Service on Finance and Development (Apr09/01)
Assembly thematic dialogue on economic crisis begins
The dialogue will include sessions on Thursday and Friday in which Prof. Joseph Stiglitz, chair of the Commission of Experts on Reforms of the International Monetary and Financial System, and other members of the Commission, will present the draft recommendations of their report.
On the opening day, there was a morning panel discussion on the origins and systemic aspects of the crisis, and an afternoon session on the UN system response to the crisis.
significant proposal was by
The UN General Assembly President, Miguel d'Escoto Brockmann of Nicaragua, started the meeting, noting that there is need for a 21st century architecture to deal with 21st century problems of a world in economic crisis.
Dr. Jomo Sundaram, UN Assistant Secretary-General at the UN's Department of Economic and Social Affairs, said the UN-DESA and UNCTAD had warned of the system's vulnerability and the impending crisis. There was an international financial architecture that is an "insult to architects" as there was actually no proper global system regulating finance.
He said that capital account liberalization was promoted by institutions like the IMF, while the IMF's own staff had recognized that financial globalization did not contribute to growth.
Though developing countries are victims, the responses are inadequate and also reflect double standards, said Jomo. There is a new situation where the non-inclusive G20 is invoked to provide leadership, while the UN General Assembly is trying for a more inclusive process.
Despite financial globalization, investment did not increase but declined over the past decades. The unwinding of global imbalances has been disorderly and the collapse of growth in trade has had disastrous effects especially for commodity producers.
There is now a deflationary spiral, where the effects of stock and property markets had led to a credit squeeze and lower global and national demand. The UN's prognosis is not optimistic. The fate of developing countries has become tied up with the developed countries' economies. There is recession in the North with slowing growth in developing countries.
Jomo said that developing countries are facing a run down in their foreign reserves. UN-DESA predicts that world trade will fall by 10% this year, an unprecedented situation in seven decades. The social impacts are serious, with an increase of 200 million working people becoming poorer and unemployment rising by 51 million, according to ILO figures.
Jomo said that this is a "Bretton Woods moment". He said there is a legitimacy problem with the present leading processes, including the G20 process. Discussing the role of the UN in the crisis, Jomo asked whether it can take the lead, ensure a systemic reform and align the IMF, World Bank and regional banks with the UN agencies to ensure policy coherence.
Ms Jane Stewart, special representative to the ILO, said the world is in a deflationary cycle, with job losses leading to more job losses. Our job is to put a floor under that cycle, she said. There has been a spike in unemployment, with 11 million losing their jobs in 2008 and in 2009, up to 50 million will be unemployed.
She said migrants' loss of income is a major problem. For end-2009, another 25 million will find employment in unsafe and precarious work. More alarming, 200 million will be pushed back into deep poverty. Small and medium sized businesses are also badly affected.
The ILO proposed that jobs is the issue through which the crisis should be tackled. The UN should consider a Decent Work Pact, in which the large stimulus packages should be transformational, making the world move towards a low-carbon economy and to make globalization work for all.
Titelman, a Director of ECLAC (the Economic Commission for Latin America
Developing countries face challenges including the tightening of external financial conditions, declining commodity prices, weak external demand causing export decline, and difficulties to finance counter-cyclical policies, he said.
capital flows to developing countries have fallen sharply. Between 2007
and 2009, the net capital inflow will fall from $184 billion to $43
billion in Latin America, while for emerging countries in
Social effects include rising unemployment, with real wages reducing and employment shifting from dynamic exports to low productivity informal sectors. Declining remittances and the return of migrants could also undermine poverty gains.
added that many developing countries (including
Denisov, first deputy foreign minister of
He said the Stiglitz Commission's recommendations were a generally sound basis for further discussion. The experts should continue their work, including to elaborate a road map to implement the recommendations. The experts can also provide their expertise to the UN follow-up activities after the UN General Assembly's high level conference on the economic crisis in June.
added that the UN has universal and unchallenged legitimacy, and thus
He proposed, in addition to the June meeting, a special international conference at the level of authorized representatives, involving experts in relevant fields, which could elaborate specific proposals and draft international conventional arrangements for a new international monetary and financial architecture. +