Developing countries have joined UN officials in calling for more money and a greater role in regulating the world economy in the wake of the worst global financial crisis since the Great Depression, which has taken a disproportionate toll on poor nations.
At Wednesday’s opening of a three-day UN financial summit, country after country laid blame for the crisis on financial liberalization and deregulation in the US and other rich nations and said it was time to reform the world financial system under the auspices of the UN.
“The reforms based on the belief in the efficiency of the market and the diminution of government did not work,” said Bangladeshi Foreign Minister Dipu Moni, speaking on behalf of the world’s poorest nations. “Reforms are needed to enhance productivity and capacity to cope with risks.”
Nobel economics laureate Joseph Stiglitz, who headed a Commission of Experts on Financial and Monetary Reform that developed several recommendations for the conference, said that “as globalization has proceeded, we haven’t created global financial institutions.”
He called for the creation of a Global Economic Coordination Council to deal with the fallout wrought by the crisis that began last year, although the council is not mentioned in the 15-page draft final document agreed upon by rich and poor nations prior to the conference.
Instead, the draft calls for the IMF, the World Bank and other lending institutions to be flexible in imposing conditions on developing countries so they can take action to deal with the economic crisis, including adopting stimulus packages. The draft also calls for measures to avoid a new debt crisis and new approaches to restructuring debt.
“It needs to be an inclusive process of decision. Not the G8, not the G20, but the G192,” Stiglitz said, referring to the Group of Eight major industrialized nations, the Group of 20 key economic powers and the UN’s 192 member nations.
He also argued that funds used to aid developing nations must come in the form of grants, rather than loans.
“Because we don’t want to end up with another debt crisis further along,” he said.
The draft document calls for donors and financial institutions to consider “grants and concessional loans as the preferred modalities of their financial support instruments to ensure debt sustainability.” The G20 countries that account for more than 80 percent of the global economy agreed at a summit in April on a substantial package of financial support totaling US$1.1 trillion, with US$50 billion targeted for low income countries.
Chinese officials seemed especially concerned about the financial situation in the US, where it holds over US$1 trillion in debt and called for wide ranging reforms.
“Countries across the world have suffered heavy losses from the ongoing global financial crisis and economic recession. One important consensus we have reached upon reflection is that it is important to keep the exchange rates of major reserve currencies relatively stable and promote a diversified and rational international monetary system,” Chinese Foreign Minister Yang Jiechi (楊潔箎) said.
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