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Africa: Global Economic Crisis, 2
AfricaFocus Bulletin
Apr 2, 2009 (090402)
(Reposted from sources cited below)
Editor's Note
"The Group of 20 (G20) is making a big show of getting together to
come to grips with the global economic crisis. But here's the
problem with the upcoming summit in London on April 2: It's all
show. What the show masks is a very deep worry and fear among the
global elite that it really doesn't know the direction in which the
world economy is heading and the measures needed to stabilize it."
Walden Bello, Foreign Policy in Focus
The G-20 have completed their meeting in London today, with a
communique promising new action to deal with the global economic
crisis. But few, including the participants, are likely to be fully
satisfied with the results. And there are parallel discussions
taking place not only among protesters but also in multiple other
fora, including the United Nations General Assembly, which some are
now referring to as the G-192.
This AfricaFocus Bulletin, the second in a series of three posted
today, contains excerpts and links to several related commentaries,
particularly highlighting the expert commission appointed by the
president of the United Nations General Assembly. It is available
on the web at http://www.africafocus.org/docs09/gec0904b.php The
other two Bulletins in this series are available at
http://www.africafocus.org/docs09/gec0904a.php (also distributed by
e-mail) and http://www.africafocus.org/docs09/gec0904c.php (only on the web,
with the full text of the Commission of Experts recommendations).
See also:
Interactive Thematic Dialogue of the UN General Assembly on the
World Financial and Economic Crisis and Its Impact on Development
http://tinyurl.com/dbql9h
The Commission of Experts of the President of the UN General
Assembly on Reforms of the International Monetary and Financial
System
http://tinyurl.com/cp3w5k
The G20 ought to be increased to 6 Billion By Daniele Archibugi,
2009-03-31
http://www.opendemocracy.net/node/47639
For previous AfricaFocus Bulletins on related issues, see
http://www.africafocus.org/econexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
United Nations General Assembly Press Release
Deep Reforms of Global Financial System Inevitable Response to
Protracted Crisis,
But Question Is Whether They Will Be Ad Hoc or Orderly, General
Assembly Hears
Expert Commission Chief Says Both Immediate Economic Stimulus,
Redesigned Financial Regulatory Schemes Needed, as Three-Day Run-Up
to June Event Concludes
http://www.un.org/News/Press/docs/2009/ga10817.doc.htm
March 27, 2008
Fundamental reforms in the global financial system were inevitable
given how deep and prolonged the economic crisis facing the world
community would be, the General Assembly was told today as it
concluded its three-day interactive dialogue on the World Financial
and Economic Crisis and Its Impact on Development. ...
The interactive dialogue was intended to help Member States define
a common position for taking stock of the crisis, evaluating
alternative short-term emergency measures and shaping an effective
approach for longer-term efforts to restore dynamism, revive
employment and enhance equity in the world economy. Its
deliberations centred around a set of draft recommendations made by
the "Stiglitz Commission", which will provide a final set of
prescriptions before the high-level United Nations conference on
the economic crisis scheduled from 1 to 3 June.
In his closing comments, Mr. Stiglitz said a dichotomy had surfaced
in the Assembly's discussions between immediate economic stimulus
or a redesign of financial regulatory regimes, but it was a false
dichotomy, as both actions were needed. Moreover, while it was
prudent to make use of existing institutions, it was important both
to reform them and create new ones.
Among the new institutions, the Commission was calling for a global
economic coordination council at the level of the General Assembly
or Security Council; a global reserve system; a new credit facility
to provide developing countries with greater resources; a financial
products safety commission; a global financial regulatory
authority; a global competition authority; and an international
bankruptcy court.
Mr. Stiglitz argued that the critical difference between the
current crisis and past ones, like the Asian crisis when talk of
reform had been mere words, was the developed world's position at
the epicentre. "This is not a downturn that happened on the
periphery. It began in the centre and has gone to the rest of the
world with devastating effects on the periphery."
In that way, the crisis had exposed flaws in the global economic
system and in globalization, making a return to the world of the
past impossible, he said. It was, therefore, in the interest of
every country -- rich and poor, debtor and creditor alike -- to
create the kind of strong institutions the Commission had proposed.
Indeed, since instability in the international economic structures
affected each country, global action would be critical.
[more at
http://www.un.org/News/Press/docs/2009/ga10817.doc.htm]
U-20: Will the Global Economy Resurface?
