Monday, June 29, 2009

International Finance Meeting Comes up Short for Proponents of a Greater U.N. Role in the Global Crisis

Sources: West Keeps U.N. At Bay on Financial Crisis; NGOs Slam Results of U.N. Financial Crisis Meeting

Developing nations do not appear to have succeeded in increasing U.N. involvement in the world economy on Friday with the results a three-day international finance conference. The meeting was billed as a summit. However, no Western leaders showed up. Further, the majority of those presidents and prime ministers in attendance, amounting to less than a dozen, were from Latin America and the Caribbean. Other participants sent delegates of a lesser status. World Bank President Robert Zoellick and IMF Chief Dominique Stauss-Kahn did not attend the conference.

Miguel D’Escoto, president of the 192-nation U.N. General Assembly, called the “financial summit” to demand a reform of the global financial structure. He drafted a document that called for extensive changes to the existing system under the belief that the General Assembly should take the helm of the world economy from elite groups of rich countries. With the aim of “democratizing” global financial bodies, he demanded the abolishment of U.S. veto power at the IMF, where rich countries dominate the current voting system. Further, the conditions the IMF places on foreign-currency loans embitter some developing nations. The draft also demanded that the IMF unit of special drawing rights (SDRs), which is anchored in multiple currencies, replace the U.S. dollar as a reserve currency.

While the document received a positive response from many developing countries, its reception in Western capitals was less than warm, as officials feared that the non-legally binding document could send an unfavorable political message. The North-South negotiations, which delayed the meeting for three weeks, ultimately rendered the text a simple appeal for developing countries to have a greater voice in the IMF. This position has the support of the United States. The declaration also acknowledged the calls of many states for a more efficient system on the issue of currency reserves.

Even so, D’Escoto, declaring the meeting a success, stated that “the General Assembly…has now been established as the central forum for the discussion of the world financial and economic issues.” Other less optimistic advocates for the called-for changes considered the declaration deficient. Venezuela’s envoy, for instance, criticized the declaration’s failure to order a definite role for the United Nations to occupy in the world economy. Anti-poverty groups have also voiced disappointment in the declaration.

While the United States joined the consensus, it remains ambivalent about much of the document and is not prepared to give the U.N. a final voice in the global economy. The U.S. advanced its view on the floor that the U.N. lacked the authority to entangle itself in matters pertaining to the governance of the IMF and the World Bank. Further, even as the European Union held the meeting out as a break for developing nations, its delegates appeared more at home discussing development aid abroad than restructuring the IMF.

Discussion Questions:
1) Can the interests of rich and poor nations be reconciled? If the U.N. assumed a greater role in the global economy, what new problems might arise in relation to these competing interests?
2) How would the U.S. economy be affected if SDRs replaced the U.S. dollar as the currency reserve?

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