UN Role in Global economic crisis

The same ever-recurring themes run like a red thread through the international initiatives to deal with financial and economic crises, although they may be weighted differently or even run in the opposing direction. It is always a question of the reform of the international financial system, acquisition of additional liquidity, control and regulation of markets and the specific competences of a wide range of institutions.

The primary actors for development policy debates were the UN and certain of their special organisations, the Bretton Woods institutions, the EU and the regional development banks. The G-20 assumed an incontestable role. Non-governmental organisations throughout the world played an active part in these discussions and published numerous documents. Many in the academic world were concerned with these issues.

The UN claimed an important role for itself at a very early juncture. UN Secretary General Ban Ki-Moon had offered to host a global conference on the financial crisis. He received the backing of the Group of 77 (G-77) and many civil society organisations. In vain! The UN and its sub-organisations did put forward analyses, staged conferences and seminars and proposed measures, but the more important role fell to the G-20 and the Bretton Woods institutions.

From Monterrey to Doha

International Conference to Review the Implementation of the Monterrey Consensus, held in Doha, Qa (...) This can be found under point 79 of the closing declaration at: http://www.un.org/esa/ffd/doha/doc (...)

The financing for the development conference held in Doha16 was staged, independent of the financial and economic crisis, to examine progress since the 2002 Monterrey conference on finance for development. But the food, energy and financial crises played a significant role throughout the preparatory phase and had a marked influence on the conference and the resolutions taken. The timing of the conference proved unfortunate. The G-20 finance summit, held shortly before in Washington, took the wind out of Doha’s sails and only a few heads of State and government attended. The closing document described the dramatic global situation for the most part pertinently but remained vague with a view to concrete action. Nevertheless, after hard negotiations the Doha conference did resolve to hold a highest-level UN conference on the financial crisis and its impact on the poorest countries in 2009.17 This was important in that the topic could not be monopolised by the G-20; the UN thus kept its role in the process of reforming global financial architecture.

Stiglitz commission

The commission comprised 18 specialists from all over the world. See: UN News Centre, General Asse (...) The UN NGO Liaison Service published a summary of all inputs on the subject. See: http://www.un.or (...) The programme, background documents (including papers by the IMF, World Bank and UNCTAD) and state (...)

Already before the Doha conference the President of the UN General Assembly, Miguel D’Escoto Brockmann, deployed a commission under Professor Joseph Stiglitz to examine the global finance system and to propose appropriate measures.18 To this end, the commission conducted a broad consultation procedure in which almost 100 civil society organisations also participated.19 The commission published its provisional report in mid-March 2009 (UNO 2009). Further to a comprehensive analysis section, in very clear language for a UN document, the report also included numerous proposals for measures. Thus, the commission urgently proposed a globally coordinated stimulation policy and demanded more financial aid for developing countries. A new global credit organisation would be necessary for this purpose. The Stiglitz commission further demanded a new international reserve currency and a comprehensive reform of the international financing institutions. Also necessary is a global council for economic coordination on the lines of an economic security council. This report, together with other analyses submitted, was discussed in-depth at a special UN General Assembly event.20 In mid-May the commission presented its provisional report, which was at the same time the basis for the UN General Assembly session scheduled for June on the reform of the international monetary and financial system (UNO 2009a).

The UN conference on the global crisis

The UN conference on the global financial crisis, which was decided on at Doha, was planned for the beginning of June 2009. However, the preparatory process proved difficult; just determining the modalities took several weeks. The conference was first postponed and then rescheduled for the end of June.

More than 200 civil society organisations signed a joint document entitled “Civil Society Backgrou (...) All the conference documentary matter and the programme are posted at: http://www.un.org/ga/econcr (...) Ambassador Martin Dahinden, Director of the Swiss Agency for Development and Cooperation (SDC), de (...)

In the meantime the G-20 had already established facts at the summit in London (see below). With considerable effort, they did manage to produce a closing document (UNO 2009b) with plenty of vague phrasing and no concrete plans of action. That was the result of an embittered struggle between the industrialised countries and the Group of 77, the latter backed up by strong commitment on the part of the non-governmental organisations.21 The primary concern of the industrialised countries was patent, i.e. the UN’s role in global economy issues should be kept as small as possible. In the end only very few heads of State and government from the industrialised countries attended the conference eventually held from 24 to 26 June.22 The final document advocated comprehensive reform of the international financing institutions. In contrast, there was nothing substantially new with a view to novel and additional instruments in development financing. The document recognised the necessity of political leeway for the developing countries, though without going into the conditionality issue. The paper further proposed that additional special IMF drawing rights should be admitted, primarily for the developing countries. In the combating of international tax evasion and illicit capital flows, the document did not go beyond the principles already established in Doha.23

This implies that all 192 member countries should have a voice at the UN. The fact that the conference managed to install a continuation process can be rated as the most positive result from the viewpoint of the developing countries (South Centre 2009). This strengthens the UN claim to a strong voice on global economic and financial issues. Thus, the UN as a “G-192”, as it has already been called,24 virtually becomes a counterbalance to the G-20. The excellent analyses by UNCTAD (2009a, 2009b, 2009d), in particular, are significant.