Walden Bello | March 30, 2009
Foreign Policy in Focus
[excerpts: full text at http://www.fpif.org/fpiftxt/6001]
The Group of 20 (G20) is making a big show of getting together to
come to grips with the global economic crisis. But here's the
problem with the upcoming summit in London on April 2: It's all
show. What the show masks is a very deep worry and fear among the
global elite that it really doesn't know the direction in which
the world economy is heading and the measures needed to stabilize
it.
The latest statistics are exceeding even the gloomiest
projections made earlier. Establishment analysts are beginning to
mention the dreaded "D" word and there is a spreading sense that
a tidal wave just now gathering momentum will simply overwhelm
the trillions of dollars allocated for stimulus spending. In this
environment, the G20 conveys the impression that they're more
commanded by than in command of developments (In addition to the
seven wealthy industrial nations that belong to the G7, the G20
includes China, India, Indonesia, Mexico, Brazil, Argentina,
Russia, Saudi Arabia, Australia, South Korea, Turkey, Italy, and
South Africa.).
Indeed, perhaps no image is more evocative of the current state
of the global economy than that of a World War II German U-Boat
depth-charged in the North Atlantic by British destroyers. ...
The current capitalist crew manning the global economy doesn't
know whether Keynesian methods can re-inflate the global economy.
Meanwhile, an increasing number of people are asking whether
using a clutch of Social Democratic-like reforms is enough to
repair the global economy, or whether the crisis will lead to a
new international economic order.
A New Bretton Woods?
The G20 meeting has been trumpeted as a new "Bretton Woods." In
July 1944, in Bretton Woods, New Hampshire, representatives of
the state-managed capitalist economies designed the postwar
multilateral order with themselves at the center.
In fact, the two meetings couldn't be further apart.
The London meeting will last one day; the Bretton Woods
conference was a tough 21-day working session.
The London meeting is exclusive, with 20 governments arrogating
to themselves the power to decide for 172 other countries. The
Bretton Woods meeting tried hard to be inclusive to avoid
precisely the illegitimacy that dogs the G20's London tryst. Even
in the midst of global war, it brought together 44 countries ...
The Bretton Woods Conference created new multilateral
institutions and rules to manage the postwar world. The G20 is
recycling failed institutions: the G20 itself, the Financial
Stability Forum (FSF), the Bank of International Settlements and
"Basel II," and the now 65-year-old International Monetary Fund
(IMF). ...
In short, institutions that were part of the problem are now
being asked to become the central part of the solution.
Unwittingly, the G20 are following Marx's maxim that history
first repeats itself as tragedy, then as farce.
Resurrecting the Fund
The most problematic component of the G20 solution is its
proposals for the International Monetary Fund (IMF). The United
States and the European Union are seeking an increase in the
capital of the IMF from $250 billion to $500 billion. The plan is
for the IMF to lend these funds to developing countries to use to
stimulate their economies, with U.S. Treasury Secretary Tim
Geithner proposing that the Fund supervise this global exercise.
If ever there was a non-starter, this is it.
First of all, the representation question continues to exercise
much of the global South. So far, only marginal changes have been
made in the allocation of voting rights at the IMF. Despite the
clamor for greater voting power for members from the global
South, the rich countries are still overrepresented on the Fund's
decision-making executive board and developing countries,
especially those in Asia and Africa, are vastly underrepresented.
Europe holds a third of the chairs in the executive board and
claims the feudal right to have a European always occupy the role
of managing director. The United States, for its part, has nearly
17% of voting power, giving it veto power.
Second, the IMF's performance during the Asian financial crisis
of 1997, more than anything, torpedoed its credibility. ...
Thailand paid off the IMF in 2003 and declared its "financial
independence." Brazil, Venezuela, and Argentina followed suit,
and Indonesia also declared its intention to repay its debts as
quickly as possible. Other countries likewise decided to stay
away, preferring to build up their foreign exchange reserves to
defend themselves against external developments rather than
contract new IMF loans. This led to the IMF's budget crisis, for
most of its income was from debt payments made by the bigger
developing countries.
Partisans of the Fund say that the IMF now sees the merit of
massive deficit spending and that, like Richard Nixon, it can now
say, "we are all Keynesians now." Many critics do not agree.
Eurodad, a non-governmental organization that monitors IMF loans,
says that the Fund still attaches onerous conditions to loans to
developing countries. ... And despite the current focus on fiscal
stimulus - with some countries, like the United States, pushing
for governments to raise their stimulus spending to at least 2%
of GDP - the IMF still requires low income borrowers to keep
their deficit spending to no more than 1% of GDP.
