South's leaders stress the UN's leading role in economic affairs

In their speeches at the UN conference on the economic crisis, developing-country leaders emphasised the importance and legitimacy of the UN as the truly democratic forum for initiating the larger process of reform and change in global economic development.

Bhumika Muchhala

THROUGHOUT the plenary sessions at the United Nations conference on the world financial and economic crisis, leaders and diplomats made speeches in the General Assembly hall offering their countries' views on the crisis and the UN's role.

Many developing countries were represented by their ministers, who stressed their support for the important role of the UN in addressing the crisis as well as the systemic issues of the global economy. However, there was low-level representation from developed countries, who in their speeches seemed to give a more limited role to the UN.

Ecuador, represented by its President, Rafael Correa, stated that developing countries have come to the G-192 'to demand democracy and to highlight the other possible world.' Ecuador stated that the crisis is no longer only a financial crisis, as 'the whole world has been contaminated', and the South, 'which had no responsibility whatsoever in the crisis, has become its main victim.'

Ecuador pointed out that for years the US 'maintained huge trade and fiscal deficits, with the connivance of the International Monetary Fund. Any other country would have been forced to devaluate and "correct" its imbalances.' However, the double standards that characterise the practices of the IMF resulted in the 'complicity' of the institution. Ecuador stressed that despite this track record of the IMF, the G20 seeks to 'recapitalise it just like that, without even moving one chair from its Board of Directors.' The reform of the Bretton Woods institutions (BWIs) is an 'insufficient stopgap solution,' Ecuador emphasised, in that the BWIs have long marketed the ideology of neoliberalism through the 'Washington Consensus.' In the same way that it would be 'absurd and irresponsible' for the speculative markets,  which were directly responsible for this global crisis, to be given the role of fixing the crisis, it is also irresponsible to let the solutions be 'proposed, programmed and executed' by the same BWIs that caused it.

Ecuador called for the enhancement of 'supranational monetary-financial sovereignty', which would be able to reduce the 'perverse effects that affect our economies' when linked with the international financial system. The country's role in the creation of the Development Bank for the South was emphasised, as was the development of a 'common reserve fund for Latin America', which would 'prevent the deposit of more than $200 billion' from Latin American countries to Northern banks. Ecuador noted that it was a paradox that even in the midst of a crisis, developing countries allow their money to 'finance rich countries, in exchange for a few dollars accrued as interest.' Ecuador also proposed 'consolidating a common monetary system, which may begin as an electronic currency to facilitate  regional exchanges.' Establishing such a system is a 'matter of coordination and political decision', and as such, this goal is already progressing through the Single Payment Compensation System known as SUCRE.

Brazil's Minister of External Relations, Celso Amorim, stated: 'This conference is an historic opportunity for change..The fact that we have been able to agree on a balanced and ambitious outcome document is a testament to the vitality of the UN. It has disproved many of the sceptics.' He stressed the importance of the UN, with its inclusive and legitimate structure, initiating a larger process of engagement, saying that it is 'incumbent upon us, UN Members, to ensure that it is the beginning of a process by means of which the whole of mankind, and not just a few, take ownership of their own destiny.'

Amorim added that the Bretton Woods institutions must be more open to cooperation with the UN General Assembly and the Economic and Social Council (ECOSOC), as it is 'essential to ensure greater transparency and accountability to the global economic policy debate.' Amorim also highlighted the personal commitment of Brazilian President Lula da Silva to advancing the role and power of the UN. In President Lula's statement at the 63rd General Assembly, he advanced proposals for a UN response to the crisis, and since then, he has 'consistently raised the issue in a number of meetings, such as the G20 and BRIC summits.'

Brazil spoke out against the restrictive and pro-cyclical conditionalities imposed on developing countries by the international financial institutions (IFIs), saying that they must be 'thoroughly overhauled'. Developing countries, including countries not in a position to finance such measures by their own means, are the ones that need counter-cyclical policies the most. These policies include social protection, cash transfer programmes, health and education, industry bailouts, infrastructure and employment.

China's Minister of Foreign Affairs, Yang Jiechi, stated that China supports a bigger role for the UN in tackling the global crisis and hopes to explore, through the UN conference, ways to 'send out a strong signal that the international community is united as one and is engaging in sincere cooperation.' China suggested that efforts be made in four areas in order to 'deepen global development partnerships, strengthen developing institutions' and ensure progress towards the Millennium Development Goals (MDGs).

First, macroeconomic policies in the area of fiscal, monetary, trade and employment policies should be coordinated. Second, open international trade should be promoted and protectionism in trade 'firmly opposed'. Third, development cooperation though implementing the Monterrey Consensus and fulfilling the commitment of using 0.7% of developed-country gross national income as development assistance should be put into action. Fourth, South-South cooperation should be strengthened in order to boost external demand. China has signed with some countries and regions bilateral currency swap agreements worth RMB650 billion, and has contributed 32% of the $120 billion reserve pooling arrangement also known as the Chiang Mai Initiative.

