|Department of Public Information • News and Media Division • New York|
Press Conference to Launch Report of General Assembly President’s Expert
Commission on Reforming International Monetary and Financial System
The Commission of Experts on Reform of the International Monetary and Financial System had helped to make the United Nations an important player in the financial realm over the past year, Miguel d’Escoto Brockmann, outgoing President of the General Assembly, said at a Headquarters press conference this afternoon.
“Nearly all will agree that the revitalized United Nations role that has emerged in the past year simply would not have been imaginable without the extraordinary commitment of the Commission,” said Mr. d’Escoto, who formed the Commission in response to the world financial crisis. Accompanying at the pre-publication launch of the Commission’s final report was that body’s Chairman, Nobel Laureate Joseph Stiglitz.
The report is under embargo until its publication on 22 September, but Mr. Stiglitz gave an overview of the Commission’s work, saying it was based on the view that the crisis should be an opportunity to consider seriously both old and new ideas that could improve the global economic system and make it more equitable, at least in terms of risk.
He explained that the Commission group did not have political accountability, but had put out a set of ideas that it hoped would be taken up by those who did have accountability. For that reason, it had been able to operate quite quickly even though was it was extremely diverse. The fact that it comprised a much more inclusive group than, say, the G-20, affected its recommendations to a certain extent, particularly since its focus was on developing countries and the poorest within them.
Early on, he said, the Commission had felt that a deep, systemic analysis of underlying problems must be done and that there should be no return to the world existing prior to the crisis. The old world could probably not return anyway, since there would probably be “an insufficiency of demand”. The huge demand existing before the crisis had been propped up by the real estate bubble and other unsustainable factors. Other restrictions on demand resulted from the fact that a lot of money was now held by the wealthy, who did not spend it, and by Governments in the form of reserves.
He said the short-term response to the crisis had been heartening, given both the size of domestic stimulus packages and the commitments made to assist lower-income countries. The problem was that the assistance was in the form of additional money for the International Monetary Fund (IMF), to be used for loans and debt that would not help ‑‑ and could hurt ‑‑ developing countries over the long term.
The Commission felt there should be more of a diversity of sources for such aid dispersals, along with a new credit facility that reflected the realities of the twenty-first century, he said. Such a new mechanism would not necessarily replace the IMF, but would augment it and, hopefully, prevent such errors as the promotion of pro-cyclical conditionality. The existing financial institutions were also part of the problem because they had recommended the kind of deregulation and market liberalization that had helped cause the crisis.
He said the Commission had also recommended the creation of a global economic coordinating council, representing all countries, which could help deal with the “externalities” being imposed on the free market. There was a particular need for a coordination of regulatory policies in place of today’s “race to the bottom”. The details of such a global economic council would have to be determined by the General Assembly, but the report recommended its possible functions and structures. The Commission proposed a small structure that was widely representative of the interests of all countries.
Such a council would have to grapple with the existence of institutions “too large to fail”, which had imposed a large cost on world society, he continued. It must also deal with tax evasion, corruption and other illicit movements of capital. In terms of the global financial architecture, new mechanisms for shifting risks must be developed so that the burden of crises did not fall heavily on the poorest. A global reserve system that did not rely on one national currency was also needed to meet the realities of a globalized world.
Asked whether the rest of the financial world had learned from the crisis, Mr. Stiglitz said that some participants had learned valuable lessons, but others felt it was just like a 100-year flood ‑‑ now that it had passed, everything could return to the previous situation. Still others had learned the wrong lessons, he added.
On whether the proposed coordinating council would create a new economic “monolith”, he stressed that harmonization was not the same as enforcing one financial regime on everyone; it was a matter of coordinating matters, such as regulation, that could only work well if there was some uniformity.
Asked if financial institutions were still imposing conditionality on countries, he pointed to the situation in Iceland, which had been told to close its budgetary deficit as a condition for receiving assistance in the aftermath of its financial crisis.
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