Finally, there is the question of whether or not the Fund knows
what it's doing. One of the key factors discrediting the IMF has
been its almost total inability to anticipate the brewing
financial crisis. ... However large the resources the G20 provide
the IMF, there will be little international buy-in to a global
stimulus program managed by the Fund.
The Way Forward
The North's response to the current crisis, which is to revive
fossilized institutions, is reminiscent of Keynes' famous saying:
"The difficulty lies not so much in developing new ideas as in
escaping from old ones." So, in Keynes' spirit, let's try to
identify ways of abandoning old ways of thinking.
First of all, since legitimacy is a very scarce commodity at this
point, the UN secretary general and the UN General Assembly -
rather than the G20 - should convoke a special session to design
the new global multilateral order. A Commission of Experts on
Reforms to the International Monetary and Financial System, set
up by the president of the General Assembly and headed by Nobel
Prize laureate Joseph Stiglitz, has already done the preparatory
policy work for such a meeting. The meeting would be an inclusive
process like the Bretton Woods Conference, and like Bretton
Woods, it should be a working session lasting several weeks. One
of the key outcomes might be the setting up of a representative
forum such as the "Global Coordination Council" suggested by the
Stiglitz Commission that would broadly coordinate global economic
and financial reform.
Second, to immediately assist countries to deal with the crisis,
the debts of developing countries to Northern institutions should
be cancelled. Most of these debts, as the Jubilee movement
reminds us, were contracted under onerous conditions and have
already been paid many times over. Debt cancellation or a debt
moratorium will allow developing countries access to greater
resources and will have a greater stimulus effect than money
channeled through the IMF.
Third, regional structures to deal with financial issues,
including development finance, should be the centerpiece of the
new architecture of new global governance, not another financial
system where the countries of the North dominate centralized
institutions like the IMF and monopolize resources and power. In
East Asia, the "ASEAN Plus Three" Grouping, or "Chiang Mai
Initiative," is a promising development that needs to be
expanded, although it also needs to be made more accountable to
the peoples of the region. In Latin America, several promising
regional initiatives are already in progress, like the Bolivarian
Alternative for the Americas and the Bank of the South. Any new
global order must have socially accountable regional institutions
as its pillars.
These are, of course, immediate steps to be made in the context
of a longer-term, more fundamental and strategic reconfiguration
of a global capitalist system now on the verge of collapsing. The
current crisis is a grand opportunity to craft a new system that
ends not just the failed system of neoliberal global governance
but the Euro-American domination of the capitalist global
economy, and put in its place a more decentralized, deglobalized,
democratic post-capitalist order. Unless this more fundamental
restructuring takes place, the global economy might not be worth
bringing back to the surface.
The G20 ought to be increased to 6 Billion
By Daniele Archibugi
2009-03-31
http://www.opendemocracy.net/node/47639
The G20 is important in the eyes of the world. Its pronouncements
could decide whether you can get a job, refinance a mortgage, get
a loan if you are a small company and, in the poorer parts of the
world, even put your kids to bed with a full stomach.
Is the G20 really the right institution to address so many hopes
and fears? From the standpoint of legitimacy, not at all. It has
no employees, no headquarters and not even a statute. Indeed the
international relations handbooks cannot tell us how to handle
it, as it is situated half way between an international
organization and the more formalized practices of traditional
diplomatic channels.
In spite of the name, it does not even have 20 member states: it
has only 19, boosted by the addition of a European Union
representative. The member governments are by no means
featherweights; as they themselves often remind us, they
represent 85 per cent of world production, 80 per cent of world
trade and two thirds of the world population.
However, these are merely quantitative values and have little to
do with legitimacy. For Bangladesh it is not enough to have a
population six times greater than that of Saudi Arabia to become
part of the group. The only representative from the continent of
Africa is South Africa. The G20 is lacking in logic also as far
as income is concerned: Spain, Iran, Taiwan, the Netherlands and
Poland have a gross domestic product exceeding that of Saudi
Arabia, Argentina and South Africa but have not been invited.
Also other countries of crucial importance for world financial
architecture, such as Switzerland with its banking system and the
Arab Emirates with its Sovereign Wealth Fund assets, are absent.
