19 May 09 - Symposium on financial crisis asks, What next?
Economic stimulus packages in response to global financial turmoil shouldn't focus only on banks and other institutions "too large to fail," but on providing jobs, speakers said at UNCTAD's public symposium on the world economic crisis.
UNCTAD's public symposium on the current world financial turmoil began its second day with a consideration of how best to respond to the global recession.
Representatives of civil society and the private sector, speaking from the floor, expressed fears that the crisis will pass without meaningful reforms to the international financial system. Multilateral institutions governing the global economy have become obsolete, one speaker said: "There is a need to restructure them. The time has come to move from words to deeds."
The session, chaired by Martin Khor, Executive Director of the South Centre, began with several presentations from the podium.
Jomo Kwame Sundaram, of the United Nations Department of Economic and Social Affairs, said it is necessary to ensure financial liquidity to limit the effects of the crisis on the "real economy" where goods are made and sold; to find money for stimulus measures to help developing countries offset weakened foreign demand for their exports; to improve domestic financing; and to use the crisis as an opportunity to improve developing country infrastructure and strengthen social protections.
Pedro Paez, former Minister of Economic Coordination of Ecuador and a member of the "Stiglitz Commission" (Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System), said "We are living in extraordinary times." It is not appropriate for the economic stimulus measures now being taken to be carried out by the same people and institutions that caused the crisis, he said; effective responses should be set up through other sources, including through regional arrangements. The "real capabilities of deciding" must be returned "to the people, to the regions," Mr. Paez said.
Heiner Flassbeck, Director of the Division of Globalization and Development Strategies of UNCTAD, said one fundamental thing learned from the crisis is that the financial markets do not "get prices right," as has often been claimed. Such markets are characterized by herd behaviour and regularly overshoot or undershoot, and actually can drive prices in the wrong direction. Stocks and commodity prices are currently going up, Mr. Flassbeck said, while the economic fundamentals do not justify these increases. He raised the need to revisit the merits of the original Bretton Woods system of fixed exchange rates adjustable only to reflect inflation. Problems of implementation aside, fixed rates systems would help to prevent over- and undervalued currency exchange rates, Mr. Flassbeck said, and so could help developing countries avoid falling heavily into debt.
Other comments from the floor included a lament that a "very great materialism has been created in the North, where, by now, money, and the accumulation of wealth, is the major concern;" a call for victims of the crisis to "rise up;" and an assertion that the current financial turmoil results from a flawed "hierarchy of values."
The public symposium, UNCTAD's first, is titled "The global economic crisis and development - the way forward." The two-day meeting grew out of UNCTAD's efforts to implement the "one UN" concept and out of the organization's stepped-up policy of responding to global developments and broadening debate on global issues.
The outcome of the symposium will be forwarded by Dian Triansyah Djani, President of UNCTAD's Trade and Development Board, to the United Nations General Assembly and to the UN Conference on the World Financial and Economic Crisis and Its Impact on Development, scheduled for early June in New York.
Also contributing to the debate as discussants were Peter Wahl of World Economy, Ecology and Development; Esperanza Duran of Agency for International Trade Information and Cooperation; Joy Kategekwa of Oxfam International; Sanya Reid Smith of Third World Network - Geneva; Stephen Pursey of the International Labour Office; and Cristophe Aguiton of Association for the Taxation of Financial Transactions to Aid Citizens.