"This crisis will perhaps have the positive effect of catalyzing the necessary action to make the international economic and financial system a better one", UNCTAD Secretary-General Rubens Ricupero said to the UNCTAD UNCTAD Trade and Development Board as it began its two-week (12-23 October) annual session yesterday (see TAD/INF/PR/9830)
"There are signs that people are moving and I firmly believe there is scope for hope. I don’t believe that the world that has managed to learn from past crises will, this time, not move in time".
"I am not among those who believe that we are on the eve of the final crisis of capitalism or of globalization". "I don’t even believe that a global recession is inevitable", Mr. Ricupero went on, citing several reasons for his relative optimism. Of the three largest economies in the world, two - the United States and Europe - had very sound fundamentals. They had practically no inflation. Budget deficits had already been eliminated or were being so. Interest rates were very low and the economies were growing, albeit at a moderate rate.
On the psychological and political front, signs were also encouraging: the determined efforts made by President Bill Clinton, US Secretary of Treasure Robert Rubin, and the president of the US Federal Reserve, Mr. Alan Greenspan; hopeful signs set by the G-7, be they incomplete; the interest rate cut by the US Federal Reserve, the prospect of converging interest rates in Europe and of even a lowering of the German rate. These were all signs that "countries are finally becoming persuaded that inflation is no longer the biggest threat and that we now have to turn our attention to deflation", said the UNCTAD Secretary-General.
In his statement, Mr. Ricupero stressed the need for continuity, independence, balance, and responsibility in economic analysis and advice - all characteristics of UNCTAD’s work.
He illustrated his argument by citing quotations from the Financial Times, by mainstream economists, including of the IMF, showing a complete turnaround in economic forecasts over the past year. Their rosy forecasts from a year ago made one "wonder whether the authors were writing about the same world we live in", he commented.
"Of course, they were", Mr. Ricupero continued." Being extremely competent and knowledgeable economists, they were able to map out the areas of danger. But, for a variety of reasons, they chose to play down their potential for damage as compared to the huge potential for good they expected from a more globalized and liberalized economy".
The UNCTAD Secretary-General found it "an extremely reassuring feeling to find ourselves as part of a distinguished mainstream. Or rather, to suddenly be able to say: ‘We’ve finally found the mainstream, and the mainstream is us’".
The first lesson to be learned from the recent transformation in the outlook for the world economy, he said, was that there were no comparative advantages in the field of ideas. "It is for this reason that we need diversity of approaches and perspectives in analysis and research on the world economy, keeping in mind the need to present as comprehensive and balanced a result as possible".
In making an analogy with the market, Mr. Ricupero pointed out that in the same way as the market was a wonderful mechanism because it was able to process millions of pieces of information about millions of individual actors, in the realm of analysis of the monetary and financial system, to be at the mercy of just one provider of thought amounted to acceptance of a monopoly of truth. This should be avoided. To avoid such a situation, UNCTAD would continue to provide sound, and independent, analysis, in fulfilment of its role of integrating, within the UN system, the treatment of the various components of economic development.
The Secretary-General pointed to the need to engage in a constructive dialogue with the IMF, the World Bank and other institutions. But, he added, we have to remain faithful to our search for an independent approach to problems posed by the international economy. And independence should lead us to a balanced approach in providing the necessary advice for countries.
Above all, Mr. Ricupero told member States, one should go beyond the old dichotomies of the past, with "sometimes extreme and exclusive views on thinking about one or other elements of an equation that should be taken in its entirety". One example was "the useless discussion" about the state versus the market. Both were necessary, as were the fight against inflation and economic growth. Stability without growth resulted in stagnation, but growth without stability was a bubble that could create much damage.
The main debate now was about where the balance of emphasis should lie between the external environment and national policies."We can now see (...) that a favorable external environment is absolutely indispensable for everybody, not only for the developing countries, but also for the most powerful country, the most successful economy in the world", Mr. Ricupero said. But "sound national macroeconomic policies" also played "a key role".
He cited Chile as an example of a country that had done everything right, according to the textbook, and yet its current account balance had still been badly affected by the crisis. Chile had been "by far the most successful example of adjustment in Latin America", with continuous growth for 13 years and all its fundamentals in place, but had become "a victim of its own success". When Asia tumbled, Chilean exports were hit doubly: by the enormous reduction in exports, but also by the fall in the price of copper which accounts for over 40% of total Chilean exports. As a result, Chile was struggling to avoid ending this year with a deficit in current account that could be in excess of 7.5% of GDP.
At the outset the Board observed a minute of silence in the memory of late Jean-Pascal Delamuraz, former President of Switzerland. Mr. Delamuraz actively participated in, and contributed to the success of, the most recent quadrennial ministerial conference on the United Nations Conference on Trade and Development (UNCTAD IX, 1996, Midrand, South Africa).
Ambassador Chak Mun See, of Singapour, was elected, by acclamation, President of the Board. Upon his election, he stated that unfortunately, the alarm bell which the UNCTAD Secretariat, in its Trade and Development Reports, had sounded back in 1990 about the inherent destabilizing effects of the globalization of finance and the vulnerability of all countries to financial crises, had been vindicated. There was a need to deal with the contagious effects of a global financial crisis that would have far-reaching effects on commodity prices, debt restructuring and the urgent need to increase the supply capacity of developing countries. In this regard, UNCTAD had the role and the capacity to serve as an appropriate multilateral forum to arrive at a consensus on what could be done and set the direction of the future.
The outgoing President, Ambassador Goce Petreski of the Republic of Macedonia, said the world financial system faced a danger of crumbling. The fears of potential global economic implosion were present and public opinion was increasingly anxious about the future. It was indisputable that the mounting backlash could have disruptive effects on economic activity worldwide. Globalization was an inevitable process and managing this process had become a fundamental issue. The governance of globalization would be a dominant feature of UNCTAD’s work. The organization deserved the full support of the international community in its search for the appropriate responses to the need to reform the "global architecture". There was a strong need for a common vision of universal growth and development in order to resolve issues that cut across cultural, ideological and theoretical boundaries.
Other members of the Bureau
Ambassador Pekka Huhtaniemi of Finland was elected Chairman of Sessional Committee I, which is entrusted with the Board’s agenda items related to the Least Developed Countries (LDCs).
Ambassador Mohamed Salah Dembri of Algeria was elected Chairman of Sessional Committee II, which will focus on Africa.
Mr. Philippe Merlin (France) was elected Rapporteur.
The ten elected Vice-Presidents are: H.E. Mr. Nobutoshi Akao (Japan), H.E. Mr. Carlos Amat Fores (Cuba), H.E. Mr. Petko Draganov (Bulgaria), H.E. Mrs. Savitri Kunadi (India), H.E. Mr. Roderic M.J. Lyne (United Kingdom of Great Britain and Northern Ireland), Mr. Syargei Mikhnevich (Belarus), H.E. Mr. Alphonse Oseku (Uganda), H.E. Mr. Carlos Perez del Castillo (Uruguay), H.E. Mr. Raimundo Perez-Hernandez (Spain), H.E. Mr. Mounir Zahran (Egypt).
