Unctad And The World Bank

UNCTAD and the WORLD BANK, two opposing views on the crisis and on its solution Francine Mestrum www.globalsocialjustice.com [email protected] UNCTAD has once more delivered… In a very interesting new report, the UN organization looks very critically at the current financial and economic crisis. Let me briefly highlight a couple of important points from the report. The crisis was predictable, according to UNCTAD. The huge disequilibria, the current account deficits in the USA, the UK, Spain and Eastern Europe, together with the growing surpluses in China, Japan, Germany and the oil-exporting countries, were bound to lead to this crisis. UNCTAD’s first warnings came in 2004! Secondly, recognizing the lack of economic logic of the financial markets is key to understanding the roots of the current crisis, according to the Trade and Development report. However, up till now, nothing has been done to address the impacts on currency and commodity markets and on the future of an open trading system. The price volatility of commodities is certainly linked to the rising or declining demand, though the price evolutions in the second part of 2008 were mainly triggered by financial investors. Commodities are increasingly seen as an alternative asset. Closer and stronger supervision, and regulation of these markets is indispensable, according to UNCTAD. UNCTAD notes that the IMF lending has surged since the outbreak of the current crisis, extending to nearly 50 countries by the end of 2009. However, the scope for expansionary policies to counter the impact of the crisis on domestic demand and employment is severely constrained by IMF conditionalities. Furthermore, experience with the current financial crisis calls into question the conventional wisdom that dismantling all obstacles to cross-border private capital flows is the best recipe for global financial integration. Too little attention has been given to the management of global finance, in particular speculative capital flows. Assertions that capital controls are ineffective or harmful have been disproved. Finally, UNCTAD notes that the Dollar-based reserve system is increasingly challenged. It proposes a reformed international exchange rate system with a constant real exchange rate (RER) in order to curb inflation, to prevent currency crises and global imbalances, to avoid debt traps and procyclical conditions and to reduce the need for international reserves. The UNCTAD report also has a chapter on climate change, and it points to the need to make mitigation compatible with growth and to introduce structural change.

After this positive note for UNCTAD, unfortunately, negative notes have to be given to the World Bank. Its new ‘Doing Business’ Report (2010) has again a chapter on ‘Employing workers’ in spite of its promises to drop these indicators. Countries are still being negatively rated if they have ‘difficult’ rules on hiring people, if working hours are regulated too ‘rigidly’, if the redundancy cost is ‘too high’, etc. This way of working is totally in contradiction with the efforts of the ILO to introduce social protection systems in all low-income countries. UN organizations are currently promoting the idea of a ‘social protection floor’ and of ‘basic social security’ in order to respect social and economic human rights. There is little scope for realizing these ideas, as long as the World Bank is promoting exactly the opposite ideas.

Read the UNCTAD report on ‘Trade and Development’ (2009): www.unctad.org Read the synthesis of the World Bank Report: Doing Business 2010: www.worldbank.org/