts to be temporarily permitted as part of legitimate policy responses, and not be classified by the IMF as a return to foreign exchange rationing when they exercise their surveillance responsibilities over the global financial system.
Yet another example was the call for poor countries to be able introduce a standstill, for the duration of the crisis, to their foreign debt obligations to rich countries.
Other types of policy options focused on global measures to immediately address the negative economic impacts of the crisis on poor countries. In this regard a variety of measures were proposed.
For example there was the call to substantially boost the resources of the international financial institutions (IFIs) and other agencies so that they could afford cheap (no interest!) loans to poor countries in distress. Yet another is the expansion of the Special Drawing Rights at the IMF, (which is printing money globally), and distributing these in a manner that disproportionately benefits poor countries.
Conference results
From all reports the conference has had three definite outcomes. The first has been the production of its Outcome Document, which summarizes the discussions, decisions, and plan of actions at the General Assembly. An open-ended Working Group has been constituted to ensure follow-up action and continuity.
Second, the conference agreed that an ad hoc panel of experts would be established. The aim is for this body to provide independent technical expertise to the General Assembly to guide it through its future deliberations in the complex areas of global finance.
Third, there was agreement for the speedy implementation of a cooperative agreement between the United Nations and the Bretton Woods Twins (the IMF and World Bank).
As reported in the media, the Outcome Document “unambiguously recognizes” the right of developing countries facing severe hardships due to the crisis, to take appropriate measures to protect their citizens, as the rich countries have always done.
The open-ended Working Group established by the United Nations is expected to take follow up action on the many specific decisions and actions agreed to and adopted in the Outcome Document.
It is also requested to submit a report on the progress of its activities to the General Assembly before the end of the 64th Session, which is scheduled for September 2010.
Next week I shall conclude this discussion on the recent UN Conference on the Global Financial and Economic Crisis
