UN General Assembly Meeting Sends Strong Message to IMF and World Bank; You Caused the Problem: We want a different system.
THE "BANK OF THE SOUTH" IS HIGHLIGHTED
In an extraordinary session called by the President of the United Nations General Assembly, Miguel D'Escoto, [See PA blog UN Session on Developing Countries & the World Financial Crisis] it became very clear, if anyone had any doubts that almost the full General Assembly are an angry group they made it clear on Thursday, October 30, 2008. But, while the anger was shared by almost the entire 192 member nations, it was the developing nations, which made it very clear that they are finished with Neoliberalism, which has robbed them of valuable resources, and in return they only got more debt.
D'Escoto is a Nicaraguan national with quite an amazing history. I am attaching his biography at the end of this Blog. His one-year presidency of the General Assembly, this is a yearly term, which passes from continent to continent, might become the most important year in the history of the UN. So, its important to know him. Please read it.
Also, the importance of the one day meeting can be understood by both this personal observation and interpretation, but also, from the official press release/narrative-transcript. In that regard, I am attaching that statement from the UN. It is a little long, but it is full of important information that those interested will learn a lot. It could be a basic primer for international economic and political courses and programs.
AT THE SESSION
Speaker after speaker made it clear that the pro-business biased policies of the International Monetary Fund [IMF] and the World Bank [WB] are the fundamental cause of the financial disaster, starting in the United States, but now circulating throughout the world, were at their doorstep.
Another system is needed. And, almost all of the gathered member countries and all the main speakers agreed that there is only one international organization that has the credibility and legitimacy to analyze the crisis and propose solutions. And, that organization is the United Nations. Most of the speeches from the dais and attending countries struck that theme. The United Nations must be part of the discussion and a major part of the solution; and, follow through. I had never heard such overwhelming support expressed so powerfully to the UN.
The General Assembly has 192 member states. And, a number of speakers, starting with the President of the Assembly, began using the term The G-192, as a new term to describe the attitude of the full complement of countries, which belong to the United Nations and participate in the UN's General Assembly. There was only strong dissatisfaction with the G-7 or G-8 and the other regional nation groupings. The G-7 came in for more targeted criticism.
The slogan for the one-day session says it all:
"FOR THE DEMOCRATIZATION OF THE UNITED NATIONS: EVERY COUNTRY COUNTS"
It was very apparent by the remarks from the member states that they didn't need the Expert Panel that the General Assembly president has assembled, lead by Joseph Stiglitz, to tell them that they a new world financial system is needed. Nothing against those experts; and, the attitude of the General Assembly members probably pushed the speakers to be more progressive.
After the three members of the Expert Panel delivered their 20 minutes, member states each took their 5 minutes to give "chapter and verse" on how the IMF and WB set policies which ultimately did not help the countries doing the borrowing, on the contrary, it sunk them further in debt.
But, for the overflow crowd that attended the all day session, in the Trusteeship Council of the UN, those speaking and those listening liked what they were hearing. Finally an analysis that was telling the truth about the IMF and the WB was in the proper forum to have an impact.
Oh Yes, there was one nation that cautioned and called for a "level headed" approach. And, it stepped up to defend the overall policies of the IMF and WB; and, that is the United States. This was after speakers representing the European Union and some individual states within the EU, called for almost major changes in international finance. The US stood alone; and, that did not go unnoticed.
NO MEDIA COVERAGE?
But it appears that the US influence over the media continues. This all day special session on the global financial crisis was NOT reported in the NY Times where "all the news fit to print" is published; nor, the Wall Street Journal. But, you can be sure the powers in the IMF, WB and other supporting countries and corporations are taking careful note.
THE HIGH LEVEL TASK FORCE
If readers want to see the official presentations of the speakers and comments from the nations, again, go to the United Nations Website and click on to the October 30th session. This Report is somewhat sanitized, but you can appreciate the presentation and responses. Significant statements are omitted or softened. See the official UN account at the end of this Blog.
JOSEPH STIGLITZ The first speaker was Joseph Stiglitz, Nobel Memorial Prize in Economics Sciences  and former Senior Vice President and Chief Economist of the World Bank. He congratulated the UN for being the first international response to the global crisis. And, he was the first to state that only the UN has the political legitimacy and inclusiveness to convene and move to viable solutions.
He said we are at a "Historical Moment." That the previous "Historical Moment" that took place in 1944 caused the creation of the Bretton Woods agreements and with it the IMB and World Bank. The theme of the Bretton Woods agreement was "sustainability and equitable development." That agreement way outlived its usefulness and a new agreement is needed. No one disagreed with that.
He said that any solutions must be within the principles of social justice and social solidarity; social solidarity must move between northern countries and developing countries; they must reflect a balance between government involvement and the market place; and foremost, there must be democratic due processes throughout deliberations. There must be total transparency in the processes.
He said that financial services and organizations are a means to get to our goals; they are not the goals. For too many years the aims and goals of the financial markets were the goals and human factors were the means and expendable.
He emphasized that the "trickle down" approach where the wealthy get all and what is left trickles down to the rest is over. That system has totally failed.
The greed that took place in the market systems is the cost being paid by our societies today, and around the world.
Stiglitz made it clear that self-regulation which is what we've had for the past 20 years has been a major failure. Too many conflicts of interest. Anti-trust laws have failed.
There is an immediate need for a new GLOBAL FINANCIAL RESERVE SYSTEM. And, all countries must agree to the new system, within the context of the UN. All countries must agree to the same level of regulation.
He also saw a strong role for the International Labour Organization.
He repeated himself by saying that with all of these solutions, the United Nations General Assembly [he left out the Security Council] and the Economic and Social Council [ECOSOC] of the UN must take the lead.
The upcoming November 29 to December 2, 2008 financial meetings in Doha, Qatar will be crucial and these meetings today can make that meeting effective.
The legendary liberal economist John Maynard Keynes came up many times by many speakers. Most said that had the Bretton Wood's agreement and subsequent implementation adhered to the Keynesian ideas we would not be having these problems today.
PRABHAT PATNAIK The next speaker was Prabhat Patnaik, professor, Centre for the Economic Studies and Planning, Jawaharial Nehru University, India
He said that we cannot have any more bubbles. Prabhat made it clear that the world cannot go through another cycle of bubbles. There must be a paradigm shift.
Individual States Must Assert Themselves Within a New World Global Order
Prabhat and other speakers made it clear, also, that while their needs to be strong international response to the crisis, individual nation states must play a strong role. Cross border financial transaction must be special attention paid. Those cross border activities must be closely regulated. The mew system must make sure that people get a good social wage, health care, education and all other human needs.
His main emphasis was the issue of Food Security. Peasants must be able to have food and small producers must be able to produce. Others also sounded that alarm. "There must be a revival of the agricultural economy."
He said that ALL policies solutions must be considered.
SAKIKO FUKUDA-PARR Then, Sakiko Fukuda-Parr from Japan spoke. She is a Japanese national who is a professor at the New School University in NYC. She agreed with the assertion that all policies possibilities must be considered. She drew parallels with the 1998 crisis in South Korea; Katrina in the USA in 2003; and the Kobe earthquake in 1998.
She continued by pointing to the severe financial problems faced by many countries over the past two decades; the Asian crisis in the 1990s; South Korea, Nicaragua in 1991, and more recently in Brazil, Philippines and Bombay, India.
