High-level officials urge bedrock reforms to prevent future crises, saydeveloping countries should not be left out when world economy recovers
Geneva, 14 September 2009 - Climbing stock prices and rising corporate profits in the financial sectors of a few industrialized countries do not amount to a recovery from the global recession, UNCTAD´s Secretary-General warned this morning.
His take on the situation was backed by a series of high-level speakers during an afternoon debate on "The global economic crisis and the necessary policy response," as the Trade and Development Board opened its annual two-week session.
The Board, or TDB, guides UNCTAD´s work from year to year. The session, which marks the organization´s 45th anniversary, will conclude on 25 September.
Economic damage, unemployment, and 4 million additional people per week suffering from hunger continue to plague developing nations, Secretary-General Supachai Panitchpakdi told representatives of the TDB´s 155 member States.
A "casino mentality" still appears to categorize the functioning of the global financial system, and major reforms are needed to limit levels of debt and surplus among nations and to moderate the role of currency and commodity speculation, Mr. Supachai said. UNCTAD had warned since 2005 of the dangers of current-account imbalances and unbridled speculation, he pointed out, adding that recent reports of economic "green shoots" do not seem to apply very strongly to productive sectors. "The fact that signs of improved performance in the financial sector -- where the source of the crisis originated -- are being used to signal recovery is certainly worrying, as it implies that we have not learned from our recent experiences."
Mr. Supachai called for continued efforts to find an "exit strategy" from the crisis for all countries. He said a more "pragmatic perspective" is needed that can enlist more active government involvement and create new international rules to prevent similar, future recessions. He also urged that further steps involving debt relief be taken to help heavily indebted developing nations weather the downturn without sacrificing social and health programmes that are much-needed during the crisis.
"The changing landscape of economic policy has brought the world closer to UNCTAD´s essentially pragmatic perspective, and hopefully now we can build further consensus over the future of the global economy," the Secretary-General said.
Featured speakers at the TDB´s afternoon high-level debate were Diego Borja Cornejo, Minister for Coordination of Economic Policy of Ecuador; John Gyetuah, Deputy Minister for Trade and Industry of Ghana; and M. Cyrille Pierre, Deputy-Director of the Global Economic Issues Division of the Ministry of Foreign Affairs of France.
Mr. Borja Cornejo said the crisis was rooted in a monetary and financial system of a hegemonic type -- welfare had been confused with consumerism. It was felt that only constant, increasing consumption could be the engine for economic growth. Money was no longer a means to an end but was a good to be consumed and accumulated, and the intent was profitability with no effort. Companies, because of this trend, had focused more on short-term profits than on the production of tangible goods. Money simply was used to make money. Countries of the South had the necessary elements for development, including abundant resources, but the current international scheme blocked them from using their resources and their talents. Mr. Borja Cornejo said. The countries of the South had become almost exclusively producers of raw materials for the use and exploitation of the North. The current financial system could no longer be repaired, he said -- it had to be transformed, based on an egalitarian approach that was truly dedicated to development.
Mr. Gyetuah told the meeting it was vital to draw lessons from an economic crisis that has spread around the globe. Ghana´s economy had grown by a record rate of 7.3 percent in 2008; the country since had coped fairly well with the crisis, but had certainly felt its effects. Overall, however, African countries were feeling the effects of a crisis that appeared would be severe and long, and which featured a slump in prices for the commodities Africa exported and depended on. Africa was in no way responsible for the crisis. The international financial system appeared to be totally disconnected from the real-life concerns of Africa and Africa´s poor, Mr. Gyetuah said. Additional resources must be mobilized to fund countercyclical efforts that could ease the situation on the continent. There also should be a temporary halt on debt servicing by African nations. That would allow governments to continue to fund programmes to help the poor. Internationally, there should be more effective financial regulation and supervision so that such a crisis does not recur.
And Mr. Pierre remarked that one year after the crisis had begun, it was a good idea to take stock of the situation. Longstanding, unresolved economic imbalances and a lack of regulation had led to the recession, and financial players had taken unwarranted risks. The financial sector had become progressively disconnected from the "real" economy. The resulting downturn was unprecedented in scale, and it spread very quickly. The recession was made worse because it followed a series of crises that already had affected the developing world -- over food prices and the energy costs, for example. The acute part of the financial crisis was now past, he contended, but at the cost of a massive increase in public debt. The economic crisis -- the effect of the recession on the real economy -- was another matter; one had to be careful in deciding about that. And in many countries an acute social crisis continued. There had been responses to this -- the International Monetary Fund, for example, had tripled its resources to help developing countries cope with the social fallout. It was clear that every country, and every financial sector, must be subjected to a safe minimum of regulation so that risk-taking did not get out of control again.
At the morning meeting, Jean Feyder of Luxembourg was elected President of the TDB. In brief opening remarks he told the meeting, "What is certain of the crisis is that no country can expect to escape the effects or expect to carry on with business as usual. What also is certain is that if we don´t learn the lessons of this crisis, we will repeat it."
The Board´s outgoing President, Dian Triansyah Djani of Indonesia, said there continues to be a need for "an urgent, coordinated response" to the global recession, and it is important to strengthen cooperation between UNCTAD and other UN agencies to that end. "All should join hands to face the crisis confronting the world today."
During his presidency, Ambassador Djani focused on enhancing UNCTAD´s contribution to the UN´s work in general and to its work on the financial and economic crisis in particular. He attended a high-level joint session of UNCTAD with the UN Economic and Social Council and the Bretton Woods institutions, as well as the high-level segment of 17th session of the UN Commission on Sustainable Development. In May, Ambassador Djani presided over UNCTAD´s first public symposium, which allowed civil society to offer its views on the financial crisis. These inputs were passed on to the UN Summit on the global economic and financial crisis in New York in June. Ambassador Djani also gave a boost to UNCTAD´s work on Africa, chairing an in-depth discussion on food security at the Board´s executive session in June.
Mr. Feyder, the new TDB President, has been Ambassador and Permanent Representative of Luxembourg to the United Nations office at Geneva since 2005, and currently also presides as Chairman of the Subcommittee on Least Developed Countries of the World Trade Organization. Earlier in his career, he was Director of Cooperation and Development of the Ministry of Foreign Affairs of Luxembourg (1998-2005); Director of Political Affairs of Luxembourg (1993-1998); Permanent Representative of Luxembourg to the United Nations Office at New York (1987-1992); and Deputy Permanent Representative of Luxembourg to the European Union in Brussels (1977-1987). At UNCTAD, he chaired the TDB Sessional Committee on Least Developed Countries in 2007 and participated in the executive session of the TDB on food security in June 2009.