China also called for the reform of the IFIs and for stable international financial markets.

Historic

India's Minister of State for External Affairs, Preneet Kaur, stated that the UN conference was 'a truly historic meeting', in the sense that it was only the second United Nations gathering held on the financial and economic system and architecture, the first being the Bretton Woods conference in 1944. She added that 'the UN provides a unique forum, with unparalleled legitimacy and inclusivity'.

India said that the General Assembly must be revitalised along with a real reform of the Security Council. ECOSOC also needs to be more robust and effective in coordinating global responses to global challenges. The IMF and World Bank need to see their voice and quota reform accelerated 'so as to make these institutions both responsive and effective as well as credible and relevant'. India also highlighted the need for more counter-cyclical policy responses and an increase in lending by IFIs and multilateral development banks (MDBs), and the need to 'not permit protectionist tendencies', not just in goods trade but also in the free flow of persons, financial services as well as imposition of non-tariff barriers.

South Africa, represented by Minister of International Relations and Cooperation, Maite Nkoana-Mashabane, said that it is 'essential that the UN, as the most inclusive and transparent multilateral international organisation, brings us all together to collectively consider the appropriate means to mitigate the largest global financial crisis faced by the international community.'

South Africa stressed that the international community must show the same urgent resolve and determination today as it did in the aftermath of World War II. 'It was because of the massive concessional resource transfers in the aftermath of World War II that Western Europe recovered and was set on its development path. A similar intervention helped put a number of Asian countries onto their own development trajectory..Now, it is time for the same to be offered to developing countries, in particular the LDCs [least developed countries].'

South Africa called for an increase in IMF resources and the recapitalisation of the MDBs, in particular the African Development Bank. Given that the resources available for counter-cyclical responses are most constrained in African countries, South Africa has urged all countries to meet international development goals, especially the G8's Gleneagles commitment to double annual aid budgets to Africa by 2010. It is also urging for infrastructure investment in Africa, where the financing gap is estimated at $50 billion in 2009.

The Governor of the State Bank of Pakistan stated that the conference's outcome document provides the 'framework, direction and timelines for actions needed to combat the adverse impacts of the global financial and economic crisis.' The establishment of the working group to follow up on specific decisions and actions is indeed a welcome development, as it marks the start of an important process. Pakistan also stated that developing countries' right to consider 'trade defence measures, temporary capital restrictions and temporary debt standstills' should be recognised in the face of their balance-of-payments difficulties stemming from the financial crisis. In order to 'avoid another debt crisis and to explore enhanced approaches to the restructuring of sovereign debt', Pakistan called for the provision of grants and concessional loans as the preferred financing instruments to developing countries.

The United States, represented by its UN Ambassador, Susan E. Rice, said 'the UN's universal membership and its well-institutionalised intergovernmental process gives it a unique advantage in responding to many dimensions of this crisis.' The dialogue of the UN conference should focus on mitigation and seeing that the 'UN performs its crucial development roles with new urgency.' The US said it 'hopes that this important conference will adopt the pragmatic and practical tone and approach that can help us achieve our shared vision for a better future.'

The European Union, represented by the Deputy Minister of Foreign Affairs of the Czech Republic, Helena Bambasova, said that the EU is 'in favour of a key role for the United Nations in the efforts to help developing countries tackle a variety of global social, economic, financial and environmental challenges and foster sustainable development in all its dimensions.'

The EU is firmly committed to taking 'comprehensive, timely, targeted and coordinated action to support developing countries, especially the poorest and most vulnerable.' The EU also stated its intent to support the achievement of the MDGs in developing countries and to take 'targeted, counter-cyclical measures aimed at protecting the most vulnerable countries and groups and at sustaining economic activity and employment, with particular attention to the private sector and productive capacity.' The governance, mandate and scope reform of the IFIs, doubling of access for low-income countries to concessional lending from the IMF and the boosting of resources to all the IFIs was supported by the EU.

The CANZ Group of Canada, Australia and New Zealand was represented by John McNee, Permanent Representative of Canada to the United Nations. The CANZ Group said that the UN conference presents a 'valuable and timely opportunity to come together to discuss the risks we all face as a result of the global financial and economic crisis, with a particular focus on development.' They welcomed the opportunity to contribute to 'coordination and collaboration between all relevant actors.' They emphasised the importance of meeting aid commitments, the critical role of the IFIs and the G20 commitments, and the 'complementary engagement of all actors, including the UN.'       

This article is reproduced from the South Bulletin (No. 38, 7 July 2009), which is published by the South Centre.

*Third World Resurgence No. 226, June 2009, pp 13-15