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|Revisiting the Stiglitz Commission Report|
The Commission of Experts of the UN General Assembly President in 2009, chaired by the Nobel Prize winning economist Joseph Stiglitz, presented its report to the UN but little of its recommendations were followed up. Below is an extract of a paper that summarises and comments on the Commission’s report, by Yash Tandon.
11th September 2012 - Published by the South Centre
At the 63rd session of the General Assembly of the United Nations, its President, Father Miguel d’Escoto Brockmann from Nicaragua, took a bold step. He set up a “Commission of Experts”, headed by Joseph Stiglitz, to study the crisis in depth and make recommendations. It was an important commission and so I summarise its main recommendations.
The Stiglitz Commission recommended an ‘Agenda for Systemic Reforms’ essential for ‘immediate global recovery’. This consisted of 10 items for immediate action. These are:
1. A New Global Reserve System (GRS) - as a greatly expanded SDR system.
2. Reforms of the Governance of the International Financial Institutions - Bretton Woods Institutions, Bank for International Settlements, Financial Stability Forum.
3. A Global Economic Coordination Council to replace the G20 (‘At a level equivalent with the General Assembly and the Security Council, such a Global Economic Council should meet annually at the Heads of State and Government level to assess developments and provide leadership in economic, social and ecologic issues’.... ‘It could thus provide a democratically representative alternative to the G-20’).
4. The surveillance of economic policies focused on ‘systemically significant countries’. It should focus not just on inflation, but also on ‘unemployment, financial stability, systemic stability ...and systems of social protection’.
5. Reform of Central Banks. Their aim should be ‘...to ensure price stability in the context of delivering long-term sustainable growth, while being sensitive to the risks to financial stability, capital flows and exchange rates’.
6. Financial Market Policies at both national and global level, including:
(a) Financial Product Safety, including through the creation of a Financial Products Safety Commission
(b) Comprehensive Application of Financial Regulation, including automatic countercyclical capital provisions
(c) Regulation of derivatives trading, including regulated exchanges for trading standardized contracts of systemically significant derivative contracts
(d) Regulation of Credit Rating Agencies – (rules for which were provided in an appendix)
(e) Towards a Global Financial Regulatory Authority (GFRA) to limit the size of banks to avoid systemic risk by including supervision by ‘Global Competition Authority’ (GCA) and a ‘College of Supervisors’
(f) Financial control of companies based on the host country (not home country) regulation, and may entail requiring the establishment of subsidiaries rather branches
(g) Reforms in regulatory structures... ‘The weaker is the system of global regulation, the more segmented will financial markets have to be to ensure global stability’
7. Support for Financial Innovations to Enhance Risk Mitigation. It is the developing countries that bear brunt of exchange interest rate fluctuations. ‘IFI lending in (possibly baskets of) local currencies and the provision of exchange and interest rate cover might be important steps in improving international risk markets’.
8. Mechanisms for handling Sovereign Debt Restructuring and Cross-border bankruptcies, including harmonization of national legislation on cross border disputes dealing with trade in financial services.
9. Completion of a truly ‘Development-Oriented Trade Round’.
10. More Stable and Sustainable Development Finance, including ‘receipts’ to support ‘the developing countries costs of reducing greenhouse gas emissions in the context of their national policies to promote sustainable development’.
There are some good ideas in all these. For example, a Global Economic Coordination Council – at a level equivalent with the Security Council – could have provided some “muscle” to the other recommendations of the Commission. But of course, this, and many other ideas were a bit too “radical” for the G7 countries and possibly for some developing countries too. These did not want too radical a perspective to come out of the Commission under the flag of the United Nations.
The Report came out in September 2009. It is now almost three years. Nothing is heard of it any more. Probably not a single recommendation has been followed up. It is of course too facile to say that the “implementation deficit” is because of lack of “political will” on the part of the ruling classes of the biggest countries of the “international community”. But that itself begs the question: why is such a political will lacking? A simple, quick answer is that the ruling classes – and the entire paraphernalia of the capitalist system controlled by an un-regulateable “mafia” of bankocrats, kleptocrats, speculators, and state bureaucrats – have absolutely no interest in reforming a system of which they are the principal beneficiaries.
I have taken time to summarise the recommendations of the Stiglitz Commission, and I have offered a (rather mild) critique of it for two reasons.
One is that it was probably the most ambitious and comprehensive effort made to reform the financial system so far, and therefore one has to take it seriously.
The second - a more significant reason - is to warn against further expenditure of time, energy and wasted expectations going over the same ground already covered extensively by the Stiglitz Commission.
Yash Tandon was formerly Executive Director of the South Centre.
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