Stimulate This!

Rich Nations Boycott UN Economic Summit
G20 Leaders to Global South: "Stimulate This!"

This blog is written by my colleague economic development policy advisor James B. Quilligan. who has just emerged from the UN Economic Summit, and feels like the core messages vital to global economic transition are not being communicated in the popular media. HuffPo being ever a unsparing communication vessel seems an appropriate vehicle, so I offered my blog space as an opportunity for an op-ed.

This article will be followed by an interview and Q&A with the author, so leave comments with whatever questions you have. This is the beginning of a series where I will interview and feature colleagues whom I feel are doing crucial and under-reported global transition work.

Click HERE to read the Outcome Document from the UN Conference last week.

June 27, 2009 - United Nations

The centuries-old dream of representatives from every nation in the world assembling to discuss their common economic issues was realized -- or at least attempted -- at a United Nations summit last week in New York. Representatives from three-quarters of UN member states attended a Conference on the World Financial and Economic Crisis and its Impact on Development, where they discussed emergency and long-term measures to combat the worst global economic downturn since the Great Depression. It was the first high-level summit on international financial reform in history.

UN Secretary-General Ban Ki-moon opened the conference, noting that "the global economic crisis shows why we need a renewed multilateralism". Since recession has gripped many of the world's industrialized nations during the past year, nearly $18000 billion has been raised or pledged to prop up global banks, financial institutions and corporations. Yet global investment in anti-poverty programs and development has sharply declined. "Surely if the world can mobilize more than $18 trillion to keep the financial sector afloat," Ki-Moon observed, "it can find more than $18 billion to keep its commitments to Africa."

Although the financial crisis began in the developed nations, the world's poor and vulnerable populations have borne the heaviest burden of the global economic meltdown. Commodity prices have fallen, global exports have slumped, foreign direct investment has declined, domestic incomes have dropped, food and energy costs have risen, debt has mounted, credit has become more expensive and aid flows and remittances have flattened.

Financing for the UN Millennium Development Goals targeted for 2015 is also falling dramatically as capital flows from rich to poor nations continue to plunge. The World Bank predicted last week that private capital flows to poor nations will decrease from a high of $1.2 trillion in 2007 to less than $363 billion this year. At the same time, economic growth in developing nations is expected to fall from 8.3% GDP in 2007 to 1.6% in 2009. Without coordinated efforts by developed nations to help the world's poorest nations, 100 million people may fall into extreme poverty each year for the foreseeable future, with women and children suffering the brunt of food insecurity, decreasing access to health care and education and deteriorating social protection. The effects of climate change have also intensified as a result of the economic crisis.

The summit was conceived last November in Doha at a UN conference on financing for development. It was shaped with input from a group of former economic policy-makers, academics and private sector representatives chaired by former World Bank Chief Economist and Nobel Laureate Joseph Stiglitz. The summit's proposals include new measures for external financing, debt relief, increased aid, sovereign debt restructuring, a global reserve currency, and systemic reforms for creating sustainable development and restoring global economic growth.

The creation of a new international economic system is hardly a new idea. During the past half-century, many leaders and activists have called for a global emergency stimulus for poor nations to enable them to become equal trading partners with developed nations, thereby raising demand for goods and services, expanding global trade and investment and reducing world unemployment. Designing a broadly representative framework to address the deep systemic flaws in the international system and provide new financing for poor nations was a central topic of the Non-Aligned Movement and the Group of 77 (1960s); the campaign at the United Nations for a New International Economic Order (70s); the international development commissions of Willy Brandt and Julius Nyerere (80s); the Commission on Global Governance (90s); and the Monterrey Conference on Financing for Development (this decade). It is sometimes forgotten that the Group of Seven -- now called the G8 -- was created in 1975 for the express purpose of countermanding any proposals of this sort that would change the structure of the global economic system and give poor nations a voice in how global development funding is organized.

Those fault lines were evident in the negotiations leading up to last week's global summit. Developed nations wanted to focus on development issues that could be ameliorated through free market policy decisions and discretionary aid and loans by the G8, the G20, the IMF and World Bank, while developing nations preferred to examine the deeper causes of the global crisis in order to overhaul the international financial system. During the past year, as many of the G20 nations generated huge domestic stimulus packages to mitigate the effects of recession, their relief efforts for developing countries have stagnated. At the same time, the world's indebted nations lack the resources to create their own stimulus plans, not only because of the current financial and economic crises but also because of IMF conditionalities on loans.

