International finance structures must be drastically overhauled in the face of the current global economic crisis, a panel of experts convened by the United Nations General Assembly said today, calling on wealthier nations to direct one per cent of their economic stimulus packages to help developing countries address poverty.
A coordinated approach – bringing together not just the so-called Group of Eight (G-8) or even Group of 20 (G-20) nations, but the “G-192” representing all members of the Assembly – is needed to pull the world out of the recession, according to the recommendations of the Commission of Experts on Reforms of International Finance and Economic Structures.
Chaired by Joseph Stiglitz, winner of the 2001 Nobel Prize for Economics, the nearly two dozen-member body stressed that many poorer countries lack the resources necessary to tackle the crisis, and developed nations should not attach inappropriate conditionalities to such funds.
“The nature, the severity of this crisis has really opened up opportunities for change for reform that I think would not have been conceivable even a few months ago,” Mr. Stiglitz told reporters.
The experts also called for the International Monetary Fund (IMF) to increase the availability of funds for hard-hit nations.
A new global reserve system must be put into place to promote economic stability and equity, the Commission said, as this would ease the deflationary effects of the massive accumulation of reserves that countries believe are necessary to brace themselves against global instability. Such a system would offset the risk of a drop in value of a major reserve currency.
Other recommendations included the creation of an elected and representative Global Economic Coordination Council, as part of the UN, to meet annually at the head-of-State level to assess development and serve as a “democratically representative alternative to the G-20.”
Further, a financial regulatory board and competition authority – which would both answer to the Coordination Council – could prevent the expansion of multi-national firms that threaten competition or become problematic when they become too big to fail, the experts said.
The creation of a new international credit facility, under the aegis of the World Bank, would provide additional credit to developing countries without pro-cyclical conditionalities, and the governance of such an entity would represent both new donor countries and take into account concerns of developing countries.
“We see the United Nations system, which includes the Bretton Woods institutions, has the institutional capacity, the expertise, and the global presence to respond in significant and practical ways” to the current crisis, Assembly President Miguel D’Escoto said today.
An interactive dialogue, expected to wrap up tomorrow, is under way at UN Headquarters on the panel’s recommendations. The results of the three-day gathering will help lay the groundwork for the International Conference on the Global Economic and Financial Crisis and its Impact on Development slated to be held in New York in June.