But, her main point was that these crises fall heaviest on women. And, most solutions have usually focused on making it possible for men to find work and not toward women who have been working. This forces woman to work in the area of unpaid work.
Dr. Fukuda-Parr pointed to the lessons of Argentina with their crisis and recovery. She also strongly opposes the neoliberal policies, which came from the Washington Consensus Agreements.
Responses from the Member States
The speakers from the European Union; the G-77 with its spokesperson from Antigua Barbuda; the Rio Group with its Mexican spokesperson; Spain; the Philippines; and other countries, with the exception of the US, sounded the same pro UN and anti IMF and WB themes.
The only country, which sounded a different tune, was the Bolivarian Republic of Venezuela. Their representative agreed with the denunciation of the IMF and the World Bank; and encouraged the G-192 approach to policy development and solutions. And, they agreed that the role of the United Nations is central.
But, it is when he said that here is another way, other than capitalism that a more significant statement was made. They said that that road should be "Socialism in the 21sth Century."
Predatory capitalism and neo liberalism is the problem and must ended.
He also said that Bolivarian Republic of Venezuela is still very much committed to the UN's Millennium Development Goals [MDGs].
He then drew attention to the "Bank of the South," which President Hugo Chavez has been proposing. This lead into the afternoon session.
One more dramatic response came from the Chilean representative who pointed to the history of his country during the dictatorship of Augusta Pinochet when he brought the ultra conservative, Milton Friedman "University of Chicago Model" to Chile and destroyed their economy. That terrible episode of Chile has been mostly reversed.
The Indian representative put forward an interesting idea that the current period should be looked as an "Economic Nuremberg." He didn't elaborate whether trials should be convened, but the way was open for that.
The Argentinean representative spoke forcefully that for too many years the developing countries were often blamed for the problems of the world; when, in fact, they were always the victims.
Human Security was a recurring theme by many speakers. This is a major ingredient of the MDGs of the UN.
In rebuttal, the main speakers made some final remarks.
Stiglitz made a special point just in case the case wasn't made clearly, i.e., this crisis has a Made in USA label, and the policies being considered in Washington are and will not work. He pointed to the environmental movement, which often said, "Polluters should pay for their pollution." The audience liked that idea.
The Bank of the South
DR. PEDRO PAEZ It is significant that the President of General Assembly chose to highlight the Chavez initiated Bank of the South by inviting Dr. Pedro Paez from Ecuador to describe the Bank. He was the lead speaker in the afternoon session. In fact, the only document, speech, which was distributed to not just the 192 member states, but also to all of the NGOs sitting in the Balcony. This full document, it is a rather technical presentation, is available on the UN Website.
The presentation by Dr. Paez was impassioned and everyone listened closely.
Clearly, this regional approach is one, which the UN will pay close attention. A number of speakers called for these kind of regional approaches but they must be coordinated on an international level.
For other details, see the following Press Release by the UN.
According to the invitation to this Session, a General Assembly working document is being prepared for the Qatar meetings. The outcomes of this day's sessions will be part of the document.
BLOGGER COMMENT: What as not mentioned in the full day of discussions, that for the time period that the IMF and WB were held in check, i.e., 1945 through about 1990, there was another economic system. It was the economic system enjoyed by the Socialist Countries lead by the Soviet Union. These nations did not suffer from the predatory capitalism, speculation and greed that has occurred since that system evaporated. And, the existence of that system had a profound influence over the rest of the world. Vladimir Putin, the Head of Russia, s president and now prime minister, may have been harkening back to those pre-1990 days when he said that the greatest mistake every made in Russia was the elimination of the Soviet Union and the relationship amongst nations that were part of the system.
NOTE ON GENERAL ASSEMBLY PRESIDENT:
H.E. Father Miguel d'Escoto Brockmann, M.M.
President of the 63rd session of the United Nations General Assembly
H.E. Father Miguel d'Escoto Brockmann, M.M., was elected President of the sixty-third session of the United Nations General Assembly on 4 June 2008.
A veteran statesman, politician, community leader and priest, Father d'Escoto served for over a decade as the Republic of Nicaragua's Minister for Foreign Affairs, a post he held from July 1979 until April 1990. During his tenure, he played a key role in the Contadora and Esquipulas peace processes to end internal armed conflicts in Central America in the 1980s. Also at that time, he spearheaded his Government's decision, in 1984, to bring to the International Court of Justice a claim against the United States for supporting military and paramilitary actions against his country, with the Court subsequently ruling in favour of Nicaragua.
Father d'Escoto is currently Senior Adviser on Foreign Affairs, with the rank of Minister, to President Daniel Ortega Saavedra, a post which he has held since 2007. He also chairs Nicaragua's National Committee on Water, in which capacity he plays a leading role in efforts to conserve Lake Cocibolca, the largest source of water in Mesoamerica. He is a member of the Sandinista National Council and the Political Commission, the highest governing body of the Sandinista National Liberation Front (FSLN).
Ordained a priest of the Maryknoll Missionaries in the early 1960s, Father d'Escoto has travelled extensively, visiting most of the world's capitals, as well as many remote and less accessible areas of the globe, and has dedicated much of his life to helping the poor. In 1963, he founded the National Institute of Research and Population Action (INAP) in Chile, aimed at empowering the disadvantaged populations of the callampas or slum neighbourhoods on the periphery of Santiago and other cities, through community action in defense of labour rights. Following the earthquake that devastated the capital city of Managua (Nicaragua) in December 1972, Father d'Escoto mobilized assistance for quake victims and, in 1973, established the Nicaraguan Foundation for Integral Community Development (FUNDECI), now one of the oldest and most prestigious non-governmental organizations in Nicaragua.
In 1970, Father d'Escoto assumed responsibility for Maryknoll's Social Communications Department at its headquarters in New York, where he founded Orbis Books. The publishing arm of Maryknoll Fathers and Brothers, Orbis quickly became a leader in religious publishing, offering works on spirituality, theology and current affairs, often from a Third World perspective. Later, while living in New York, Father d'Escoto was one of the founders of the "Grupo de los Doce" (Group of 12), composed of progressive, democratic intellectuals and professionals who supported the FSLN in its struggle to overthrow the dictatorship of Anastasio Somoza in Nicaragua. He was appointed Foreign Minister of Nicaragua shortly after Somoza's downfall.
Inspired by the lives and works of such personalities as Leo Tolstoy, M. K. Gandhi, Dr. Martin Luther King, Jr., and Dorothy Day, Father d'Escoto is an advocate of multilateralism and respect for international law, and is deeply committed to the principles of active nonviolence, solidarity and social justice, which, together with a deep sense of ethics, have formed the basis of his political life.
Father d'Escoto is the recipient of numerous awards, such as: the Order of Cardinal Miguel Obando Bravo (2007), the highest honour awarded by the Catholic University Redemptoris Mater (UNICA), for his work for peace; the Thomas Merton Award (1987), for his commitment to world peace; the Order of Carlos Fonseca Amador (1986), the FSLN's highest honour, for his contributions to international law; the International Lenin Peace Prize (1985/86) awarded by the Soviet Union; the Julio Cortázar Prize for Peace and Democracy in Latin America and the Caribbean (1985), awarded by Argentina's Institute of International Relations; and the Alfonso Comín Peace Prize (first recipient, Barcelona, Spain, 1984), which he accepted on behalf of the Nicaraguan people. In June of this year, Father d'Escoto received the unanimous endorsement of the Group of Latin American and Caribbean States (GRULAC) within the United Nations as its candidate for the Presidency of the sixty-third General Assembly of the United Nations.
