Experts commissioned by the President of the General Assembly are proposing far-reaching changes to international finance structures and strong measures to overcome the current economic crisis.
Led by Nobel Laureate Joseph Stiglitz, the Commission of Experts on Reforms of International Finance and Economic Structures recommends that 1 per cent of developed-country stimulus packages be directed to the developing world to fight poverty and build global demand.
While a coordinated stimulus is required for global recovery, many poorer developing countries lack the requisite resources. The Commission proposes a number of additional sources, including an immediate issuance of Special Drawing Rights (SDRs) and supports regional efforts, like the Chang Mai initiative. It emphasizes, however, that such funds should be provided without the inappropriate conditionality often associated with such assistance.
The Commission also advises enactment of an already approved International Monetary Fund (IMF) measure to double SDRs available to hard-hit countries, up to SDRs 42.8 billion. To further help the world economy get back on its feet, and to guard against a repeat global financial debacle, it proposes an overhaul of the current system of global reserves.
A new global reserve system,possibly based on greatly expanded SDRs, could contribute to economic stability and equity, the Commission says. It would reduce the deflationary effects of the massive reserve accumulations that countries have found necessary to protect themselves against the high level of global instability. Such a system is “feasible, non-inflationary and easily implemented”, and counteracts the risk of a rapid fall in the value of a major reserve currency, gutting hard-earned reserve funds.
General Assembly President Miguel d’Escoto Brockmann empanelled the Commission of Experts last year in response to the downward spiral in the world economy. Its recommendations were under consideration at the Thematic Interactive Dialogue on the crisis, taking place from 25 to 27 March at Headquarters, Conference Room 4. National representatives, United Nations officials, experts and civil society stakeholders are participating in the Dialogue, which is open to the media.
Both the recommendations to the General Assembly and the Interactive Dialogue will inform preparations for the upcoming International Conference on the Global Economic and Financial Crisis and its Impact on Development, to be held from 1 to 3 June in New York.
The Commission emphasizes that the welfare of developed and developing countries is interdependent in an increasingly integrated global economy, and also that an inclusive global response to the crisis must encompass not just the G-7, G-8 or G-20, but the “G-192” (number of Member States in the General Assembly). Short-term measures to stabilize the current situation must ensure protection of the world’s poor and blend into reforms to prevent future financial catastrophes, while addressing current global inequalities.
Other proposals of the Commission include:
— An elected and representative Global Economic Coordination Council, within the United Nations system, to meet annually at Head-of-State level to assess developments and problems, coordinate policies, and lend leadership on social and environmental as well as economic concerns. Such a body would provide “a democratically representative alternative to the G-20”.
— A Global Financial Regulatory Authorityand aGlobal Competition Authority, accountable to the Coordination Council, under more broad-based governance than the current Financial Stability Forum, to oversee global financial stability, prevent regulatory arbitrage, harmonize regulations, and prevent the growth of multinational firms that represent a threat to competition or pose a problem having become too big to fail.
— A new international credit facility that could provide additional credit to developing countries without pro-cyclical conditionality, and whose governance would be both more representative of the new donor countries and more sensitive to the concerns of the developing countries. It might be most rapidly opened under the umbrella of the World Bank, where efforts are already under way to remedy inadequacies in governance and lending practices, or in regional development banks, where developing countries enjoy more equitable representation.
Reviving Global Trade
The Commission was expected to present a further range of recommendations during the Interactive Dialogue. They include establishment of a mechanism to resolve sovereign debt and cross-border investment disputes; better mechanisms to manage risks faced by developing countries, especially in managing their debt; and a broad array of proposals for improving the regulation of the financial system.
With trade volume projected to decline for the first time in decades, and at the steepest rate since the Great Depression, the Commission cautions against protectionist measures because of their restrictive effect. But it notes that subsidies (including recent bail-outs and extensive guarantees) “can be just as detrimental to the efficiency of a free and fair trading system as tariffs. Indeed, they may be far more inequitable, because rich countries have more resources …”. The experts advocate fulfilment of the 2001 Doha Declaration on Development, the immediate opening of markets in the developed countries to goods from the least developed countries, and the immediate implementation of the 2005 World Trade Organization Ministerial Agreement reached in Hong Kong on eliminating all forms of developed-country export subsidies by 2013