Opinion Editorials, July 2009

The UN Responds to the Global Financial Crisis?

By Curtis F.J. Doebbler

ccun.org, July 3, 2009

 
In the first week of the Northern hemisphere's summer, heads of states and their special envoys from both the North and the South as well as one of the largest collections of senior economic experts from across the globe met at the UN to advise the world on how to deal with the Global Financial Crisis.
 
Although the meeting comes after many of the most powerful countries have already charted their paths to economic recovery by throwing their lot in with the existing laissez faire market status quo, the UN Economic Summit seems to be taking a much different view.
 
Given its timing and that some important states decided to boycott, as they did the recent global meeting on racism, or appear only at a junior level what difference will this meeting make? There are some reasons why it might.
 
First, the meeting is much more inclusive than that of any group that has tried to deal with the problem to date. It was initiated by the President of the 192-member state United Nations Organization with the creation of an expert panel of more than 40 economists from every region of the world. This group was led by the Nobel Prize winning former Chief Economist of the World Bank, Joesph Stieglitz.
 
Neither the G8 nor the G20 comes anywhere near achieving the inclusiveness that characterized this meeting. At the same time these forums admit that nearly everyone is affected by the global financial crisis and that just about every state needs to contribute to solving it.
 
Unabashed by their collective arrogance of power, the G8 and G20 leaders merely reconcile these contradictory messages by assuming that every state will follow their instructions. If you get burnt as badly as many people and states have been by the financial collapse that was caused by following the advice of the the G8 and G20 one could reasonably wonder why they should follow even more potentially wrong advice from the people who got them into the hole the first place.
 
Leaving the logical propensity of people not to follow bad advice twice behind, there is a second reasons why the UN Economic Summit—officially called the UN Conference on the World Financial and Economic Crisis and its Impact on Development—might be the most appropriate forum to discuss the world financial woes.
 
The UN gathering is an all-inclusive meeting about a problem that affects everyone in the world. It is thus more likely to provide advice that will be viewed as more legitimate by everyone in the world, than is a meeting of a mere single digit percentage of the states in the international community like the G20.
 
It is only common sense that people and governments are more likely to honor obligations that they have been involved in creating, rather than prescriptions that are dictated by a small group of elites. Under the system of international relations established after World War II in the Charter of the United Nations every state is equal.
 
All states are entitled to rely on this explicit statement in the UN Charter—just like black slaves in the post-Civil War US were entitled to rely upon the Proclamation of Emancipation to claim they were free and equal. Contrary claims impose decisions in a neo-colonialist manner on the people of the world, mainly in the South, who do not share in the wealth or the decision making of their Northern neighbours.
 
The arrogance of power was one of the central tenets not only of the UN, but which international law dating back to the 17th Century was intended to overcome.
 
A comparison of the recent G20 communique with the draft UN Outcome Document also shows the value of a more inclusive process.
 
The short two-page communique declares that the G20 aims to “stabilize the financial sector and provide stimulus to restore economic growth and there are signs of stabilization in our economies, including a recovery of stock markets, a decline in interest rate spreads, improved business and consumer confidence.”
 
It goes on to describe the need to take “actions to reduce the impact of the crisis on employment,” to ensure “liquidity and capital needs of banks,” and to ensure reliance on the IMF and World Bank as the institutions that will lead us out of this crisis. The tone is laudatory, not humble. Instead recognizing that those giving these prescriptions are the ones who got us into this mess, it assumes that we, the “People of the United Nations,” will be inclined to follow their dictates blindly to get out of the crisis.
 
By comparison the draft UN Outcome Document admits the gravity of the financial crisis calling it the “worst financial and economic crisis since the Great Depression” in the first paragraph. The fifteen page document containing 59 paragraphs, also goes on to state in seven parts the the problem and to suggest “The Way Forward.”
 
The UN Outcome document also encourages cooperation, reiterating in several paragraphs the need for  states and their international organizations to cooperate with each other to solve “economic, social, cultural and humanitarian” problems. It is premised on the belief that the UN is the body to coordinate the cooperation.
 
While the G20 Communique states that “working with others” is useful, it also emphasizes that such cooperation will be only on proposal put forward by the elite group of twenty countries or the institutions they control, including the World Bank and the IMF. In other words there is not indication of an intention to cooperate with the other 184 states member states of the United Nations in the manner this overwhelming majority of states might deem most appropriate.
 
Appearing to confirm this suspicion, both the World Bank President Robert Zoellick and IMF Managing Director Dominique Strauss-Kahn has turned down the President of the General Assembly Miguel D'Escoto Brockmann's  invitation to them to come and discuss their policies with most of the rest of the world.
 
