As the UN Economic and Social Council (ECOSOC) was tasked to take up many action points on the follow-up to the UN Conference on the World Financial and Economic Crisis and its Impact on Development (24-26 June 2009, New York), NGLS, in collaboration with the International Trade Union Confederation (ITUC) and Third World Network (TWN), organized a side event on 23 July 2009 to brief Geneva-based government delegations and NGOs on the Conference outcome and begin discussion on the challenges and opportunities for moving the process forward.
The first Panel was moderated by Hamish Jenkins of NGLS. It was noted that among civil society organizations, reactions to the Conference outcome ranged from strong disappointment to cautious optimism on the way forward. Expectations that the Conference would amount to a fundamental overhaul of the international financial and monetary system (a “Bretton Woods II”) had clearly not been met, but the short time span for substantive negotiations (little over a month and a half) did provide the basis to start a process to promote deeper and more comprehensive reform of the global economic governance under the aegis of the UN. “Those that wanted the Conference to be a one-off event with no follow-up did not succeed,” said Gemma Adaba from ITUC. In particular, an open-ended working group of the UN General Assembly will follow-up on the issues contained in the outcome document (these include explicitly or implicitly many systemic issues not taken up in the April 2009 G-20 Summit, ranging from debt restructuring to a new development-oriented global reserve system).
Keeping the momentum
Senior Advisor to the President of the General Assembly Michael Clark emphasized the key role played by civil society and other actors in the build-up to the conference. These coalitions have to be kept alive around a set of well-sequenced priorities and the consolidation of North-South as well as South-South alliances of State- and non-State actors. A key challenge is for civil society to maintain pressure on capitals to ensure that the more progressive forces within national governments prevail in future negotiations. It is important to find synergies with other processes, notably the upcoming negotiations on climate change.
The combination of strong expertise on highly complex financial topics and political mobilization had been an essential component in the build-up to the Conference as it would be for the follow-up. This included the work of the so-called “Stiglitz Commission” whose recommendations, it was noted, reflected many of the main proposals by civil society channeled through NGLS earlier this year. In turn these proposals were taken up by a very large number of countries in the negotiating process.
Ambassador Lumumba Di-Aping (chief negotiator for the G-77 group of over 130 developing countries and China) emphasized this point as he explained the role of civil society and think tanks in upgrading the knowledge base of delegations as part of the consensus-building process. It was noted that a key Stiglitz Commission recommendation, namely to set up a panel of experts based on the experience of the Inter-Governmental Panel on Climate Change (IPCC), was now a key feature of the Conference follow-up process, for which ECOSOC was tasked with elaborating recommendations. The IPCC had been instrumental in building consensus on complex climatic issues (e.g. is global warming a fact? and is it caused by human activity?), as could be a comparable panel on complex global economic and financial issues (eg. is the existing global reserve system inherently unstable and deflationary? Are more employment- and development-centered alternatives feasible?).
Ambassador Lumumba stressed not only the political unity of developing countries in the process, but also the role played by what he described as the “Social Democratic North”, which included progressive ministries and think tanks in Europe, as well as the commitment to multilateralism within elements of the new Obama administration that he said prevailed to some degree over more conservative factions. “Let’s face it: without Obama, this deal would not have been made.” He outlined three priority areas from a G-77 perspective, namely (1) effective short-term crisis mitigation, especially for poorer countries; (2) deep transformative reform of the global economic and financial architecture; and (3) the centrality of the United Nations in the reform process.
Key Conference achievements
These priority areas overlapped considerably with civil society perspectives put forward by Bhumika Muchhala of Third World Network, who said that the UN Conference represented a legitimate and inclusive process, which achieved consensus among all 192 Member States, where the richest of the G8 countries as well the poorest of the low-income countries were able to voice themselves. This historic Conference occurred at a juncture where the role of the UN in economic affairs had diminished steadily over the last several decades due to the rise of the Bretton Woods Institutions’ power in development financing and economic policy-making. “As such, the potential of the UN to re-position its role and reassert its voice in the area of economics and finance may show openings that it had not shown previously,” she said. Ms. Muchhala contrasted this process with the G-20, which she said lacked political legitimacy and had no mechanisms for accountability. She noted that G-20 Summit outcome of April 2009 decided to triple the lending capacity of the IMF without serious governance reform preconditions. Despite official rhetoric to the contrary, she added with concern, the Fund was continuing to promote “pro-cyclical” and “contractionary” (that is, deflationary) policies in a number of its recent standby agreements with countries in need of emergency finance.
