Highlights of Interactive Thematic Dialogue on World Financial Crisis

UN General Assembly, 25 to 27 March, 2009

Member States of the UN General Assembly participating in the Interactive Thematic Dialogue of 25 to 27 March 2009 viewed the dialogue as an opportunity to build worldwide consensus for global action to address the deepening crisis. The Interim Report of the Commission of Experts on reforms of the international monetary and financial crisis was presented by the Chair of the Commission, Professor Joseph Stiglitz, and provided the background for the discussions.

ILO PRESENTATION TO THE THEMATIC DIALOGUE

Participating in one of the Panels of the Dialogue was Jane Stewart , Special Representative to the United Nations of the International Labour Organization (ILO).

Focusing on the issue of equity in employment, Stewart drew attention to the fact that even before the onset of the sub-prime mortgage crisis in the US , the International Labour Organization had emphasized that the present course of globalization was not economically or socially sustainable.  While the world economy had experienced consecutive years of robust growth, the benefits were not being shared by all. In its December 2008 World of Work and Global Wage reports, according to Stewart, ILO had noted that during the two decades preceding the crisis, the incomes of the richest had grown much faster than those of middle- and low-income groups.  Stagnating wages and incomes for a majority of workers had spurred demand for credit to sustain consumption and housing investments.  That, in conjunction with lax regulation of certain financial practices, had allowed for excessive debt accumulation and the persistent focus on short-term economic returns rather than long-term productive investments, which lay at the heart of the current crisis.

The crisis had now taken on a dynamic of its own, and was dramatically impacting employment, business prospects and social stability, she said.  In developed countries, there was a vicious circle of negative interactions between financial, product, trade and labour markets.  Job losses led to lower consumption, which undermined industrial confidence and resulted in less investment and more job losses.  In developing countries, multiple transmission mechanisms — including reduced trade flows, declining commodity prices, reduced liquidity, tighter credit markets, reduced remittance flow, declining foreign direct investment as well as official development assistance (ODA) — had increased the ranks of those in vulnerable employment and the working poor. 
 
Based on growth projections, the global number of unemployed persons could rise by 20 million at best, and 50 million at worst, bringing the worldwide unemployment rate to above 7 per cent.  Women, youth and migrants would be the hardest hit.  Further, vulnerable employment would also increase by 25 million, and there would be substantial downward pressure on wages in the informal economy.  Against the backdrop of the imbalances of the pre-crisis period, perceptions of unfairness were mounting, increasing the risk of social instability.  Moreover, labour market recession would lead to significant social hardship for millions of workers left without any form of protection coverage.

In response to that global picture, ILO was proposing the creation of a Global Jobs Pact, Stewart announced.  Decent work must be central to expansionary policies if they are to be effective. This is key to stimulating aggregate demand.  The crisis should be looked at not only from the perspective of restoring growth, but also as an opportunity to enhance social justice while undertaking transformative action towards the “green economy”.  It should also be recognized that solutions must be nationally and globally coordinated with full participation of social partners (employers and workers organizations), and civil society.  The new Jobs Pact should also focus on enterprise and human resource development, avoid wage devaluation, protect workers’ rights and promote international coordination in policy responses.  Further, a Global Jobs Fund should be seen as a counter-cyclical global mechanism, targeting countries with little or no fiscal space.  The world community should return to the “basic function of finance”, namely, promotion of growth with equity in the real economy, concluded Stewart.

CIVIL SOCIETY INPUTS TO THE THEMATIC DIALOGUE

Civil society representatives participating in the Dialogue drew attention to the serious risks of debt distress for many countries. Some that had exited HIPC (Heavily Indebted Poor Countries Initiative) ran the risk of falling again into deep debt. A World Bank study had shown that 38 countries were currently facing such serious risks. Echoing a recommendation in the Stiglitz Commission Report, CSOs called for a fair and transparent mechanism for orderly debt work-out. Also, to mitigate debt distress, stimulus packages targeting these countries should be in the form of grants, not loans. The ITUC representative drew attention to the jobs crisis, and called for countercyclical measures to have a sustained focus on active labour market policies consistent with gender equality objectives, social protection, and transition to low carbon economies that produced decent work and green jobs.

A representative of the Women’s Working Group on Financing for Development stressed the need for the UN to play a pivotal role in a new global development architecture that fully integrates gender equality and women’s rights. Some called for fundamental reforms of the IMF, including its voting structure, but also pointed to a number of reforms that were feasible in the short term, including mechanisms to enhance transparency of board decisions, to provide oversight of senior management performance, and to introduce parliamentary oversight. They called for the use of Special Drawing Rights (SDRs) as a way to interject adequate levels of liquidity into the global economy, with access by developing countries. Some criticized the piece-meal, undemocratic approach of current global governance arrangements, and hailed the crisis as an opportunity to create new institutions. They expressed support for the proposed new Global Economic Coordinating Council, stressing that it should be established within the United Nations, and be democratic, inclusive, and transparent.

GENRAL DISCUSSIONS WITH MEMBER STATES

In his presentation, Stiglitz had warned against protectionism. He pointed out that of 20 countries that had agreed at the November G20 meeting not to engage in protectionism, 17 had proceeded to do so. The need to counter harmful conditionality and the constriction of policy space in the context of stimulus packages was also discussed. A representative of Third World Network drew attention to 9 recent IMF loan arrangements where all of the conventional harmful policy conditionalities remained firmly in place.

Representatives of the G77 Group of developing countries insisted on the need for an inclusive, policy-making forum where the voices of developing countries could be heard, and their issues adequately addressed. Responding to these concerns, Australia ’s representative said the message that the G20 was not inclusive enough had been heard, and the London summit had to produce a substantial response that incorporated the concerns and goals of developing and developed countries alike.

The representative of the United Kingdom , which is hosting the G20 Summit, said he supported the Commission’s approach to dealing with the crisis and its goal to provide global solutions that would protect the world’s poorest people.  He hoped the G20 meeting would address that aspect. Many welcomed the statements by the German Minister of Development Cooperation and Commission Member, urging industrialized nations to maintain their ODA commitments, and additionally allocate 1% of their stimulus packages to low income developing countries.

Source: UN General Assembly Press Releases – GA/10814 of 25 March, 2009; GA/10815 of 26 March, 2009; GA/10817 of 27 March, 2009.

For your information, Social Watch has provided some detailed coverage of the Thematic Dialogue at this website: http://www.socialwatch.org/en/noticias/noticia_337.htm