Born in Los Angeles, California, in 1933, Miguel d'Escoto spent his childhood years in Nicaragua, but returned to the United States in 1947 to study. He entered the Catholic seminary at Maryknoll (New York) in 1953, and in 1961 was ordained a priest. In 1962, he obtained a Master's of Science from Columbia University's School of Journalism
THIS IS OFFICIAL RELEASE FROM THE UNITED NATIONS; DESCRIBING THE ONE DAY SESSION
30 October 2008
Department of Public Information • News and Media Division • New York
Sixty-third General Assembly
On Global Financial Crisis (AM & PM)
UNITED NATIONS MUST INTERVENE FOLLOWING FAILURE OF UNITED STATES GOVERNMENT,
BRETTON WOODS INSTITUTIONS TO ADDRESS FINANCIAL CRISIS, SAYS NOBEL LAUREATE
General Assembly President Says Global Solution
Must Involve 'G-192', Not Quick-Fix Half-Measures Agreed 'Behind Closed Doors'
The United States Government and the Bretton Woods institutions had failed to adequately address the international financial crisis, and the United Nations must intervene as the one institution that was inclusive and had political legitimacy, Joseph Stiglitz, former Chief Economist of the World Bank, said today during an interactive panel discussion on the global financial crisis.
Mr. Stiglitz, a Nobel Laureate and Professor at Columbia University, said that, while the crisis bore a "Made in the United States" label, it was in fact worldwide and required a global response that must be consistent with justice and social solidarity for all countries, reflect an understanding of the necessary balance between Government and markets, and respect the principles of democratic due process, including full transparency.
"We are now at another Bretton Woods moment", he said, noting that the Bretton Woods institutions had been founded principally to maintain global economic stability and employment, not to push capital and financial market liberalization or promote contractionary fiscal policy in the midst of a depression or a recession. Liberalization had led to advanced growth, but also increased instability, and the global financial system had often worked to the disadvantage of developing countries. Emerging market countries had little if any representation in decision-making, and reform of the governance structure of the International Monetary Fund (IMF) had been insufficient. The current crisis also threatened to exacerbate poverty in developing nations, and the IMF had failed so far to propose adequate regulatory reform measures to avert the danger.
That situation must change, he said. Creation of an external shock facility was a good idea, as was creating a multilateral reserve system with greater stability. There must also be more global cooperation in setting macroeconomic policies, and the creation of a global financial regulatory commission should be studied urgently. The global response must also be based on rebuilding trust in the financial markets, which must serve society at large, not just a wealthy few. "The financial markets did not do what they were supposed to do, which was to manage risks and allocate capital", he said. "We're not going to restore confidence to the markets and the global economy until we re-earn that trust."
Financial markets were not an end in themselves. What was good for them was not necessarily good of the economy, he said. The belief that the wealth earned on markets would "trickle down" to everyone was not true. On the contrary, the United States bailout had helped banks, but had done very little for homeowners losing their homes and workers losing their jobs. The United States response violated basic democratic principles of good governance and transparency, as well as the "polluter-pay" principle of cleaning up one's own mess. The United Kingdom's response had been the right one.
General Assembly President Miguel d'Escoto Brockmann agreed with that assessment, saying it was unreasonable to recommend that a little tinkering would restore prosperity or confidence. While States must pick up the pieces, it would be folly to put the global financial system back together as it had been. The international community had the responsibility and the opportunity to identify longer-term measures beyond protecting banks, stabilizing credit markets and reassuring big investors. It was time to take advantage of the unique forum provided by the United Nations to build agreement on the new financial architecture that was needed. The stakes were too high for half-measures and quick fixes put together behind closed doors. Long-term solutions must include the "G-192".
Noting that many recommendations had been heard in recent months, he said solutions must involve all countries in a democratic process that must address the needs of the billions of people without enough to eat, much less retirement savings to worry about. Member States had solemnly promised to meet their commitments to financing for development, and, throughout the crisis, they must ensure that those promises were kept.
Solutions were not to be found in poorly conceived regulations that would be discarded at the first sign of renewed "exuberance", he emphasized. "Our deliberations must be calm and thoughtful. But let us be guided by a passion for justice and fairness and inclusiveness. By including new voices, we can begin to restore that all-important sense of trust -– in each other, in our Governments, the United Nations and other international institutions."
Calestous Juma, Professor of the Practice of International Development at the Belfer Centre for Science and International Affairs of the Harvard Kennedy School, said the United Nations should play a key role in fostering the creation of a new financial diplomacy regime that would bring together the global community to identify and share best practices in managing the relationships linking finance, innovation and development. It could bring to New York experts from finance ministries to connect with the diplomatic community and engage with central banks, something that historically had not been done.
Sakiko Fukuda-Parr, Professor of International Affairs at The New School, said it was important to learn from the responses to the economic crises of the 1980s, 1990s and 2000, in which orthodox stabilization policies had been applied without safeguards to protect the poor and vulnerable. It was important not to cut budgets for aid, social safety nets and strategies to fight global warming. There was also a need to rethink restrictive expenditure and inflation policies, to incorporate pro-poor recovery measures that offset unequal burdens for women.
Prabhat Patnaik, Professor at the Centre for Economic Studies and Planning at India's Jawaharlal Nehru University, said the problem was that the real lives of millions of people were determined by the whims of "a bunch of speculators" under the free market system who were interested not in the long-term yield on assets, but only in the short-term appreciation in asset values. Governments in advanced countries had still not recognized the onset of a market crash, proceeding instead on the assumption that the injection of liquidity into the system was all that was needed. But the injection of liquidity was inadequate in a situation where a recession had already started. Credit would not start flowing simply because banks could access more liquidity. There must be adequate demand, by solvent and worthwhile borrowers, for credit to launch viable projects, and that was not happening.
Pedro Páez Pérez, Minister for Economic Policy Coordination of Ecuador and President of the Ecuadorian Presidential Commission for the New Regional Financial Architecture–Banco del Sur, said that, given the speed and depth with which the crisis was unfolding, a regional "Monterrey agreement" among South American countries was urgently needed to act as a common framework in which the exchange rates of participating countries would be monitored, assessed and, if possible, agreed at the subregional level, according to the principle of mutual concern for exchange-rate credibility and stability. The coordination of relatively flexible regional-bloc agreements was the most plausible way to achieve a rapid outcome, and their success could generate the political momentum for further institutional agreements that would open the horizon for a holistic and stable new global financial architecture.
François Houtart, Professor Emeritus at Belgium's Catholic University of Louvain and founder of the Tricontinental Centre, said the world needed alternative choices and not just regulation. It was not enough to rearrange the system; the system must be transformed. It was a moral duty, and in order to understand that one must adopt the viewpoint of victims. When 850 million people lived below the poverty threshold, and the climate got increasingly worse, it was not possible to talk only about the financial crisis. All the systemic breakdowns had led to a real crisis of society. There was a need for a long-term vision based on a renewable, rational use of natural resources, which pre-implied a different approach to nature. That meant respect for the source of life, rather than the unlimited exploitation of raw materials.
