The scale and complexity of the economic crisis signals the need to reform the global financial system. Policy responses should recognise the inequity and unsustainability of unrestrained growth and the difference in consumption across
income groups and countries, says a report by CIDSE.
From Collapse to Opportunity: Development Perspectives on the Global Financial Crisis - Eldis, July 09
Link to Report: From Collapse to Opportunity: Development Perspectives on the Global Financial Crisis - CIDSE, April 09
8th July 09 ~ STWR
From Collapse to Opportunity: Development Perspectives on the Global Financial Crisis
July 09 -
The global crises grew out of an economic model that is fuelled by risk-taking and speculation, with lopsided standards that cannot effectively supervise such behaviour. The present model of growth is based on an unsustainable over-exploitation of natural resources. Global integration has meant that those in control of financial resources and with political and economic leverage have become increasingly mobile and can ‘shop around’ to find the most favourable tax and standard regimes to invest in. Growing out of this flawed model of growth, the global crises have claimed millions of victims.
This CIDSE policy paper, analyses the crises and makes recommendations to overcome them, drawing on the principles of Catholic social teaching.
It argues that industrialised and emerging economies should realise that the enormity and complexity of the global crises with their multiple dimensions require a response that represents a fundamental change in the status-quo. This response must be based on a profound reflection on the inequity and unsustainable nature of current models of growth, the differential value placed on the various modes of production and the vastly different patterns of consumption across income groups and across countries.
Highlights and recommendations include:
Link to original source
International financial regulation and the bodies that design them are deficient in many ways. Standards used are faulty and membership is unrepresentative. CIDSE recommends that financial standard-setting bodies add developing countries to their membership. An intergovernmental group of experts based in the United Nations (UN) should be established to address development-related questions that arise out of the design of financial standards.
The International Monetary Fund (IMF) failed to broker the coordination of exchange rates among hard currency issuers. This function is essential to avoid the negative impacts of exchange rate volatility on the trading and debt-servicing capacities and ultimately the development prospects of developing countries. There is an urgent need to establish alternative credible mechanisms for the multilateral management of exchange rates. The current system that relies on a single country’s currency should be substituted by strengthened regional and sub-regional schemes for monetary cooperation.
Governance of the Bretton Woods Institutions (BWIs) is out of date, reflecting a power distribution going back to the post-World War II era. Many developing countries do not consider that their interests are adequately upheld by these institutions. The great hesitation with which only a small number of developing countries sought IMF assistance when they started to feel the impacts of the financial crisis illustrates this. Reforms tabled so far have been piece-meal. Deep and extensive reforms of the voting system are recommended. The international community must also take measures to enhance the accountability of governments and the BWIs to citizens at the national level and to international law. The procedure for the selection of the BWI’s leadership must also be changed
The UN has been rendered incapable of governing the global economic and financial systems.Much of this inability arose from countries in the global north shifting political emphasis and resources to the BWIs. The UN mandate to hold the BWIs accountable to international social and economic agreements or conventions remains underdeveloped. Finally, the organisation is also marked by internal deficits that restrict its effectiveness and are still the subject of a series of reforms. CIDSE proposes a mechanism by which the follow up to the International Conference on Financing for Development (the ‘Monterrey Consensus’) that integrally deals with development in all its aspects can provide for this.
Link to STWR's key facts page on the Global Financial Crisis
Beyond the London Summit - Put People First, 16th June 09
The New Depression -Martin Jacques, New Statesman (UK)
Why This Crisis May Be Our Best Chance to Build a New Economy - David Korten, YES! Magazine