UN is the crucial body to address global crisis (Part 2)

Bhumika Muchhala

The United Nations, which incorporate the voices of the majority of countries in the world, is a legitimate global structure to address the global financial and economic crisis.

The critical impacts of the current financial and economic crisis on developing countries threaten to undermine their development prospects and require the attention of the highest level of participation in the June conference of the UN General Assembly on the world financial crisis.

The indispensable and crucial role that the UN must play to build an inclusive process and coherent response to the financial and economic crisis, as well as to exemplify a fair and legitimate structure for global governance, was highlighted by many official and country delegate participants.

The Group of 77 (G77) countries and China, represented by Sudan, said that the United Nations is mandated, by charter, to be a center for harmonizing the efforts of different nations to respond to global crises.

The current crisis requires decisive and concerted action by the UN, which has its own charter on the obligation of the UN to solve problems of economic, social and humanitarian nature. ECOSOC is mandated to be an institution exactly for this purpose of enhancing systemic responses. More attention needs to be placed on how the UN can play a stronger role toward a renewed permanent institutional mechanism for financial and monetary matters.

This gathering, as well as the UN conference in June, are important venues to pursue this goal. The policies and programmes of the IMF need to be singled out, precisely because it remains to be work as usual in the IMF. Balance-of-payments loans should not come attached to policy conditionalities that are contractionary and procyclical, constraining development objectives that are urgently needed.

Financial assistance

While provision of new resources and flexibilities are welcomed, access to these resources must not be contingent on the implementation of conditionalities. Sudan emphasized that policy space for developing countries must be maintained, while alternative modalities for providing liquidity must be explored, including possible trust funds and regional loan facilities.

The international community needs to provide conditionality-free financial assistance to developing countries, particularly the most vulnerable countries.

Financial and trade matters

Sudan also said there is a need to redouble efforts in multilateral trade negotiations, while strongly rejecting any kind of protectionism in financial and trade matters. This is essential to recovery and the G77 calls upon all states to avert the tendency to resort to protectionist measures.

What is at risk in the current crisis is the human dignity of every person and child, and the world must act to unite the human family. This crisis, if not contained rapidly by addressing the root causes, will have unimaginable consequences.

China said that it is in full agreement with the position expressed by Ambassador Lumumba Di-Aping on behalf of the G77 and China.

The issues of the huge financing gap present in developing countries, the need for fiscal measures, aid for trade, and the threat imposed by financial and trade protectionism all need to be addressed and resolved upon in the June conference, toward the aim of sending a positive signal to the international community that the UN is committed to reduce the impact of the global financial crisis and to reforming the international financial architecture.

Market liberalization

Iran said that Western countries and banks encouraged excessive deregulation and market liberalization, which channeled problems into developing countries.

On the other hand, Islamic banking services can be seen as an alternative model that does not operate on the same principles.

Brazil said that it fully ascribes to the statement of the G77 and China group, and what other speakers have already highlighted regarding the severity of the crisis and its impacts on development.

A consensus seems to be emerging on the imperative need for short-term measures to enable adequate fiscal responses in developing countries, while also enabling them to continue and accelerate progress toward MDG achievements.

The Commission of Experts led by Joseph Stiglitz proposed some serious measures that can be adopted in the short-term, preferably on concessional terms. It is important the June conference of the UN focuses on discussing longer-term structural issues.

Brazil reinforced that trade financing, debt relief, capital flows, and official development assistance (ODA) are all needed in developing countries. The Global Monitoring report of the World Bank and IMF demonstrates that all of these considerations must go into addressing developing country demands.

The Doha development round should be a final package that really delivers its development mandate by eliminating or reducing export and domestic subsidies in developed countries.

Brazil reiterated the call for greater developing country voice in the IFIs, and said that this change will entail reviewing the mandate of the IFIs in order to make them more development-oriented, and in particular, “more attune to the need for policy space by developing countries.”

Algeria stressed that a truly global and inclusive response requires the sincere participation of all institutions - the Bretton Woods Institutions need to partake and play a central role in establishing goals at the UN conference in June.

A “new multilateralism requires a more open WTO with strengthened international oversight,” said Algeria. This oversight should be concentrated on not only countries, but also on employment and major economic imbalances.

Economic recovery

Jamaica highlighted that the treatment of deeply indebted countries needs to be reviewed. Sovereign and corporate debt needs to be reviewed in new ways that affords indebted countries the chance to pursue economic recovery.

The Netherlands took a proactive stance by stating that it fully supports the UN General Assembly conference on the financial crisis in June, and will recommend to its capital participation at the highest level.

The Netherlands said that two key issues for June are efforts to build a system of global governance and rebuilding the architecture of international finance. Resolving the disconnection between the real and financial economy, after the great problems caused by an era of ‘casino capitalism’ will also be a key challenge for June.

The extent to which economic recovery is connected to a “green recovery” is also critical. The global community needs a decision in Copenhagen in December on climate change. Given that the current crisis is as severe as that of the 1930s, the world has not yet witnessed the kind of coordinated reaction of that era.

The Netherlands is committed to allocating 0.8 percent ODA and about 500 million Euros for clean energy in Europe. Predictable finance to the poorest should be major priority for immediate measures in counteracting the crisis, and it should be delivered in a way that does not make one country the victim of another.

The world has not seen what can be called a ‘multilateral moment’ in many years. There is a great imperative to improve global governance at this juncture and poor countries need to have not only a stake but also an effective voice in the decision-making of the international financial institutions.

German Development Minister Heidemarie Wieczorek-Zeul emphasized that the legitimacy of the United Nations is precisely that it incorporates the voices and the participation of all 192 countries.

Global governance

There is no group of countries in the clusters of the “Gs” that can demonstrate the UN’s inclusive and effective global governance.

There is a need for further discussion on how to use the UN’s legitimacy in global governance in the June conference, which must show the world that the UN is an economic and policy actor in this world and that the global community should use the institutions it already has, along with the Bretton Woods Institutions, to tackle this crisis in a meaningful way.

Minister Heidemarie also stressed that the poorest countries and societies of the world need to be the priority of global crisis response.

The poor should not be trapped in a cycle of debt and poverty and the global community needs to help them to act countercyclically, as all countries have the equal right to be able to act countercyclically. This requires not just talking globally but also acting globally.

The United States said that ECOSOC has fulfilled an important role in the process that started in 2002 in Monterrey. With many countries grappling with steep revenue declines, international assistance is crucial for developing countries to weather the storm.

Over the past three months, the US has taken unprecedented action to put its own house in order. It has jumpstarted job creation, laid the foundation for future growth and put in place standards on regulatory system.

Food security

President Obama has stated that “we are living through a time of global economic challenges that cannot be met by half-measures or isolated actions by any one country.”

The US delegate assured participants that the US is following that principle and encouraging trade and fiscal stimuli to benefit all. In London, President Obama also underscored the US commitment to provide an additional US$1.1 billion to assist food security.

The Dean of the IMF Executive Directors stated that the role of the IMF’s board is separate and critical in its own right, apart from the role of the IMFC (International Monetary and Finance Committee) body.

The Fund’s Executive Directors have been committed to implement speedy reforms in the IMF’s loan facilities and programmes to respond effectively to the needs of its crisis-affected members.

Many flexibilities have been put in place, access amounts have been double, conditionality has been streamlined and new lending instruments such as the Flexible Credit Line have been put in place.

However, the Dean reaffirmed that the most urgent reform is quota and voice reform.

- Third World Network Features