The panel discussion was moderated by Paul Oquist, Senior Adviser to the General Assembly President.
Also speaking during the discussion were the representatives of Qatar, France (on behalf of the European Union), Antigua and Barbuda (on behalf of the "Group of 77" developing countries and China), Mexico (on behalf of the Rio Group), Spain, Philippines, United States, Venezuela, China, Chile, United Kingdom, India, Jamaica, Japan, Argentina, Egypt, Brazil, Nicaragua, Portugal, Morocco, Indonesia, Bolivia, Singapore, Honduras, Republic of Korea, Ecuador, Belarus, Canada, Kenya and Germany.
Opening Remarks by General Assembly President
MIGUEL D'ESCOTO BROCKMANN, President of the General Assembly, said the world was in the midst of a complex economic crisis; the dimensions of which were not yet clear, but which would have game-changing consequences. What had once been benignly described, as "irrational exuberance" had now been exposed for what it was: unbridled greed and pervasive corruption enabled by Governments that had lost sight of their responsibility to protect their citizens. The credibility of the dominant stakeholders had been shattered. Trust, that most precious and essential element in human exchange, had vanished. The world faced setbacks that were already causing untold suffering. For some, the consequences were fatal.
He said it was not reasonable to recommend that a little tinkering would restore prosperity or confidence. In the short term, of course, financial managers in the public and private sectors were attempting to assess the extent of the damage and taking actions to prevent the global economy from tipping into worldwide depression -– a nightmare difficult to contemplate. While States must pick up the pieces, it would be folly to put it back together again as it had been. The international community had the responsibility and the opportunity to identify longer-term measures beyond protecting banks, stabilizing credit markets and reassuring big investors. The stakes were too high for half measures and quick fixes put together behind closed doors.
Noting that many recommendations had been heard in recent months, he emphasized that solutions must involve all countries in a democratic process. Economies were global and interdependent, but the global financial architecture did not correspond to that reality. It was time to stop viewing the global economy as the private dominion of exclusive clubs. The G-8, G-15 and G-20 were no longer sufficient in their scope to solve the current problems. Long-term solutions must include the G-192; only full participation within a truly representative framework would restore the confidence of citizens in Governments and financial institutions. Therefore, it was necessary to take advantage of the unique forum provided by the United Nations to build agreement on the new financial architecture required by the international community.
The response must be multifaceted, taking into account the poor of the world, he continued. Member States had solemnly promised to meet their commitments to financing for development, and throughout the crisis, they must ensure that those promises were kept. Today's discussion should be candid, not restrained by the powerful taboo against challenging the gods of the marketplace and institutions that had imposed the dysfunctional policies that had led to the present breakdown. The solution was not to be found in poorly conceived regulations that would be discarded at the first sign of renewed "exuberance". And certainly they were not to be found in the next bubble that would evaporate, leaving elites astonishingly richer, and well-intentioned citizens feeling robbed, bewildered and dangerously angry.
Above all, there was a need to address the billions of people without enough to eat, much less retirement savings to worry about, he stressed. That required some fundamental shifts in mindsets. It was necessary to take into account the current confluence of crises and resist the temptation to restore a status quo ante that was not viable. The governance of a sustainable, inclusive global economy must be adapted to new and urgent challenges that would be present for the foreseeable future.
Underscoring the necessity to address directly the unsustainable culture of over-consumption that was contributing to wild excesses and irresponsible speculation, he called for the courage to tell citizens the truth about the sacrifices ahead, which must be shared and not placed on the backs of the poor, as usual. All nations, including the rich and powerful, must be subject to financial discipline; otherwise there would be no effective international regulations.
However, that would not happen overnight, he cautioned, warning also that there was much damage to repair. It was not just the promise of prosperity that had once again been snatched away; it was the corrosive damage to the sense of trust that must guide any relationship. "Our deliberations must be calm and thoughtful. But let us be guided by a passion for justice and fairness and inclusiveness. By including new voices, we can begin to restore that all-important sense of trust -– in each other, in our Governments, the United Nations and other international institutions."
JOSEPH STIGLITZ ( United States), former Chief Economist of the World Bank and a Professor at Columbia University, said the global crisis required a global response from the United Nations -- the one institution that was inclusive and had political legitimacy. Four general principles should guide that response: it must be consistent with justice and social solidarity; the bonds of social solidarity must go across national boundaries; it must reflect an understanding of the necessary balance between Government and markets; and it must respect the principles of democratic due process, including full transparency.
The economy in general and the financial markets, in particular, must serve society, he emphasized, underlining also that financial markets were not an end in themselves. What was good for the markets was not necessarily good for the economy. The notion that the wealth earned in the markets would "trickle down" to everyone had been proven ineffectual. Conflicts of interest posed important risks. Modern corporations had a separation between ownership and control; corporate managers did not necessarily have the best interests of stakeholders at heart. That was an example of failure, in which corporations served neither the interest of the economy nor that of the people.
What happened in the financial and other sectors of society affected other markets, he said, adding: "The United States Government and Governments of other countries have allowed banks to grow to the point where they are not only too big to fail, they're also too big to bail out." The entire world had borne the consequences of the market failures. The "trickle-down" effect had not worked. The bail-out had helped the banks, but too little had been done for homeowners losing their homes and workers losing their jobs. The response violated basic democratic principles of good governance and transparency.
The financial crisis was now global, and it had impacted emerging markets with no responsibility for causing it, he said. Any global solution must pay due regard to and assist those countries. If not, poverty reduction would be threatened around the world. In the past, the global financial system had often worked to the disadvantage of developing countries. There had been inadequate and, in some cases, no representation of emerging market countries in decision-making. Reform of the governance structure of the International Monetary Fund (IMF) had been inadequate and insufficient. That must change; decision-making must reside within international institutions with broad political legitimacy and adequate representation for middle-income and least developed countries. Only the United Nations had that broad legitimacy. It had set up the Bretton Woods institutions, but the world had changed a great deal since their inception. "We are now at another Bretton Woods moment."
He said that, in the past, the IMF and the World Bank had followed specific economic perspectives that said markets were best. Capital and financial market liberalization may have brought the benefits of advanced growth, but it had also increased instability. Any economic policy had large, widespread consequences, and policymakers had to respect that. Problems had been exacerbated by conflicts of interest, and the credibility and effectiveness of institutions must be restored. In the current crisis, advanced and industrialized countries needed to work in synergy with developing countries, as guarantees provided by Governments in the latter may not have the guaranteed credit provided by those in the former.
Recalling his testimony before the United States Congress last week, he said he had outlined the necessary reforms. Self-regulation would clearly not suffice, and current enforcement of antitrust laws was inadequate and lax. What was needed were reforms in transparency and disclosure standards and limits on leveraging, a focus on safety in national financial systems and comprehensive regulation. There was a need to consider the creation of commissions to establish the safety of new financial products and their appropriateness for new financial parties. The creation of a global financial regulatory commission should also be studied urgently. Several banks must consider changing their mandate, in recognition that price stability was not sufficient to maintain economic stability. There was also a need for due attention to the financial system and to macroeconomic trends.
However, it was not enough to have good regulations, he said, emphasizing that they must also be enforced. Special interest groups should not dictate policy and decisions. There must be more global cooperation in setting macroeconomic policies. Industrial associations could not be relied upon to set standards, and credit rating agencies could not be relied upon for risk assessment. The General Assembly, working with the Economic and Social Council, and other United Nations agencies, such as the International Labour Organization (ILO), must assess the broader social and economic impacts of the financial system.
