TWN Info Service on Finance and Development (Dec11/03)
16 December 2011
Third World Network
is a report of the informal dialogue at the UN during the fifth high-level
Dialogue of the General Assembly on Financing for Development held on
7-8 December 2011. Panelists discussed gaps in meeting agreed development
goals, expressing support for the UN’s role in economic governance and
the need for systemic change to salvage global financial stability followed
by statements by several Member States and civil society speakers.
Third World Network
for development discussions on development goals,
governance and global financial instability
15 December (Bhumika Muchhala) – The informal interactive dialogue at
the fifth High-Level Dialogue of the General Assembly on Financing for
Development (FFD) held on 7-8 December 2011 explored the links between
the themes of FFD and agreed development goals, the upcoming Conference
on Sustainable Development (Rio+20), and the role of the UN in global
stressed the continuing importance of the Monterrey Consensus principles;
underscored that the UN needs to be, and has the authority to be, involved
in global economic governance; and highlighted the dilemma of austerity
policies and the connection to human rights as well as the structural
problems in global financial stability. Developing country representatives
reiterated that South-South development cooperation is a complement
to, and not a substitute for, North-South cooperation.
Chilean Ambassador, Eduardo Galvez, said that the Monterrey Consensus still “serves as the lynchpin” for development
today, and that a critical problem in moving forward is the deficiencies
in global financial governance. “The problem is sometimes that people
don’t want to see the UN involved in discussions beyond humanitarian
aid and development assistance. However, there is ample evidence that
the UN does indeed have the authority to discuss financial and economic
policy issues,” said Galvez.
said that the legitimacy of the UN involves both the framework for global
economic governance as well as the UN’s ability to come up with international
guidelines for sustainable development. The UN should work on a document
that would yield an international basis for the post-2015 horizon, when
consensus will be sought on what the UN should do on both the MDGs and
comes to the future of the MDGs, the most important thing is the clarity
of the goals, a clarity which must be preserved, Galvez underscored.
However, several aspects should be integrated into the future of the
MDGs, such as the Monterrey Consensus, alternative measurements of development,
and the notion of sustainable development, as economic, environmental
and social issues should be seen as a whole. The Rio+20 Summit should
stimulate a push in this direction direction.
sad parallels with the climate crisis, the effects of the financial
and economic crisis have been felt most intensely by those in no way
responsible for it, said Roberto Bissio, coordinator of the non-governmental
organization Social Watch. Bissio pointed to a chart from the annual
Social Watch report to the audience, which demonstrated that while world
trade had increased significantly over the last 40 years, world per
capital income had increased much less, and world basic capabilities
index had increased even less. Given the multiplication of global wealth,
why has this happened, Bissio asked.
The (2011) OECD report on inequality, Divided We Stand: Why Inequality
Keeps Rising, shows numerical evidence that rich countries are becoming
more unequal. Developing countries growing the fastest are at the same
time increasing their inequality the fastest as well. The ways in which
massive transfers of resources from the poor to the rich occur imply
that inequality cannot be sustained.
The financial paradox, Bissio said, is that some LDCs accumulate more
money every year in their central bank reserves than what they receive
as official development assistance (ODA). This amounts to the poorest
of the world providing soft loans to the new “HIPCs, the Highly Indebted
Powerful Countries.” Bissio asserted that “global financial stability
is a global public good that is required to free developing countries
from this financial servitude.”
Many middle-income developing countries are today buying IMF bonds,
which are then recycled to European countries. Why are developing countries
doing that? And how can all developing countries plug the leaks to that
outflow of resources? The reason for this is simply that the international
financial system is so unstable and predatory, that reserves are required
to self-insure countries from competitive and speculative attacks. The
primary deficit in the Monterrey Agenda is that of global financial
stability, and this makes it impossible for countries to use their own
resources for themselves.
Bissio said there was a worrying trend whereby even countries enjoying
economic growth and budget surpluses were implementing austerity packages,
with 70% of 128 countries studied by the United Nations Children’s Fund
(UNICEF) either implementing or considering the implementation of austerity
measures. One quarter of developing countries out of the 128 country
sample were even cutting expenditures to pre-crisis levels, despite
the fact that they faced no fiscal debt problems. “This is a horrible
fashion that is being followed, maybe because that’s what Paris and
other fashion centres are doing, and therefore we all follow the fashion
and do it even if we don’t need it,” he said, describing the trend as
Referring to Social Watch’s annual report, Bissio said 66 countries
had reported on the question of sustainability ahead of the “Rio+20”
UN Conference on Sustainable Development in June 2012. When the question
of sustainable development was put to people at the grassroots level,
it did referred not only to environmental sustainability, but also to
financial and political sustainability, “because the financial crisis
was disrupting the social contract around the world.”
Such issues are being featured in the current High-level Dialogue on
Financing for Development, he said, adding that a key advantage of the
United Nations was its capacity to integrate the various aspects of
sustainable development within a human rights framework, which was the
cornerstone of the Organization and its image around the world.