From the G-8 to the G-20

he countries are members of the G-20: Argentina, Australia, Brazil, Canada, China, France, German (...) In this respect Jeffrey Sachs wrote in the Financial Times: America has passed on the baton, Septe (...) The G-2025 has clearly assumed the role of coordinating instrument for global economic and financial policy. The major threshold countries definitely have their own place at the Group of Seven/Eight (G-7/G-8) table now. And with this, the industrialised countries have taken the changed global economic power structure into account. The financial crisis further accelerated this development. The G-20 represents 85% of the world GDP, but 2.6 billion (for the most part impoverished) people and 172 countries are excluded. The G-20 put itself on the throne, rendering the legitimacy of decisions with global impact questionable.26

Switzerland is not a member either. Like the Netherlands and Spain, it does not even have observer status. After the Pittsburgh summit, Swiss Federal Councillor and Finance Minister Hans-Rudolf Merz commented critically on its legitimacy. Officially, the Federal Department of Finance does, however, welcome the Pittsburgh resolutions (FDF 2009).

All closing communiqués are posted at: http://www.g20.org/pub_communiques.aspx. This contribution (...) The G-20 summit in Washington in mid-November 2008 was the first held at heads of State and government level. Previously the meetings had involved the individual ministers of finance and the heads of the issuing banks.27 Although there was talk of “Bretton Woods 2” in the run-up to this summit, the results were far below expectations. In particular, the direct interests of the poor countries were, for the most part, not taken into consideration, although the final declaration did mention the necessity of supporting the threshold and developing countries. They would have to obtain access to sufficient financial resources. The declaration called on the IMF to be flexible in applying its credit instruments. The World Bank and multilateral development banks should use all their resources, and if necessary increase them, to support the poor countries. In the same vein, the heads of State affirmed they were ready to head the reform of the IMF and the World Bank. There were no concrete courses of action in favour of the developing countries; the phraseology remained vague. The major threshold countries integrated in the G-20 proved to be ineffective pioneers for the poorer developing countries. However, the latter hope to be able to benefit indirectly from the incipient technical reform process, e.g. from the already resolved extended cooperation in the tax sector under the reform of the IMF and the World Bank.

For details see the London Leaders’ Statement, 2 April 2009, London Summit Outcomes, Declaration o (...) The G-20 summit in London on 2April 2009, for the first time with new US President Barack Obama, brought more important progress for the developing countries. The summit agreed an expansion of the IMF credit resources available totalling USD 750 billion. The World Bank and multilateral development banks would increase their loans to low-income countries by USD 100 billion. The capital basis would be broadened proportionately. A further USD 250 billion should be made available to finance trade. IMF and World Bank institutional reforms that have already been initiated should be speeded up and extended.

The international media felt the outcome of this summit was rather disappointing, at least with respect to a new global financial order. In contrast, various comments on the results with respect to the development aspects were cautiously optimistic. Thus, Oxfam (Oxfam 2009) considered it important that the final statement, dated 2 April 2009, acknowledged in article 25 (G-20 2009c): “We recognise that the current crisis has a disproportionate impact on the vulnerable in the poorest countries and recognise our collective responsibility to mitigate the social impact of the crisis to minimise long-lasting damage to global potential.”Oxfam further calculated that a potential USD 240 billion could flow to the developing countries, USD 50 billion of these to the poorest countries. The aid organisation added critically that, however, this would be for the most part in the form of loans and not gifts. Oxfam called for expeditious implementation.

The strengthened position of the IMF was rated more critically by the developing countries and the aid organisations. The voting reform and other governance questions remained mired in generalities. There was no call for a new IMF and World Bank policy; the strict conditionality of loans was only mildly modified (see below).

The third G-20 heads of State summit held on 24-25 September 2009 in Pittsburgh dealt intensively with bank regulation, minimum capital prescriptions, bonuses and debt limits, but also with the continuation and deliberate lapsing of growth and occupation strategies as well as global imbalances. After all, the summit agreed that 5% of IMF voting rights should be transferred from the over-represented to the under-represented countries. Moreover, 3% of the World Bank voting rights are to be shifted. At the same time the summit emphasised that reforms of the IMF and World Bank mandate, mission and governance should be continued. The conference also presented two extensive representations in table form of progress made, both with a fundamentally positive appraisal of what had been achieved (G-20 2009).

External institutions were significantly more differentiated and critical in their opinions. N. Woods (2009) did acknowledge IMF efforts for increased inflows of funds. However, he criticised that to date less than 2% of the new IMF credits went to African countries.

Eurodad (2009), the European Network on Debt and Development, acknowledges that more progress has been achieved in comparison to previous G-7 summits. However, it criticised the fact that the G-20 had not yet provided the funds pledged. Aid resources for the developing countries are linked to disadvantageous conditions. Regulation of raw materials speculation and progress with tax havens, inter alia, are slow and insufficient.

Jubilee USA Network (2009) takes the same stance. This network of 75 civil society organisations is examining, on the basis of 13 G-20 aims, whether the G-20 is indeed on the right road and whether the needs of the developing countries have been met. Only in the event of a surveillance mechanism, to be created by the UN, monitoring the effects of the crisis on the poorest, does Jubilee come to a positive response on both counts.

4.3.3. International financing institution activities

The IMF and the World Bank as well as other multilateral financing institutions addressed the financial and economic crisis early and on their own initiative. At the same time the G-20 resolutions also added impetus. Vice versa, the heads of these organisations were not loath to call urgently on the G-20 heads of State for speedier and more intensive action. They were able to attend the summits as observers.

The principal concerns included on the one hand the policy counselling of the member countries and financial support, which is to be considerably increased. To this end, all the multilateral financing institutions had to significantly expand their own resources. This process had not been completed by autumn 2009. At the same time the financial crisis had entailed increased pressure on the reform of governance. However, the resistance of a few industrialised countries remained high; nevertheless, the reforms should be completed in 2010.

Both the IMF and the World Bank use the spring and autumn meetings to present their measures and activities in the best possible light. The annual meeting in Istanbul in early October 2009 even adopted the optimistic slogan: “Road to global recovery”.