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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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