PRABHAT PATNAIK ( India), Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, India, said that John Maynard Keynes, writing in the midst of the Great Depression of the 1930s, had located the fundamental defect of the free market system in its incapacity to distinguish between "speculation" and "enterprise". Hence, it had a tendency to be dominated by speculators, interested not in the long-term yield on assets but only in the short-term appreciation in asset values. Their whims and caprices, causing sharp swings in asset prices, determined the magnitude of productive investment and, therefore, the level of aggregate demand, employment and output in the economy. The real lives of millions of people were determined by the whims of "a bunch of speculators" under the free market system.
He said that, to overcome the irrationality inherent in such an arrangement, Keynes had suggested what he called a comprehensive "socialization" of investment, whereby the State, acting on behalf of society, always ensured a level of investment in the economy and, hence, a level of aggregate demand, that was adequate for full employment. That prescription entailed not only a jettisoning of the free market system, in favour of State intervention, but also restraints on the free global mobility of finance, since meaningful State intervention could not be possible if the nation-State faced internationally mobile capital. The reason for the undermining of Keynes was that the agency that was supposed to carry out that management was the nation-State.
What the world was seeing today was the end of the latest bubble boom, he said. The reliance on bubbles had acted as a substitute for the earlier regime of Keynesian demand management; it was management through the creation and sustenance of bubbles, rather than through the pace of public spending. Not surprisingly, the frequency of financial crises associated with the bursting of those bubbles had increased greatly after 1973, and the capitalist world was, even now, headed for a major crash. Governments in advanced countries had still not recognized the onset of a crash, proceeding on the assumption that the injection of liquidity into the system was all that was needed. But the injection of liquidity was inadequate in a situation where a recession had started. Credit would not start flowing simply because banks could access more liquidity. There must be adequate demand for credit for viable projects, by solvent and worthwhile borrowers, and that was not happening.
Moreover, countries of the developing world would not escape the effects of a depression, he warned. Their export earnings in both merchandise and "invisibles" would be hit, causing unemployment and output contraction on the one hand, and foreign exchange crises, exchange rate depreciation and accentuated inflation on the other. An area of special concern was the inevitable decline, in terms of trade for primary commodities, that would push cash-crop growing peasants into even greater distress and destitution. Another concern was the loss of food security that would inevitably occur over much of the developing world.
Furthermore, the current need was not just for injections of liquidity into the world economy, but also the injection of demand, he pointed out. That could occur only through direct fiscal action by Governments around the world. Taking the world economy as a whole, the new growth stimulus would have to come not from some new speculative bubble, but from enlarged Government expenditure that directly improved people's livelihoods, both in the advanced and the developing economies, and that was geared towards improving the world's food grain output, by revamping peasant agriculture.
SAKIKO FUKUDA-PARR ( Japan), Professor of International Affairs, The New School, said that, as the crisis of historically unprecedented magnitude and scope unfolded, there was a need to turn attention to its implications for poor people in poor countries, and for safeguards against such downside risks that threatened human security. Impacts on developing countries were caused more by recession in the real economy than by the financial market crisis. Despite implementing sound macroeconomic policies, and building up huge reserves and surpluses to protect themselves against the risks of global financial instability, emerging economies such as India, China and Brazil were already feeling the "contagion effect", which threatened to reverse the growth and development gains they had achieved over the last several years.
She warned that developing countries would feel the impact of the fall in commodity prices, the contraction of markets for export goods due to economic downturn, a decline in official development assistance as donor countries sought to find budgetary savings to finance their rescue plans, and a decline in many forms of private capital flows, particularly remittances. Already, the Inter-American Development Bank projected the value of remittances to Latin America in 2008 to drop nearly 2 per cent, in real terms, compared with 2007, reversing the rapid rise of remittances in recent years. The human consequences of economic crisis were often hidden from economic aggregates. As shown by studies of the impact of the Asian financial crisis and the 1980s structural adjustments programmes, people had lost their jobs; Government social spending on such essential services as primary health care, education and transport had deteriorated; and inflation threatened to wipe out the value of household incomes and assets.
The distributional impact of those consequences was skewed, with the poor and disempowered being the most vulnerable and slowest to recover, she said. Studies of the East Asian crisis, for example, showed a rapid rise in poverty, health and education. In Indonesia, studies by the United Nations Children's Fund (UNICEF) had found a sharp reduction in the use of public health services as people could not afford fees, and services were short of drugs and other supplies.
Women were usually the first to be laid off, as the paradigm of the "male breadwinner" assumed that women's empowerment was less critical to household survival, even though, in reality, women were often family breadwinners.
She went on to say that the impact went beyond jobs into the complex reality of human survival -– the domain of social reproduction -– as health services retrenched, households had to spend more time and money looking after the sick, household incomes declined, and women spent more time producing and processing food. Such "unpaid work" by women was not included in national accounts, but it was essential for human survival and flourishing. Given a monetary value, it would be about two thirds the value of global gross domestic product (GDP).
It was important to learn lessons from the responses to the economic crises of the 1980s, 1990s and 2000, she said, recalling that they had applied orthodox stabilization policies and disregarded the priorities of protecting the poor and vulnerable. Particular attention must be given to not cutting budgets for aid, social safety nets, and measures in order to combat global warming. There was a need for rethinking restrictive expenditure and inflation policies, as well as conventional macroeconomic prescriptions, such as expenditure ceilings and inflation below 5 per cent; incorporating pro-poor recovery measures that offset unequal burdens for women; job creation for men but social investments in care services that reduced women's burdens; and heeding the lessons that Argentina learned from managing its financial crisis.
She pointed to the double standard of counter-cyclical measures for rich countries and pro-cyclical measures for poor countries, as well as Keynesian economics for rich countries and neoliberal economics for poor countries. While big financial stakeholders too big to fail had been rescued, there had been no safeguards for the human system and no rescue for billions of people struggling to survive even in normal times.
In the ensuing discussion, the representative of the Philippines proposed the establishment of an entity to regulate credit rating agencies, suggesting also that liquidity management should be improved and that a flexible system should be put in place, to ensure that.
Referring to Mr. Stiglitz's comments about the 1997 Asian financial crisis and the fact that sufficient financial reforms had not been carried out, she asked about economic and financial policy changes that could cushion developing nations and Asia in the present crisis.
The representative of India said the original Keynesian mandate used to set up the Bretton Woods institutions had since been abandoned, and article 4 had not been implemented. Speculative commercial interests could no longer be defended. Justice was fairness, and that must be illustrated through a fair distribution of power in the international financial institutions, bringing developing countries into decision-making, in order to set right the financial crisis over the long term.
He said the system of quotas must be changed and the association agreements already in place reformed. Could Mr. Stiglitz elaborate on his recommendations for a new institution, for an audit of the Bretton Woods institutions and the creation of a new external shock facility with conditionality? Could all panelists elaborate on how the United Nations could stimulate reform of the Bretton Woods institutions? Could Mr. Stiglitz give his views on a revived Doha Round of trade negotiations?
The representative of Argentina asked Mr. Stiglitz to explain how it was possible, in light of current developments, to balance politically democratic regimes with systems of just distribution of income.
