| Informal
Session with Prof Joseph E. Stiglitz on
GLOBALIZATION Underlying the issues to be raised were two premises: i) the new era of globalization made economies
interdependent and pointed to the need for global action within a democratic
framework; and, The first premise justified the need for multilateralism and the second, the need for the United Nations as an international forum. The Organization brought the two strands together. In times past, decisions in the field
of economics emerged from a “smokestack structure” which accommodated
the views of ministers and experts exclusively. Today’s world, in
which issues were interconnected and interests overlapped, everyone should
be seated around the negotiating table in a truly democratic atmosphere,
despite differences in power. In contrast, the reality in the global arena
allowed great power to exercise great influence in dealing with the global
issues, each of which was treated separately. The principles being used
in that arena were not linked to democracy. The IMF’s mode of operation
illustrated that clearly, though it dealt with issues that were of importance
to everybody. The democratic deficit had serious consequences. For instance, in the last round of trade negotiations the TRIPS Agreement restricted the access of the world’s poor to cheap anti-HIV drugs. That agreement had implications for health everywhere. Yet Ministers of Health were not allowed to play any part in the decision on the matter. Left to the US citizenry, a favourable vote would have been given for such access. Another case in point concerned capital market liberalization. Having failed to win IMF support for that policy, the US Government sought to have the WTO endorse capital market liberalization, encouraging its involvement in a distinctly non-trade issue. DEVELOPMENT Because finance and trade ministers were the ones who set the global development agenda, the concept of development commonly in use in international forums was very narrow. Their philosophy of development, unendorsed by the statistical data, called for free markets, trade liberalization and minimal governmental involvement. But in East Asia, governments played a critical, positive role in the development process. To a large extent, the restrictions with which the WTO and the IMF hedged the development process were ideological in content, representing views being advanced by the US Government. However, the UNDP focused on the right issues in dealing with development. Instead of capital market liberalization, with its downside, the global development agenda should place emphasis on land reform (especially proper land distribution), the benefits for which were evident in Taiwan and Japan. The agenda should also take up matters pertaining to interest rates, exchange rate volatility and global public goods. It should seek to identify weaknesses in the global economy and adopt corrective measures to make the system work better.
What were the challenges to globalization and the development agenda? There were three sets of challenges: 1) Unilateralism: in particular America’s unilateralist approach to many issues. In the case of the reconstruction of Iraq, for example, America departed from the norm by appealing for forgiveness for the country’s enormous debts, arguing that these debts were incurred by an illegitimate, corrupt, dictatorial regime. In general, unsustainable debt in other countries led to IMF intervention. However, since its handling of the debt situation in Argentina, the IMF has sought to adjust its approach in such matters. The World Bank too was changing. With the US needing UN support for the work in Iraq, the opportunity to argue for a set of principles to guide international action and support the virtues of multilateralism was created. 2) Finance: This was one of the issues raised at Monterrey, where there was also discussion about global public goods. It was important to find ways to finance global public goods. Revenue generated from the management of global natural resources, such as the atmosphere, could be used for the production of global public goods. Creation of an international reserve system, an issue that should be on an international agenda for development, would also yield finances for their production. 3) Making global decision-making more democratic (eliminating the democratic deficit): There had to be greater public awareness of global economic issues, beyond that shown by special interest groups and international companies, so that decisions could be made more democratically. Prof Stiglitz concluded his remarks by pointing out that the UN had an enormously important role to play in world affairs. In particular, the UNDP’s role would be expanded in the future. To oversee the activities of multilateral financial and trade institutions such as the World Bank, IMF and WTO and to determine whether they were working for the greater good of humanity, it may be useful to set up an economic security council for those purposes.
1) How will an economic security council correct the existing situation if it is hindered by the same difficulties that affect the work of the political security council: primarily the inequality of power among nations? The strong have to be convinced that it is their vested interest to help the weak. 2) The “democratic deficit” must be addressed. Wouldn’t the new economic security council be subject to manipulation and control by the main powers in the world? Also, what caused the World Bank to change its approach? 3) There was a need for change in global governance. The multilateral approach enjoyed widespread support, even from the US, at Monterrey but the US subsequently adopted a unilateralist approach when it came to implementation. In general, global economic affairs dominated by the quadripartite group comprising the US, Japan, Canada and the EU. Multilateralism was affected more by the misuse of power and lack of political will than by the democratic deficit. What is your perspective on this school of thought?
Power was an important factor in international
economic affairs. It was necessary to convince the powerful that they
needed to help the poor. US recognized that after 9/11. This reality justified the creation of an economic security council, not as a decision-making body but as a forum for discussion. There was a difference between the World Bank and the IMF. The former was regarded more as a people’s institution whereas the latter was beholden to technical experts and ministers. But even the IMF was undergoing change as a result of the Asian crisis, which exposed it as being part of the problem and not part of the solution. Debt forgiveness necessitated a private sector “bail in”. Of note was the fact that IMF conditionalities had been adjusted because of pressure from civil society. Questions 5) Multilateralism, from a cynical point of view, could be viewed as a new form of domination. Are developing countries being coerced? What can be done to remedy this situation and ensure the survival of developing countries? 6) How do we go about redefining the role of the UN?
The problems being faced by the US in Iraq demonstrate the limitations of economic and political power. America was losing the battle for the hearts and minds of the Iraqi people. This was a good time to push forward a multilateral agenda. The UN should use the occasion to lay down principles for international action and not just make ad hoc decisions. International principles should be established for debt relief. In the last 10 years major changes in the world had forced countries to cooperate. Furthermore, the increasing democratization of the global community, with national governments accountable to more alert electorates, had led to more principled international agreements being adopted. Questions 7) What do you think the response to the establishment of the economic security council would be? 8) What formulation or strategy should be used to get the private sector, especially multinational corporations, to assume a greater role in fulfilling the global social development agenda?
None of the multilateral institutions would willingly accept an economic security council. It would most likely receive support in the wider global community, particularly if it did not grant the power of the veto. But the council would be used to give balance to negotiations for international agreements and provide a platform for the views of non-state actors, such as labour, when discussing such matters as reform of the global financial architecture. It would serve to bring more balance to the global development agenda. Because multinational corporations do not normally pursue national interests, their activities would need to be regulated by prescribing what was admissible and what was not. Since the success of their businesses depended on support from consumers in communities, they should in turn support those communities. In addition, to advance the social development agenda corporate entities should be made to disclose information about the consequences of their actions. --ooOoo--
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