While the Group of Twenty includes both the G8 nations as well as many former 'developing' countries -- such as China, India, Indonesia, South Korea, Brazil, Mexico, Saudi Arabia and Turkey -- the world's poorest nations are increasingly recognizing that these newly emergent industrial and oil powers no longer speak for them. The international press has also blurred the distinction between developing and emerging economies, making little mention that the G20 nations have become part of the global financial oligarchy in recent years, even though their views may not be fully in sync with the Western-based G8. With the onset of the global recession, the G20 has been anointed the new center of global economic decision-making by the International Monetary Fund, the World Bank, the World Trade Organization, the international press and the public in the world's wealthiest nations. Yet in spite of their recent promises to tackle the current economic crisis through effective global regulation, most G20 nations are still pursuing policies of financial and capital market liberalization, deregulation and trade protectionism.

The UN Economic and Social Council, which United Nations founders in 1945 envisioned as a leading determiner of international economic policy, has only been given authority over UN development policy. Meanwhile, the IMF and World Bank, which are technically United Nations institutions, have always made autonomous decisions based on input from the world's richest nations. Hence, during the post-war period, voting power and representation at the IMF and World Bank have been granted only to nations with the strongest economies, and developing nations are rarely given an opportunity to address their meetings or those of the G8 and G20.

Some analysts believe that the IMF and World Bank should be abolished, or at least marginalized, and that decisions on the management of the global economy should be transferred to the UN General Assembly -- the only universal body of sovereign states, the only body with global political legitimacy, and the only body with the capacity to analyze global financial crises and their impact on development. Last week's summit marked the first time that all UN member nations -- the G192 -- had been invited to offer a coordinated response on the world's financial and economic conditions.

But the historic significance of inclusive global decision-making is not appreciated by everyone. It's no secret that G20 nations are not interested in addressing the structural causes of poverty or their impact on development and human rights, and have worked behind the scenes to undermine the creation of a broad economic decision-making framework. At its last summit in April in London, the G20 declared that the UN's role was merely to "monitor the impact of the crisis on the poorest and most vulnerable", not to address the long-term restructuring of the international monetary and financial architecture to restore global economic stability.

Unsurprisingly, the planning process before the UN summit was contentious, including a whisper campaign of political pressure to dampen conference participation. As a consequence, only 10 presidents and prime ministers attended, mainly from small Caribbean nations. G20 leaders either boycotted the meeting altogether or sent low-level representatives. Of the 142 delegations present, nearly half were comprised of UN ambassadors. Nor did the G20 news media cover the event in much breadth, although numerous articles discrediting General Assembly President Miguel d'Escoto Brockmann as a former leftist Nicaraguan foreign minister were peppered throughout the Western press during the weeks leading up to the summit. Pundits expressed relief that D'Escoto's term as head of the General Assembly is slated to end in September, perhaps also ending the UN's quest for international economic coordination.

As the G8 meets in Italy next month and the G20 assembles in Pittsburgh this September, many issues remain unresolved. How long will these self-appointed clubs go on wielding the authority and legitimacy of an international free market agenda over the world's 6.7 billion people? Was the UN summit on the world economic crisis a wasted opportunity or a historic step toward global economic governance? Can the UN overcome its bureaucracy and inefficiency and establish a permanent working group to carry out a plan of action for transforming the world's financial architecture?

How these concerns will be addressed is uncertain. What is clear is that in shoring up the world's financial institutions through a short-term stimulus for private capital, banks and corporations, effectively ignoring the long-term stimulus of human and social development through the eradication of poverty, the G20 seems to be engineering another 'lost decade of development' for poor nations. The world's impoverished people will continue to suffer the results of a systemic global crisis they did not create but must pay for nonetheless.


James Quilligan, Economic development policy advisor and writer for many international politicians and leaders, including Pierre Trudeau, François Mitterand, Jimmy Carter, Edward Heath, Olof Palme, Tony Blair, and His Royal Highness Prince El Hassan bin Talal and worked with the Brandt and Nyerere commissions in the 1980s. www.global-negotiations.org.

