1 July 2008
Press Conference

Department of Public Information • News and Media Division • New York


There had been an increase in global economic insecurity, which could be seen as culminating in the current food crisis, Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development, said today at a Headquarters press conference upon the launch of the United Nations World Economic and Social Survey 2008.

Joining Mr. Jomo in releasing the sixty-second survey, with the theme “Overcoming Economic Insecurity”, was Rob Vos, director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs (DESA), and the main writer for the project.

Rising commodity prices, financial liberalization, globalization and the high cost of self-insurance for countries following the 1997-1998 financial crisis made up the perfect storm, at the macroeconomic level, as far as the food crisis was concerned, Mr. Jomo said.

Other factors contributing to the insecurity included climate-related disasters such as hurricanes, typhoons and floods, and non-climate disasters such as earthquakes, long-term civil wars and other conflicts, he said.  The survey contained recommendations on how countries could prepare for and respond to such shocks and how international assistance could help in that effort.  It also discussed household poverty and the interventions that could assist on that level.

Mr. Vos listed other macroeconomic factors described in the survey, such as the sub-prime crisis, plummeting housing prices and the ever-weakening dollar, but said that worldwide polling had shown that the greatest economic insecurity was caused by worries over unemployment, poverty and inflation.

He said that there was actually less macroeconomic volatility in relation to gross domestic product in the past decade than in previous decades, but there were slower average growth rates than in the past and investment flows remained volatile.  That climate discouraged productive and job-creating investment flows.  In addition, “pro-cyclical policies” exacerbated economic downturns.

The survey, he said, recommended the diversification of economies to help decrease vulnerability to external shocks, as well as the integration of macroeconomic policies with development policies.  Rather than prioritizing stabilization, such policies should place the most emphasis on growth through employment and diversification.

It also recommended counter-cyclical policies that did not exacerbate economic downturns, along with prudent regulation of financial markets, the prudent use of capital controls and reduced reliance on self-insurance through vast national economic reserves, he noted, adding that insurance should instead be provided through international and regional mechanisms.

Multilateral responses should also include multilateral surveillance and internationally coordinated macroeconomic policies, he said, with better pooling of international reserves and other financial reforms, along with the strengthening of the multilateral trading system.

Asked if it was effective to raise interest rates to control inflation, the presenters agreed that it was not the best idea for most countries that were undergoing economic difficulties.  There was a trade-off between controlling inflation and stimulating the economy.  In any case, much of the inflation right now was due to high food and energy costs.

In response to other questions, they said that it was best if financial regulations were universal and consistent, and did not consist of ad hoc interventions, such as bailouts.  The global financial crises required multilateral solutions and strengthened coordination, in order to stabilize the dollar and the markets.

Regarding the Doha round of trade talks, they said that assuring a development-friendly outcome and ensuring food security were two different things.  The cause of the rise in food prices was complex and involved the commodity markets, as well as trade rules.

The Europeans, in fact, were now talking about extending food subsidies to developing countries instead of getting rid of their domestic subsidies, saying that the purpose of subsidies for farmers was to provide more predictable food security.  In general, they said, the international focus on food security had declined in recent decades and needed to be brought to the fore again.

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For information media • not an official record