Overcoming the serious weaknesses exposed by the global economic crisis will not be easy and will require a major overhaul of the machinery for international finance, aid and trade, according to a new United Nations report released today.
The World Economic and Social Survey 2010 notes that getting ‘back on track’ will require significant reforms in global economic governance and new thinking to put the world on a more sustainable path of development.
“This year’s report looks at the prospects for post-crisis global development and concludes that a major rebalancing of the global economy is needed to make it sustainable,” said Rob Vos, the Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs (DESA).
“To that end, it argues for much more effective mechanisms of global economic governance, requiring a major overhaul of the existing ones,” he told reporters at the launch of the report.
Mr. Vos said one of the main messages in the report is that many of the global crises in recent years – such as the food, fuel and financial crises – are to a large extent due to major systemic failures in the global economy and weaknesses in the mechanisms for global governance.
The survey – entitled “Retooling Global Development” – notes that the financial crisis provides an opportunity to re-examine and reform the system of global governance so that economic interdependence can be harnessed to overcome poverty instead of being the source of instability and greater inequalities.
International aid and trade processes must be reformed to ensure that governments have the needed policy space to experiment with solutions appropriate to the local situation.
“Decades-old promises to provide the official development assistance (ODA) needed have not been kept time and again, except by a small handful of rich countries,” said Assistant Secretary-General for Economic Development Jomo Kwame Sundaram.
“Many developing countries also suffer from volatile aid flows which undermine government planning efforts. Bilateral aid requirements as well as aid conditionalities have long undermined meaningful national ownership of development strategies as well as processes,” he added.
One key source of policy incoherence, said Mr. Sundaram, is the aid architecture itself, both internally and in the way it interacts with trade, debt and other financial policies.
The survey proposes that developing countries be put in the driver’s seat in identifying financing gaps through well-designed national development strategies.
On trade, the survey notes that the equal treatment of all nations effectively skews international trading against small economies. To make the multilateral trading system more conducive to sustainable development, it needs to both expand and restrict the scope of the World Trade Organization (WTO) rules.
For a sustainable rebalancing of the global economy, the survey says much closer coordination is needed across the trading system, the new regime for international financial regulation, the global reserve system and the mechanisms for mobilizing and channelling development finance and climate funding.
It also proposes that the international community consider establishing a global economic coordination mechanism which goes well beyond the Group of 20 (G20) leading and emerging economies.