Last week I attended two events that focussed on the crisis and its impact on development: a big DFID conference in preparation for its forthcoming white paper, and an NGO presentation to the UN ‘Commission of Experts’ on reforming the international financial system, which is chaired by Joe Stiglitz. Discussions at both events brought home just limited a role the UN is playing in the G20 process, and the broader response to the crisis.
Seen from London, (and I suspect, Washington) the marginality of the UN is striking – barely a mention in the first G20 leaders’ communique in November. In contrast, both the IMF and World Bank have been hugely boosted by the crisis – before it hit, the IMF was struggling to justify its existence, and was even undergoing some structural adjustment of its own, as developing countries stopped taking its loans, cutting its sources of revenue. All that seems a long time ago now, with all parties relying on both Fund and Bank to lead the response, especially in the poorest countries. At the weekend, G20 finance ministers agreed to double the IMF’s resources with a further $250bn to allow it to respond to the crisis.
Why is this? In principle, the UN really ought to be at the centre of any response, as the only half-way representative international body which truly gives a voice to developing countries. Even the G20, while an undoubted improvement on the G8, raises the question of how the missing ‘G172’ are to be represented.
Many NGOs think the UN has been deliberately frozen out by the big G20 powers because its message is too radical, but at the DFID event, US and British aid wonks privately accused the UN of ‘lack of leadership’ and ‘fighting old battles’ – by focussing on the failings of the IMF in particular, the UN was distancing itself from the centre of the debate. That, plus the need for speed – never a UN strongpoint – in responding to the downturn have meant that it has largely gone missing in action in the core G20 discussions..
When I asked Joe Stiglitz and his fellow commissioners about this, we got into an extensive bout of metaphorical arm-wrestling, which I think I probably lost:
Me: the world economy is on fire, and there’s only one fire engine equipped to disburse the money needed fast enough – the IMF. Surely, we should be trying to identify the minimum level of IMF reforms compatible with the twin aims of getting money out the door fast enough to head off an economic disaster and building a new IMF that won’t repeat the errors of the past.
Stiglitz: But what if the fire engine is also responsible for setting some of the fire?! We have to reform the fire department while the fire is burning – we have no choice.
· We need to break the monopoly of the Bretton Woods institutions, using a variety of vehicles for the fiscal stimulus, both multilateral (Fund, Bank etc) and regional.
· Any stimulus must be free of conditionalities, especially those that are ‘procyclical’ (e.g. cutting spending during a downturn)
· A new global reserve system is essential to reduce levels of volatility.
· In addition, most Commissioners support a new global credit facility, maybe tapping into new sources of capital from China, or in oil producer sovereign wealth funds. Stiglitz thinks this could be set up quite quickly, although opponents might find it easy to delay (as the US did with the proposed creation of an Asian Monetary Fund after the Asia crisis in the late 1990s).
All well and good, but which G20 leaders, if any, are listening? I felt completely at home with the Commission – they seemed like ‘our kind of guys’ (if intimidatingly clever). And maybe that’s part of the problem. Influence is as much about ‘optics’ as the strength of your arguments. In Stiglitz, the UN has appointed the world’s most prominent critic of the IMF to lead its response to the crisis. The G20 has decided the Fund is essential to its crisis response. Hardly surprising, therefore, as one senior UK civil servant told me, that the Commission report risks ‘being dismissed in two lines.’