How does that one third of the world population whose state
representatives have not even been invited to the Summit feel
about it? A good 173 countries in the world have been left out
and can only wait and see what is decided in London. We are
talking about one third of the world population which has all the
problems of the other two thirds and often many more, but in this
case have no voice.
However, it is still better than the G8, it might be objected,
which groups the governments of only 14 per cent of the world
population, all of which located in the North of the world. It
might be argued that to enlarge the meeting and turn it into a
G192, a kind of UN General Assembly on a school outing, would
make it more representative but also inconclusive as there would
be no possibility of taking effective decisions. The crisis that
has hit the financial markets calls for strong messages to be
transmitted, which can only come from those governments that have
enough resources to guarantee them. But the countries that have
fat wallets do not seem to be interested in sending these
messages, perhaps because they have not been given a mandate to
act on behalf of all countries.
More: http://www.opendemocracy.net/node/47639
African leaders and experts warn that reform of global governance
will fail if poorest countries are sidelined
27th Mar 2009
Africa Progress Panel launches new publication bringing together
views of African leaders and development experts
Africa Progress Panel (Geneva)
http://www.africaprogresspanel.org
Geneva, 27 March 2009 - The Africa Progress Panel has today
launched a new publication ahead of the G20 Summit in London next
week, bringing together the views of eleven African leaders and
development experts. They conclude that a new and improved form
of multilateralism is needed to allow the developing world to
overcome the challenges created by the economic crisis, warning
that reform will not be effective or sustainable if the world's
poorest countries are not included in reformed governance
structures.
The eleven contributors include Kofi Annan (Chair of the Africa
Progress Panel), Michel Camdessus (former Managing Director,
IMF), Goodall Gondwe (Minister of Finance, Malawi), Gilbert
Houngbo (Prime Minister, Togo), Trevor Manuel (Minister of
Finance, South Africa), Simon Maxwell (Director, Overseas
Development Institute), Festus Mogae (former President of
Botswana), Linah Mohohlo (Governor, Bank of Botswana), Todd Moss
(Senior Fellow, Center for Global Development), Benno Ndulu
(Governor, Central Bank of Tanzania) and Ngaire Woods (Director
of the Global Economic Governance Programme, University of
Oxford).
The contributors make a number of key policy recommendations,
including:
- The Bretton Woods Institutions must be reformed at several
levels to make them more inclusive. While the World Bank's
allocation of a third seat on its Executive Board to Sub-Saharan
Africa is a first step in the right direction, others like it
must follow to ensure a more equitable and fair distribution of
voting power.
- Backroom deals should give way to transparency and full
representation, whether in the Bretton Woods or other financial
institutions such as the Financial Stability Forum and the Basel
Committee on Banking Supervision.
- In the short term, if the G20 is to become the premier forum
for coordinating a global response, then the African Union should
be systematically represented. In the longer term,
multilateralism must be underpinned by institutions with
universal reach such as the UN whose legitimacy is beyond
question.
- This crisis will not be overcome by institutional reform alone.
Donors must renew their commitment to boost resource levels for
the least developed countries, ease access to credit, review debt
sustainability criteria and lessen aid conditionality.
Mr Annan, Chair of the Africa Progress Panel, states in the
report that:
"Africa now needs urgent support to maintain economic activity
and protect the vulnerable from the crisis. But while trillions
of dollars are being found, at short notice, for stimulus plans
and bail outs in the richer countries, the least developed
countries find themselves lacking access to credit and faced with
lending policies and practices that minimise their chances of
receiving loans".
"Lacking the means to argue their case at the top tables in the
global economic and financial architecture, Africa's countries
are left to face the very real danger of malignant decoupling,
derailment and abandonment".
[More:
http://www.africaprogresspanel.org/english/pressrelease.php?id=99
]
Other Recent Resources
G-20 Official Site
http://www.g20.org
London Summit Official Site
http://www.londonsummit.gov.uk
Summit Communique, April 2, 2009
http://tinyurl.com/cjuqfr
Put People First Coalition
(coalition organizing London demonstrations)
http://www.putpeoplefirst.org.uk/about-us/policy-platform/
Africa Continent's Four Demands of IMF and World Bank
Ngaire Woods (affiliated with Africa Progress Panel)
http://allafrica.com/stories/200903270167.html
Open Democracy, The G20 and the post-crisis world by David Hayes
http://tinyurl.com/cwnrap / http://www.opendemocracy.net
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues,
with a particular focus on U.S. and international policies.
AfricaFocus Bulletin is edited by William Minter.
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