Download World Economic Situation and Prospects 2004

The way forward
International Responses to the Crisis
Jomo Kwame Sundaram
UN Assistant Secretary-General
for Economic Development
Inter-Parliamentary Union
19 November 2009
Problems  Crisis
• International financial architecture:
non-system
• Policy responses: inadequate;
double standards
• Inadequate and inappropriate
regulation
• International cooperation:
G7G20, UN
Financial deepening
 fragility
964％ of
World GDP
138％ of
World GDP
122％ of
World GDP
9％ of
World GDP
Derivatives
Securitized
Debt
Broad
Money
Power
Money
78％ of
Total
11％ of
Total
10％ of
Total
1％ of
Total
3
Financial globalization
• Net capital flows from South to
North (US largest borrower)
• Cost of funds not generally lower
due to financial deepening
(more intermediation, financial
rents)
• Higher volatility, higher instability
• Lower growth
Net transfer of financial
resources from South to North
200
Billions of US dollars
0
-200
-400
-600
-800
-1000
Developing economies
Africa
Eastern and Southern Asia
Western Asia
Source: UN World Economic Situation and Prospects 2008 (forthcoming)
Latin America
Short-term capital
inflows problematic
• No real contribution to investment,
growth rates
• Asset (shares, real estate) price +
related (e.g. construction) bubbles
instead
• Cheaper finance for consumption
binges
• Over-investment  excess capacity
• All exacerbate instability, pro-cyclicality
Globalization: Parallel fates
8
Developing
countries
6
World
4
2
Developed countries
0
-2
Preliminary,
revised forecast
-4
7
2003
2004
2005
2006
2007
2008
2009 (P)
Aid flows unreliable
8%
LDCs
7%
6%
5%
4%
Sub-Saharan Africa
3%
2%
Other LICs
1%
0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
ODA for Africa vs G20 recovery efforts
20000
19697
Billion US Dollar
15000
10000
5000
1591
26
0
G-20 total commitment
G-20 fiscal stimulus, 2009
ODA to Africa, 2008
Net aid transfers?
• Net ODA is net of principal payments,
but not of interest received on such loans
• Net Aid Transfers (NAT) are net of both
• Japan recently received >$2bn/year in interest
on ODA loans
• NAT excludes cancellation of old non-ODA
loans, e.g. a 2003 Paris Club deal cancelled
some $5bn in non-ODA official debt owed
• That cancellation is ODA, but generated little
additional net transfers, i.e. NAT
• Hence, e.g. DRC received $5.4bn in ODA in
2003, but only $400m. in NAT
Protection
• Trade
• Finance
• Migration
Recovery constraints
• Reduced external finance
-- less K flows (including FDI)
-- less, costlier credit
-- higher debt burden
-- less aid
-- less remittances
• Fiscal constraints
-- less revenue
-- less fiscal space
-- IMF fiscal discipline conditionality
• Stimulus delay  greater lag
• Earlier over-invt  slower investment recovery
• Output recovery/job recovery lag
Global recovery with coordinated vs
uncoordinated stimuli, 2010-15
Stimulus lags delay recovery
Im m ediate and
s us tained
s tim ulus
efforts
3 m onth delay
Q2
0
Q3
Q4
2
Q1
Q2
4
Q3
6Q4
Q1
Q2
8
Output, jobs recovery
lags, 1991, 2001
Duration of output recovery and job market recovery after the 1991 and
2001 US recessions (in months)
60
1991
2001
50
40
30
20
10
0
Output
Job market recovery
International responses
• UN, BIS forecasts more accurate than
others; IMF, WB upbeat till late 2008
• IMF, WB also marginalized by G7, etc
• IMF discouraging strong fiscal stimulus by
developing countries without surplus
• G7  G20: more inclusive? legitimate?
crisis-management, but neither
developmental nor equitable
• UN PGA (Stiglitz) Commission of Experts
• June 09 summit on crisis + impact on
developing countries
New Bretton Woods
moment?
Bretton Woods, 1944: United Nations conference
on monetary and financial affairs
• 15 years after 1929 Depression
• Middle of WW2
• FDR initiative vs Churchill bilateral preference
• 44 countries (28 developing countries; 19 LA)
• UN system: IMF, IBRD, ITO
• Clear emphasis on sustaining growth, job
creation, post-war reconstruction, postcolonial development, not just financial
stability
Systemic reform agenda
• Ensure macro-financial stability with countercyclical macroeconomic policies +
prudential risk management, including
capital controls
• Finance growth (output, employment) with
developmental financial system
• Ensure inclusive financial system -- NEW
• Monterrey policy coherence: Align IMF, WB
with UN development agenda, IADGs
• UN: universal, legitimate  lead
comprehensive reform process?
G20 London Summit
Commitments
$250bn
SDR allocation
44% to G7 countries alone
Only $80bn to DCs
$500bn
IMF Funding
$0 New
Commitments
$1,100bn
Total
$100bn
Aid for the poorest
New Commitments
< $100bn
$250bn
Trade Finance
New commitments
< $25bn
24
G20 Pittsburgh commitments
• G20 takeover (G7)?
• BWI governance shifts
• Executive remuneration debate
• Financial regulation reform?
• Capital requirements
• Surveillance
Stiglitz Commission:
New institutions
Global Economic Coordination Council
democratically representative G-20/L27
include UN system chief executives and
Heads of Government
coordinate international adjustment of
imbalances
International Expert Panel (model: IPCC)
New Financing Facility
New International Reserve Currency
Other Proposed Institutions
• International Debt Restructuring Tribunal
• Independent of IMF (unlike DRM proposal)
• Replace World Bank’s ICSID
• Foreign Debt Commission
• Intergovernmental Commission on Tax
Cooperation (for resource mobilization)
• Multilateral Regulations
• International Tax Compact
• Global Financial Authority
• New Policy Surveillance Mechanism
– Independent of IMF
– Support national capital account management
Thank you
Please visit UN-DESA www.un.org
and G24 www.g24.org websites
•Research papers
•Policy briefs
•Other documents
Acknowledgements: UN-DESA, ILO
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