Ms Muchhala noted that the UN Conference’s outcome document presents several areas where political space and opportunity for advocacy and exploration emerges for developmental policy measures to respond to the crisis. Some of these positive opportunities include policy space, debt mechanisms, loan conditionality and the follow-up process overall. However, she said the document also includes areas that present challenges, such as the language on the Doha round of the WTO.
On policy space, the document unambiguously recognizes, in Paragraph 15, the right of developing countries facing severe shortages of foreign reserves to use “legitimate trade defence measures” in accordance with WTO provisions. This would include the right to raise tariffs within WTO bound rates and the ability to use balance-of-payment safeguard provisions. Paragraph 15 also recognizes the right to “impose temporary capital restrictions, and seek to negotiate agreements on temporary debt standstills between debtors and creditors.” Temporary controls over capital outflows are not only technically consistent with the IMF’s Articles of Agreements, she said, but have also been pursued by Asian countries during the 1997-98 financial crisis.
Having followed the negotiations closely, Ms. Muchhala also noted that the G-77 and China had proposed an innovative measure to address the dramatic foreign exchange shortfall facing developing countries as a result of the crisis. This included US$100 billion worth of Special Drawing Rights (or SDRs, which involves the emission of a kind of international money) be allocated by the IMF to low-income countries at no cost to them, while another $800 billion be disbursed to middle-income countries, which can be returned to the IMF when the crisis effects subside, in order to avoid inflationary impacts. This proposal was blocked during the negotiations, which she described as a “missed opportunity”. However, the Conference’s follow-up process does give the possibility to further study the potential role of SDRs for “development purposes,” as stated in Paragraph 35.
On the broader follow-up, Ms. Muchhala stressed that “the matter of how strong the mandated working group of the General Assembly will be, how much it is able to flesh out and develop further, and how much effective participation it can get will be an oncoming test of the UN.” On the panel of experts, she said a key potential would be the ability to provide a menu of policy options, and thereby to challenge what she described as the one-size-fits-all framework of the Washington Consensus and the Bretton Woods Institutions. “Many members of civil society have been consistently advocating for a broader range of policy options and scenarios to be discussed with developing countries during the negotiation of loans and agreements. It will be the task of civil society to push for ensuring that the Panel of Experts is representative, diverse, and reflects development-oriented economic policies.”
As this event was taking place, the President of the General Assembly had put forward a draft resolution on the establishment of the General Assembly follow-up working group, while a draft ECOSOC resolution on the establishment of the panel of experts was being circulated.
Synergies with the Global Jobs Pact
The event also examined synergies with the Global Jobs Pact, adopted at the ILO Jobs Summit held in June 2009 in Geneva. In many respects, this represented the other side of the coin: what was the end goal of financial reforms? Finance had to be reformed to ultimately serve the real economy, the flourishing of sustainable enterprises and the goal of full and productive employment and decent work for all. Conversely, many policy options in the Global Jobs Pact would be hampered without a more supportive financial and macroeconomic framework.
Raquel Gonzalez, Secretary of the Workers’ Group in the ILO’s tripartite negotiations said that the Pact provided the basis for new model of development based on the Decent Work Agenda, Social Justice and a Fair Globalization. She said it addressed two main crises:
- Firstly, to counter the crisis of global aggregate demand and avoiding a deflationary wage spiral through coordinated efforts at embedding employment generation at the heart of stimulus packages, while developing a social protection floor for all and promoting basic workers rights, especially freedom of association and collective bargaining.
- Secondly, to address the “crisis of the system” through greater coherence and coordination of international organizations around decent work, reforms of the financial sector to serve longer term real economy and productive employment objectives, fiscal space as well as policy space in trade for developing countries, while managing a transition to a green economy.
Linkages with strengthening the UN’s Financing for Development Mechanism
A second Panel, moderated by Martin Tsoukeu from Africa Development Interchange Network, consisted of a presentation by Eva Hanfstaengl from Jubilee Germany, on the Financing for Development (FfD) history and perspectives on the current mandate of ECOSOC to strengthen the FfD mechanism. While it remains unclear how the FfD mechanism and UN Conference follow-up processes will interface, Ms. Hanfstaengl and other participants insisted it was essential to find ways for both processes to strengthen each other.
This article is available in Spanish.