Several delegates underscored the need for reform of the international financial system and governance architecture, and for strong multilateral cooperation, with the United Nations at the centre. Speaking on behalf of the European Union, the representative of France said States could not tackle the crisis as if it was just a digression in history. It was necessary to invent a new model of international governance, and revert to the values of a market economy, making all financial players responsible, especially in the credit distribution chain.
The representative of Antigua and Barbuda, speaking on behalf of the "Group of 77" and China, said the current multiple crises posed the question of how to deal with the economy, while the representative of Mexico, speaking on behalf of the Rio Group, called for far-reaching reform of the rules of governance.
The representative of Spain said any initiative to mitigate the effects of the financial crisis and prevent future crises would only make progress in a climate of cooperation and multilateral cooperation, while bearing in mind the large number of proposals for surveillance and regulation of financial markets.
Echoing the General Assembly President, the representatives of Venezuela and Chile said long-term solutions would have to include a "G-192", with the latter warning that the world must be careful about the possible effects of a social crash, and reiterating that the current crises must be handled by the United Nations.
In response, Ms. FUKUDA-PARR noted that many of the observations made by delegations were about the nature and need for reform of the international financial architecture. Several delegates had talked about the locus of decision-making and the scope of the reform needed. Reforms were necessary, but not only in such areas as banking regulation. It was more about having a broader scope of governance structures in international institutions, but also governance of the global economy in such a way that developing countries would actually have the space they needed to promote development, and protect themselves from threats and vulnerability.
Member States had also recognized that expertise and knowledge about development and global economic management resided everywhere, and was not the monopoly of a few individuals in universities or in Washington, she said. Much of it resided in Korea, Indonesia, India, China, Mexico, Argentina, Brazil and elsewhere. In addition, an enormous amount of scientific work had been done in many parts of the world, and many studies focusing on diverse perspectives had flourished. The feminist perspective, for example, was one that had something very relevant to add. States must remember the need to maintain a broad scope as they came together to deal with the current crises.
Responding to a question from Japan's representative about the role of the United Nations in human security, she said there was a role for many actors in the broad process. The analytical work carried out in the United Nations, and in other agencies and organizations, had a great deal to contribute to that process.
In another response, Mr. PATNAIK said the question of financial architecture had an important governance dimension, but it could not be detached from the question of how the development paradigm would be visualized in the years to come. Countries could not think in terms of simply making minor adjustments to existing financial structures while waiting for the next bubble to appear, and think it would not burst quickly. States should be "non-bubble based".
People did not often realize that the original Bretton Woods Conference actually had an objective, which was to push towards full employment in the world, he said. The objective had not been to institutionalize free capital mobility. The Bretton Woods institutions had subsequently continued, even though the system had collapsed, because the institutions had shifted towards neoliberal stances that had replaced the Bretton Woods system.
In the last couple of decades, there had been a worsening of world poverty in the most elemental sense of the term, he said. That would be further aggravated if the world allowed the depression to continue. There was a need for different Governments to coordinate their actions, in order to stimulate demand in the economy. In the Depression of the 1930s, a large number of plans had all argued for a coordinated set of actions by the world's Governments, but those plans had been ignored. As a result, the Depression had continued and was arguably one of the factors that had given rise to the Second World War. That must not be allowed to happen, and the current crises provided an opportunity to take action.
If the balance of payments improved in some countries while worsening in others, those benefiting should simply hand over the surplus they were getting, he said. In that way, there would be no losers, and it would be a non-zero-sum game. There would be no sufferers, and everybody would still be better off. It might become necessary to initiate a set of protectionist measures that some countries might have to adopt, owing to insufficient available finance. However, that should not get countries worried, because even the original system had allowed for protectionism. It might be important to deviate from the belief in free trade doctrines, in order to ensure that the world moved towards lowering poverty levels.
Also responding, Mr. STIGLITZ reaffirmed the importance of the human dimension, reiterating that financial markets were a means to an end, and not an end in themselves. While the crisis bore a "made in the United States" label, it was global. The United States had exported its toxic mortgages and was now exporting its recession. The aid channel could not provide a response to the crisis.
The United States Government had somehow found $700 billion for a bank bail-out on top of $600 billion, which some people viewed as a mere down payment. That was equivalent to all the official development assistance from all developed countries. The United States Treasury Secretary had stated recently that it was beyond the United States budget envelope to live up to the commitments of the Monterrey Consensus. That was not true, and it was to be hoped that the next President of the United States would live up to the country's Monterrey obligations.
However, the inadequate response to the crisis by the United States had come as no surprise, he said. The country's financial sector had created the problem through a deregulation philosophy developed by the same people in charge of responding to it. They had used the wrong measures and had responded too late in the hope that recovery was around the corner. The United States had begun by throwing massive amounts of money at financial markets, but doing very little for homeowners and workers. The result was a deep and prolonged economic downturn. In line with the "polluter-pay" principle, the United States, which was responsible for the "pollution", should pay for the clean up.
Noting that the only offer of assistance to date had been from Japan, he said the response to the global crisis must be global and based on rebuilding trust in the financial markets. "We're not going to restore confidence to the markets and the global economy until we re-earn that trust." The United Kingdom had handled the crisis in the right way; the United States had not.
He said he had less confidence that the IMF was the appropriate place to respond to the crisis, although the world may have no choice, in the long run, but to rely on it. The Fund had not anticipated or prevented the problem, and so far, it had not proposed adequate regulatory reforms to prevent a recurrence. "How could the IMF be viewed as the solution, when they are so linked to the financial markets which are the cause and the philosophy behind the markets which are the cause of the problem?" The G1 had the veto in the IMF, but the G1 was the source of the problem.
At the founding of the IMF, he said, its main responsibility had been to maintain global economic stability and employment, not to push capital market liberalization or to promote contractionary fiscal policy in the midst of the depression and the recession. Today's concern was that, in the case of some bail-outs, the Fund was proposing the same polices that had failed in the past, cutting out aid for basic services exactly when they were most needed.
The good news was that there was discussion of creating an external shock facility, he said, adding that it was also necessary to create a multilateral reserve system with greater stability. "When you socialize risk and privatize profits, that is not what a market economy is about. The financial markets did not do what they were supposed to do, which was to manage risks and allocate capital." The flaws in the financial system were now obvious.
Concerning the innovation that had occurred in Silicon Valley, he said it had not in fact happened in ways that would help ordinary Americans, but had instead benefited only a few.
Regarding the Doha Round, he said it had not addressed the problems of the Uruguay Round, which was supposed to address development concerns, particularly in developing countries. The so-called free trade agreements were not free trade agreements, but managed trade agreements. A free trade agreement need only be three pages long, in which countries agreed to remove tariffs, subsidies and barriers. There was a need for a genuine opening of trade, but it was also necessary to rectify the mistakes of previous trade rounds. Developing countries needed more than just aid; they needed opportunities to earn an income.
The representatives of Qatar, United States, China, United Kingdom, Jamaica, Japan, Egypt and Brazil also participated in the discussion.