Comments

[Bob56]

07:37 PM on 07/16/2009

I could not agree more with James Quilligan. It has become increasing­ly apparent to me that only an economic system built on the idea of one world and one people will work in the long term.

[Mike Howell]

01:14 AM on 07/07/2009

To Michael Strong, It seems to me that you've missed the whole point that any socially sensitive economist makes, that what we've created works only for 25% of the world and only really benefits less than 10%. Economic liberaliza­tion does not work, period. We know now that for any system to work it has to be inclusive and that means all the world, Sudan, Zimbabwe, Nth Korea and others that you mention. Separation is the very feeling that enables one to commit evil against another human being. What the world is suffering from most today is separation symptomati­c in the way the richest countries and corporatio­ns look after their own backyard and continue to expand it without regard to the globally detrimenta­l consequenc­es. The UN is ideally the only possible global representa­tive though God knows we need to do a lot of dirty washing to clean it up.
It's the chasing of and attachment to profit and power that has harmed the world for generation­s. Without thought for environmen­t or others of the human family the developed world has created conditions to favour only it. The World Bank, IMF and other global financial institutio­ns that demand usury must change or be dismantled or the consequenc­es will be disastrous­. The economy will be only the tip of the iceberg.

[coursewecan]

11:03 PM on 07/04/2009

I note that the recent summit 'marked the first time that all UN member nations - the G192- had been invited to offer a co ordinated response on the world's financial and economic conditions­'
EXCUSE ME but why are we wasting such a resource?
If the internatio­nal monetary and financial architectu­re needs to be restructur­ed to restore economic
stability, imput is needed from the world's most skilled and those who currently manage this need a wide perspectiv­e. wid.......­..........­..........­..........­..........­..........­..........­.........e­r
Are our values so corrupted that we would choose the status quo?
Because things are the way they are they must not remain the way they are.
Thanks to James Quilligan and Christiana Wyly for keeping us informed.

[Michael Strong]

04:17 PM on 07/04/2009

This "decisions on the management of the global economy should be transferre­d to the UN General Assembly" is a nightmaris­h proposal. The U.N. Human Rights Commission has included as members China, Zimbabwe, Saudi Arabia, Pakistan, Algeria, Syria, Libya, Vietnamn, and Sudan, some of the worst violators of human rights on the planet. Sudan was elected to the commission in 2004, in the midst of Sudan's ethnic cleansing of Darfur. And Quilligan thinks that the U.N. should manage the global economy?

For a sane approach to global governance­, see

http://www­.wider.unu­.edu/publi­cations/ne­wsletter/a­rticles/en­_GB/05-09-­brauer-hay­wood/

Quilligan'­s approach will lead to more poverty and war. He ignores the long term correlatio­ns between economic liberaliza­tion and poverty reduction. On China and India alone, see,

http://sit­eresources­.worldbank­.org/INTPG­I/Resource­s/12404_TN­Srinivasan­-Paper2+Ta­bles.pdf

He also ignores the correlatio­ns between economic liberaliza­tion and peace, as shown in the work Gartzke, Djankov, and others.

He is right to complain about the role of unfair trade barriers put up by the rich countries. Stiglitz's best work is that developed nations should unilateral­ly eliminate trade barriers (as the U.S. has done for Africa with AGOA).

But pushing more foreign aid at this point, after the work of George Ayittey, Bill Easterly, Dambisa Moyo, and others is simply a recipe for enriching developing world kleptocrat­s while the citizens continue to suffer.

[global commoner]

02:38 PM on 06/30/2009

To Christiana Wyly,

Thanks for offering your space for this article. I've no doubt concerns like Mr. Quilligan'­s are, and have been for decades, as relevant as anything in terms of educating us on the causes and solutions to this global crisis.

Like so many other readers out there would probably agree, intelligen­t and experience­d perspectiv­es (in addition to relevant facts) like these are seldom brought up in public discourse, mainly because the news media tends to avoid looking into the source of problems, ugly and uncomforta­ble as they can be. Until humanity starts thinking in terms of the whole, instead of protecting certain parts, we will only continue going downhill with financial worries and tension among the masses.