The “austerity” epidemic can be substantially addressed from two angles.
First, from a human rights standpoint that stresses the responsibilities
of governments, under the United Nations Charter, to use all available
resources to ensure the human rights of their populations, and equated
the cutting of basic services with a violation of those human rights.
Second, the economics of austerity policies are poor, he said, warning
that if countries kept lowering costs in competition with others, there
would be a “race to the bottom, which ultimately submerges the entire
world economy.” If the G20 was to formulate a plan to stop States from
racing to the bottom, the United Nations needed to take the reins, he
The Basel Accord established laws for the banking industry. The problem
is not so much the absence of institutions as it is a lack of enforcement
and institutional regulatory capacity. Off-shore banking and fiscal
havens mean that unregulated money is circulating in undocumented places,
contributing to the race to the bottom.
But this does not mean there is no authority. This means that the democracy
and legitimacy of decision-making is lacking. “That’s what sustainable
development is all about – governance of ‘sustainability.’” With regard
to governance, three urgent measures are needed in financial regulation
governance: (i) the curbing of speculation through the establishment
of position limits, (ii) increased transparency in the trade of derivatives
and (iii) compulsory delivery or banning of certain types of trading.
Furthermore, large firms should be broken up into smaller size firms.
The director of the Bureau of Development Policy for the UNDP, Olav
Kjorven, reviewed MDG achievements and noted “remarkable progress
in several areas, such as maternal health, HIV/AIDS and infant mortality.”
Even in disaster-prone countries, the evidence showed that MDG achievement
is possible. However, progress remains uneven across many countries
due to the aggregate problems of various issues such as food security,
youth unemployment, women’s empowerment.
Most critically, financing for development has been a shortcoming on
many fronts. “For example, ODA lags far behind, and in fact, had donors
met their aid commitments there would have been more than enough resources
by now. Important advances in the area of health and environment.” Financial
inclusion, which responds to the need of poor households, also needs
to be supported and scaled up. Concrete examples include post-office
banks, telephone and internet banking, which need to be combined with
increased public financial management.
Although good progress has been made to combine debt resolution mechanisms
such as HIPC and MDRI, many LDCs are excluded from these processes although
the recent crises has exacerbated debt vulnerabilities. In this context,
the current FFD is critical to scale up financing for the achievement
of all previously enshrined goals.
The Busan Outcome Document, endorsed by both developed and developing
countries, is important because it recognizes the plurality of development
players, ranging from South, North, civil society, private sector, academics,
and other stakeholders. The multitude of new development partners requires
a consideration of sovereign bond markets, private capital flows, remittances,
and other private sector flows. These ought to be combined with new
international commitments to mobilize new resources.
Going forward, there is a need to expand, define and diversify safety
nets, as well as proposals on international taxation, tax havens, illicit
financing flows and financial stability. However, it will be a challenge
to make sure that innovative financing makes a constructive contribution
Several member states made contributions to the informal dialogue.
India said that it was “slightly disconcerting that when discussing
FFD, the UN is too focused on the post-2015 development framework.”
This is a premature step, as “we first need to bridge the current gap
on MDGs and meet the commitments which have been previously agreed to.”
As such, fulfillment of the MDG goals by the deadline of 20015 should
be at the center of FFD.
India expressed support of the Busan outcome with a “clear understanding
that South-South cooperation is different from North-South cooperation.”
While there has been much dialogue on an improved model of development
cooperation, India reminded its fellow delegates and officials to “keep
in mind that developed countries still face many challenges ahead.”
China also made a distinction between North-South and South-South
development cooperation, saying that “South-South cooperation is not
a substitute for North-South cooperation, but rather a complement to
it.” The nature, modalities, expectations and outcome of South-South
cooperation is qualitatively different than that of North-North. China
added that the key to ensure aid effectiveness is the fulfillment of
adequate ODA development resources to developing countries.
Colombia also added its voice to the prevailing sentiment among
developing countries that South-South cooperation is complementary,
not a substitute, to North-South cooperation.
Venezuela agreed with other delegates who had, during the two-day
FFD dialogue, said that although the Busan Agreement is significant,
it is not an official UN document and thus, it cannot be viewed as part
of the UN system. The systemic chapter of the proposal that developing
countries brought to Monterrey in 2002 on the international financial
system, that is, the issue of world economic governance, as Amb Galvez
has rightly mentioned, should instead be at the center of our discussions.
“How can we then contribute to the follow-up of Doha and Monterrey?”
asked Venezuela. “The issue of economic governance is very important,
especially when it comes to reforming the global reserve system, which
is a serious concern to my delegation.”