PEDRO PÁEZ PÉREZ ( Ecuador), Minister for Economic Policy Coordination and President of the Ecuadorian Presidential Commission for the New Regional Financial Architecture, Banco del Sur, said it was important to detail the key conditions for emerging from the crisis, in order to begin launch a response. It was essential to overcome unipolarity and recover the historical subject. Control over natural resources had given rise to the crisis and was now determining the course of events. The crisis clearly showed the increasingly intensive and massive process of expropriation by private initiative, which was a paradox. The model, supposedly based on private initiative, had actually become a mechanism to deprive the vast majority of people of that initiative. It was amazing that, with the scientific and technological achievements that mankind had enjoyed upon entering the twenty-first century, the world was still threatened by famine. Today's forum might be the only discussion that could create a space in which mankind could express its different voices and ultimately find a way out of the crisis.
Among the factors that had led to the crisis was that the financial system had asphyxiated the productive machinery, both at its centre and periphery, he said. That had brought about further speculation. For that reason, it was very important to recover productivity, and link it with trade issues and development financing. If a predatory niche market in the international division of labour was creating structural vacuums in the balance of trade, that could be temporarily resolved, but that hole could only become larger, depleting the patrimony of a nation and its labour force. The alternative would be systemic charity from the North to the South, which would not be effective. It was, therefore, important to find a solution to the crisis with a healthier financial system.
It was also essential that States think about relaunching growth from a territorial perspective, based on communities, and from the angle of sustainable development, as well as economic, social and cultural rights, he said. It was in that context that the Government of Ecuador had been working on a number of proposals and initiatives for the design of a new regional financial architecture. Today, more than ever before, it was essential to speed up the time in which such a design could be achieved. An alternative was needed for the "here and now", in order to halt an agenda that was linked to desperate logic. The United Nations was the "Government of nations" that must decide what to do with the fetish of the market. It was also important to think immediately about the economic and political conditions of every region.
Given the speed and depth with which the crisis was unfolding, a regional Monterrey agreement among the countries of South America was urgently needed, he said. Such an agreement would act as a common framework in which the exchange rates of participating countries would be monitored, assessed and, if possible, agreed upon at the subregional level, according to the principle of mutual concern for exchange rate credibility and stability. As the pressures and conditions for each individual country were heavy and heterogeneous, it was more viable to push for semi-annual agreements. At the same time, it was important to launch, in parallel, an international diplomatic campaign to push for similar accords in other regions of the world. The coordination of relatively flexible regional bloc agreements was the most plausible way to achieve a rapid outcome. The success of that step could generate the political momentum for further institutional agreements that would open the horizon for a holistic and stable new global financial architecture.
Depending on the political possibilities of each country in the current situation, it was important to explore different institutional arrangements, he continued. They included defining a multilateral agreement to share information about and monitor monetary policy; establishing a single agreed monetary policy definition framework; and, ultimately, fixing a compulsory shared policy. Restrictions on capital movements should not be excluded where politically viable. Among the more flexible options in the spectrum of possible exchange rate regimes, the regional monetary agreement would be limited to a formal cooperative commitment, in the absence of formal commitments about any parity grid among regional partners. The commitment would be to permanently monitor exchange rate policies, and to share regularly ex ante information on the respective national policy mixes and macroeconomic development. That monitoring exercise, involving peer exchange of opinions and criticisms, would build confidence and reduce information asymmetry among regulators.
He said it would be very difficult to move ahead with a new international financial architecture, unless each country worked simultaneously on a new domestic financial architecture and a new productive system. The economy was not flat: the productive system was hierarchical, and if strategic sectors of the economy were to benefit, a new system of powerful interests committed to integration could be built. Today, the commercial dependency and intra-firm trade with the North was high and, with a change in the productive system, great returns would be generated in the construction of supranational spaces of food, energy and health sovereignties.
CALESTOUS JUMA ( Kenya), Professor of the Practice of International Development at the Belfer Centre for Science and International Affairs, Harvard Kennedy School, said developing countries were rethinking their place in the global economy in light of the current global financial crisis. Their quest for solutions was taking place in an age of unprecedented growth in scientific and technical knowledge. The challenge for them now was to manage technological opportunities to respond to the growing economic crisis. The United Nations could, and should, play a key role in fostering the creation of a new regime of financial diplomacy, that would bring together the global community to identify and share best practices in managing the relationships linking finance, innovation and development.
He said investments in basic infrastructure -- including roads, schools, water, sanitation, irrigation, clinics, telecommunications and energy -- were the foundation for technological learning. They nurtured the development of small and medium-sized enterprises, which were a major contributor to the rapid economic transformation of emerging economies. The spread of scientific knowledge in society was eroding traditional boundaries between scientists and the general public, and the growth in knowledge was making it possible to find low-cost, high technology solutions to persistent problems.
Noting that life sciences were not the only areas where research could contribute to development, he said a continent's economic future depended crucially on the state of its infrastructure, the development of which depended, in turn, on the contributions of the engineering, materials and related sciences. Those fields, particularly weak in developing countries, could benefit from local materials used in road construction and maintenance, and expand the energy base through the development of programmes for alternative energy, such as geothermal, biofuels, solar and wind energy. Economic renewal was the result of the development of infrastructure facilities, such as public utilities and research facilities; higher education reform; business entrepreneurship; and regional integration.
The crisis was no longer the concern of a few countries, but a challenge for the global community, he said. The United Nations could launch a round of negotiations to advance the collection of information on financial information, as a way to promote transparency in global markets; the creation of early warning systems for identifying threats to global economic systems; the setting of standards and the sharing of good practices in financial markets; national implementation of guidance arising from international negotiations; and the building of capacity to enable developing countries to bring their financial institutions into line with international operating standards.
He said significant investment in technological innovation and related institutional adjustments was needed to help developing countries address major challenges related to the provision of basic needs, participation in the global economy, management of the environment and improvement of their governance systems. Their ability to harness available knowledge and turn it into goods and services would depend largely on whether they could focus their policies on building critical physical infrastructure, reforming higher technical education, stimulating business incubation, participating in international trade and tapping into global knowledge networks.
Global economic cycles lasted for 50 to 60 years, but in all cases where there had been an observation of recovery, it had happened in the business and economic sector, he noted. It was necessary to examine the sources of economic renewal and to see integration in financial systems. That could not be resolved in the next five years or so, and the United Nations should start to think about how it could position itself as a source of ideas about how the global community could work its way out of a global recession. The Organization's universality meant there were many and diverse ideas that were not limited to or hamstrung by one ideological framework. There was a case to be made for developing the concept of financial diplomacy, with the United Nations bringing to New York experts from finance ministries to connect with the diplomatic community and engage with central banks, something that historically had not been done in the past.
FRANÇOIS HOUTART ( Belgium), Professor Emeritus at the Catholic University of Louvain and Founder of the Tricontinental Centre, said the world needed alternative choices and not just regulation. It was not enough to rearrange the system; the system needed to be transformed. It was a moral duty and, in order to understand that, one must adopt the viewpoint of victims. The fact was that the crises all had a single cause, but the conviction was that the course of history could be changed. When 850 million people lived below the poverty threshold and that number was on the rise, and when the climate got increasingly worse, it was not possible to talk only about the financial crisis.
The social consequences of the financial crisis could already be felt well beyond its actual place of origin, he continued. It was necessary to be frank: unemployment and the growing vulnerability of the idle classes, among other things, were not just temporary setbacks or the result of abuses carried out as part of a few economic factors; they were all trends in the economic history of the past two centuries. In a rising market there was deregulation, while in a falling one, there was regulation. What was being seen today was nothing new.