While the basic economic aims of the G20 Communique might be appropriate for strengthening an economic and financial system that has already failed, they do nothing to earn the trust of the billions of people who were not served by it in the first place.  These include the estimated half the world's population living on less than 2 Euros per day.
 
The UN Outcome Document in contrast focuses on the humanitarian needs of ordinary people. The Outcome Document also repeatedly stressed the disproportionate impact the crisis is having on the most vulnerable people in the world.
 
This later focus is consistent with the mandate given by states to the UN at the Follow-up International Conference on Financing for Development held in Doha, Qatar in December 2008.
 
The Economic Summit's draft Outcome Document recognizes that the while the financial crisis was started by the riches countries, its greatest impacts are on the poorest countries. This realization appear to go more to the heart of the impact of the financial crisis, then the ambiguous G20 Communique  by which the richer countries fails to accept responsibility or to recognize who will be hurt most.
 
In addition, the Economic Summit's draft Outcome Document largely ratifying some of the lines of action currently being taken by the G20, emphasizes the need to ensure the stimulus works for all and the need to reform the “international financial and economic system and architecture.” Concrete proposals, however, are lacking with the exception of a call for the enhanced representation of developing countries in the Bretton Woods Institutions—the World Bank and IMF—and a call for the heads of these institutions to be appointed through more “open, transparent, and merit-based selection processes” with “due regard to gender equality, geographical and regional representation.”
 
Considering that the heads of neither the World Bank or the IMF has ever been a women or anyone from outside the United States or Europe, such changes would be a marked shift towards establishing the legitimacy of these institutions. So too would be the call for more “cooperation, coordination and coherence” between the international financial institutions and the United Nations.
 
Many of the aspirational goals will be tasks that successive Presidents of the General Assembly will have to propel forward. This also means that states, especially the G77 that includes well over half the states in the United Nations, will also have to find the courage to support such changes in the global inequities upon which the current global financial system is based.
 
The UN Economic Summit is a crucial step in the direct or righting some historical wrongs, but it has yet to be seen whether it is merely and isolated step, or part of the process that will continue. This is something that will depend more on the will of states. The process by which the draft Outcome Document was arrived at raises questions.
 
The draft Outcome Document was finalized by several co-facilitators at 4 a.m. on 22 June 2009 and adopted just after 3 p.m. the next day by states before being put to senior state officials, including heads of states and government, during the three day conference at UN headquarters.
 
It was based on a report of the group of eminent experts led by Nobel Prize winning Economist Stieglitz, a revised draft by the General Assembly President based on reports form the IL and other UN family agencies, and state negotiations. During the negotiations the United States and European Union objected to virtually any discussion of the international financial institutions. As a result the issue of the reform of these institutions has been left somewhat vague in the text. So too have have many of the calls for concrete action that were included in a draft promulgated by the activist President of the General Assembly.
 
In some respects the process and the final Outcome Document reflect the similarly named results of the recent Durban Review Conference against Racism held in Geneva, Switzerland this past April.
 
In both cases, the failure of states to agree on a common approach to the problems led to muted texts that added little in terms of calls for concrete action. In both cases the richer western countries refused to fully participate in the UN's work citing the fact that they could not get their way and despite the fact that draft Outcome Documents going into the conferences reflected significant compromises to the absentees' concerns.
 
Both the Durban Review Conference and the UN's Economic Summit Outcome documents reflect the haunting theme of inequality and discrimination. While the later dealt with the more direct manifestations of discrimination, the former has tried to address the indirect and structural forms of discrimination perpetrated against the majority of the people in the world, especially those living in the global South. As one might expect, this has not always been appreciated by the wealthier elites that reside in or are intimately connected to the global North.
 
Nevertheless, at the very least the UN Economic Summit illustrates the hypocrisy of the current international system. Even more pointedly the views of many rich Northern states illustrate the inherent bias of a structure that is based in the North and heavily under the influence of the Northern states.
 
Ironically as the Northern states encourage people power in Iran, they appear to be gagging the rest of the world that seeks to question a financial system controlled by Northern interests that has impoverished large numbers of people in the South. This UN Economic Summit comes at a time when inequalities in the world are becoming more pronounced and more apparent to people everywhere. The looming question mark however, is whether or not the wealthier states that must act to end the insidious discrimination between the North and the South are willing to do so.
 
As the Economic Summits Outcome Document points out the richest states numerous times to enhance their Overseas Development Assistance to developing countries, they undertook to achieve the minimums required by Millennium Development Goals, and they undertook to form United Nations organisation that would treat all peoples and states equally. As the better forty or so states have been slow to make progress on any of these promises, what makes another set of promises worth listening to? This is a crucial question the Economic Summit and it aftermath will have to answer.