Mexico said that the Rio+20 Summit “is an opportunity to promote
a more inclusive vision, and to integrate the environment as a cross-cutting
key agenda, particularly because Rio involves arrangements for the vertical
strengthening of each of the pillars.” The three Rio+20 pillars of environment,
social, and economy reminds us that we should not lose sight of the
whole, which is complex and which goes beyond purely monetary factors.
The United States said that the remarks of Roberto Bissio, of
Social Watch, are particularly important. There is a relationship between
economic growth and economic inequality, in that “we should never think
that there is some sort of trickle-down.”
Furthermore, significant changes are occurring in the economic geography
of debt, trade finance, and foreign direct investment (FDI). Today,
40% of world trade and 35% of outward FDI comes from developing countries.
“Cooperation amongst developing countries can foster greater growth,
poverty alleviation and development results.”
The European Union stated that the EU has continuously supported
a wide range of development financing tools. Since 2003, the EU has
presented an annual review of its financing to monitor and review the
progress made. The goal now is to raise awareness through innovative
financing mechanisms for development, such as a financial transactions
tax. However, there is still a clear need to mobilize traditional ODA
as well as new financing for development resources.
The NGO Committee on Financing for Development made an intervention
on development principles and systemic financial issues. Even as the
MDGs were being adopted, more than a decade ago, questions were raised
as to how they would be financed. Just two years later, the Monterrey
Consensus contained not only principles and agreements, but also a call
for a detailed intergovernmental process, and to carry forward a discussion
The FFD office was created in DESA to fulfill this responsibility. Given
what has happened since 2002 it is now time to raise the FFD office
to a substantive commission of the ECOSOC. This upgrade would strengthen
the FFD mandate, provide a forum for the urgently needed and ongoing
global financial crisis, and would contribute to greater coherence of
global trade, financial and economic policies.
Goal 8 of the MDGs calls for real partnership. We call on member states
to commit to three means that would be mutually beneficial to contribute
to MDGs. First, an international debt resolution mechanism to address
the destructive burden of debt repayment imposed on developing countries,
which in many cases are illegitimate and odious. Any such mechanism
needs to be fair, transparent and legitimate.
Second, the implementation of a financial transactions tax, which is
widely supported at the present time. The revenues from this tax ought
to be used for development, such as meeting the internationally agreed
development goals, a universal social protection floor and addressing
the financing needed for climate change.
Third, member states are called upon to allot 5% of their present military
budget to development.
The Global Foundation for Democracy and Development, based in
the Dominican Republic and New York, made a statement on the impacts
of financial speculation on futures markets and global development.
Food insecurity and price volatility, as a result of food and oil speculation,
has become one of the key constraints to the MDGs. Food speculation
has radically changed the science of economics. The price of commodities
is no longer determined by supply and demand but by the perceptions
and risks of financial speculators.
Financial speculation takes unfair advantage of economic, social, political
and environmental conditions, so as to increase profit margins of institutional
investment firms, who dictate market prices to a far greater degree
than consumers and producers do. Markets no longer have a social value.
They have become casinos where speculators spend money they do not have
for commodities they have no use for. According to World Bank estimates,
during 2010 and the first half of 2011, 70 million people plunged into
poverty as a result of volatile and high food and oil prices. If effective
measures are not put in place to address excessive speculation, this
situation will keep getting worse.
The Global Foundation for Democracy and Development promotes a new consensus
on commodity price stability, defined by the following criteria: (i)
limits on the positions of investors, (ii) higher margins than the premiums
required to underwrite futures contracts, (iii) limits on the volumes
that financial investors can trade and (iv) banning financial speculation
in food futures markets.
Barbara Adams, representing Social Watch, addressed the dilemma
where on the one hand the international community seeks concrete measurable
targets and on the other hand there is a significant narrowing of the
approach to development from an integrated one to one that is fragmented
and isolated. Most of the panelists articulated how important it is
to strengthen the role of the UN system as we go forward. How do we
do this with regard to development results, and not just effectiveness
alone, and how do we measure progress toward those results? There is
confusion around the Paris indicators. Are they in or are they out?
National ownership and the use of country systems is another contentious
area which CSOs feel is lacking in many cases.
Ambassador Galvez highlighted the way in which we are measuring progress.
The international community relies too heavily on aggregate GDP, whose
insufficiencies have been pointed out by many. My question would be
what would need to happen in Rio 2012 and the Beyond 2015 process, in
that what sort of new metrics are needed and how will they be translated
into practical use beyond the academic interpretation?
John Langhorn, Representative of the UN’s Academic Council, focused
his intervention on the problem of fiscal austerity, saying that “there
is a tendency in some quarters to regard austerity as the signal of
responsible macroeconomic policy, when in fact what’s responsible is
to maximize growth and well-being.”
If we can learn one lesson from the Great Depression, he said, it should
be that it is perverse to cut expenditure and wages at a time when the
economy is either in recession or worse. What is responsible is to build
up aggregate demand and output that would contribute directly to faster
movement on development, which would include achieving the MDGs.+
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