The financial bubble created over the past few decades had blown out of proportion the dimensions of the problem, he said. Differences in income had exploded and speculation had become the operational method of the economic system. What was new, however, was the convergence between the different forms of deregulation in the world today. The food crisis was one example of that deregulation as the lives of human beings had been made subject to profit-taking. The energy crisis went far beyond a sudden increase in the price of petroleum products; it was the end of the cheap energy period the world had lived though. Low energy prices had led to waste, which had promoted accelerated growth. The overexploitation of the world's natural resources and the liberalization of trade, particularly starting in the 1970s, had led to a proliferation in the transportation of goods, and promoted the development of individual travel, without taking into account the consequences of those new trends. The lifestyle of the upper classes was based on wasting energy. Once again, commercial value had prevailed over the used value of a limited commodity.
Today, the crisis had thus led nations to say that an urgent solution must be found, he noted. However, in finding a solution, there was a need to respect the basic parameters while maintaining high profit rates. Capital ignored externalities except when they started to reduce profit rates. For example, the increase in the use of raw materials and increased transport -- together with the deregulation of environmental protection measures -- had increased climate devastation and reduced nature's ability to protect itself. Sea levels and the acidity of sea water would increase dangerously, and the world might have to deal with 150 million to 200 million climate refugees as of the middle of the present century. That context was indicative of the social crisis.
To give spectacular economic growth to 20 per cent of the world's population was far more useful for short- and medium-term capital accumulation than for meeting the basic needs of those with limited or no purchasing power, he said. Since those poor people could not produce added value, they were just a "useless mob", barely good enough for welfare and nothing more. That perception had become worse with the accumulation of financial capital. All the systemic breakdowns had led to a real crisis of society. There was a need for long-term vision based on a renewable, rational use of natural resources, which pre-implied a different approach to nature. That meant respect for the source of life, rather than the unlimited exploitation of raw materials.
Discussion and Concluding Remarks
The representative of Nicaragua said it was up to the G-192 to restructure the economic, financial and trade system, beginning with a high-level meeting led and coordinated by Member States. The task force created by the General Assembly to study the crisis was a step in the right direction.
The representative of Portugal said that while the bail-outs were enabling banks to lend to other banks and then to people, they were perpetuating the same bad judgment of the past. The outdated financial and economic formats of the 1990s were being followed, but they were not inclusive or representative of all countries and many principal actors were being left out of the equation. How long would it take for the money injected into the banks to result in tangible, healthy benefits for the real economy?
The representative of Morocco asked the panelists, given the necessity of regulation, to elaborate on how to ensure balance between regulation and a market economy. How could the world prevent a return to protectionist policies, which would have a clear impact on economic growth and human security? Would the threat of a global economic recession have an impact on the Doha Round?
The representative of Indonesia asked how the United Nations could become more proactive and concretely put into effect the various recommendations and plans presented during today's discussion.
The representative of Germany, noting the image of a burst bubble used to describe the current crisis, asked how much of it was just hot air. Had the world believed it had acquired a certain wealth when, in fact, it was just "virtual"? Since the first German banks to run into trouble had been State-owned, was State intervention a good thing?
The representative of Pakistan asked the panelists to explain how they saw the crisis in comparison to the Great Depression.
The representative of Thailand sought the panellists' views on the synergies of many measures being taken around the world.
Also participating in the discussion were representatives of Bolivia, Singapore, Honduras, Republic of Korea, Ecuador, Belarus, Canada, Kenya, Ethiopia, and Israel.
A representative of the Holy See also participated.
Mr. HOUTART, responding to the German representative's question about State intervention, said a distinction must be made between State intervention for the common good, as in the State intervening to try to resolve problems in society, and the functions that States exercised as economic actors within the capitalist system. In the latter case, States intervened in accordance with the rules and laws of the system. It was obviously necessary to find immediate solutions, and regulation was absolutely unavoidable. Solutions were necessary because people were suffering and dying, not tomorrow, but today.
The financial crisis was just one element of a broader pattern, an epic phenomenon of something much more profound, he said. People's lives were in jeopardy due to the speculation of capitalism. There must be a great sense of urgency, because the world faced extremely urgent problems, which were not just financial in nature, but which affected the climate as well. There was a need to look at what the major economic actors were doing, their approach to the environment and the fact that they were destroying biodiversity. It was necessary also to listen to what victims had to say.
Mr. JUMA said that if there was no urgent response to the crisis, especially with respect to the development objectives of the poor countries, there would be a significant loss of trust in the global system, which would make it even more difficult to find collective solutions. That meant that the responses to the crisis -– particularly those adopted by industrialized countries -- must include very clear provisions on the relationship of trust.
Responding to the question from Thailand's representative about harnessing synergies, he said the strength of the United Nations lay in its ability to codify experiences and practices. One way to do that was working towards a general agreement that codified principles.
Mr. PÁEZ said the discussion had clearly shown that the panel discussion had not only been successful but also insufficient. More similar events were urgently needed. The current global situation was a conundrum, and the world could end up with a good balance or a catastrophic one, and the way things were going, it would probably be the latter. Financial stability was an international public good, and actions in one country affected another. It was, therefore, important to know how much money was being injected into financial sectors.
Closing Statement by General Assembly President
Mr. D'ESCOTO, President of the General Assembly, said, in closing remarks, that he was heartened by the enthusiastic and constructive participation of Member States in the initial dialogue, and by the support that they had expressed in continuing to use the Assembly and the United Nations system as a forum for the unfolding process. Panelists and delegates alike had acknowledged that the Organization was a uniquely representative and democratic body with the convening power to bring together all the stakeholders in that global pursuit. Non-governmental organizations were also stakeholders and would give voice to civil society's recommendations at the International Conference on Financing for Development in Doha at the end of November.
From what Member States had heard today, it was very clear that there was broad-based agreement on the need to work together to identify long-term solutions to the faltering governance of the global economy. The United Nations was accustomed to dealing with problems without borders, especially those that no single Government or group of Governments could solve on their own. Its system of regional commissions, specialized agencies, funds and programmes maintained a global presence, working with national Governments throughout the world. It drew on a deep pool of expertise and wisdom that would be very helpful in providing support for long-term solutions to the crisis.
Today Member States had deepened their understanding of the systemic nature of that breakdown and heard many constructive recommendations, he continued. Many of them had helped to remind that economic policies translated immediately into life and death issues in many societies. Most of those present today were convinced that the problems did not have to provoke wider human tragedy. But to address the downturn and prevent future crises, business could not continue as usual.
The panelists had pointed the way forward regarding institutional solutions to the crisis, he said, adding that the unanimity of in their concern for its human costs was particularly striking. They had spoken of small farmers and urban workers, women and men and their families who, through no fault of their own, now faced food shortages, reduced social services and unemployment. Those people were as distant from the origins of the crisis as the bankers were from their small farms in Ecuador, Kenya and Cambodia. Yet, they would suffer the most. It was no longer acceptable that the poor and vulnerable pay the costs of the world's mistakes.
In the weeks and months ahead, there would be a need to remain engaged in the search for solutions transcending narrowly defined national interests, he stressed. States must ensure that the changes decided upon would truly serve the good of all peoples, nations and the fragile planet. Only through democratization could States fulfill the trust that so many people had placed in the United Nations to represent them in the construction of a new international financial architecture.