The international financial crisis
The need for systemic reform in global governance
The last 30 years have seen an unjust shift of resource investment from labour to the financial sector, contributing to an overestimation of the value of finance above all other productive resources. The financial crisis underlines the need for a fundamentally new approach. A decent income for workers; the creation of stabilisation mechanisms for food prices which greatly impact on the incomes of farmers who make up the majority of the work force in developing countries; and mechanisms for a fairer distribution of income and wealth should be central to this approach.
The international financial crisis originated from the growing deregulation and opacity of the international financial system. At a deeper level, the crisis has exposed the failure of an outdated and unbalanced international financial architecture that serves the interests of a few. Most financial standards-setting and regulatory bodies are either controlled by private actors (for instance the International Accounting Standards Board) with vested interests or monopolised by industrialised countries (such as the Basel Committee on Banking Supervision). Policies coming out of such bodies logically serve the interests of its members and therefore not those of developing countries. The International Financial Institutions (IFIs) exhibit a similar disproportionate power balance between developed and developing countries, in the favour of developed countries. Not surprisingly, the IFIs’ policies uphold the interest of its rich members, despite evidence that these policies are not serving development objectives.
Just as the crisis was unfolding in all its dramatic proportions in 2008, a small group of 20 rich and emerging economies agreed to put together an emergency global rescue package and subsequently to decide on measures to address the causes of the crisis within the G20 forum. In keeping with the existing power imbalance in the world, this forum excluded the majority of the international community from their discussions. The rescue package was essentially aimed at rescuing their own economies. Predictably, a genuine reform of international architecture does not feature among their measures to address the crisis.
The Doha process
CIDSE therefore welcomes the initiative agreed by the international community at the Doha International Financing for Development Review Conference to organise an international conference at the highest level to discuss the financial crisis and its impacts on development in 2009. Its success will lie in it tackling the fundamental problems of global institutional architecture that is perpetuating the crisis. Much will depend on the political will of all eco-political power blocs, particularly those part of the G20 forum, to commit to it, supporting its preparation and participating at the highest level in its proceedings.
The international conference will take place between 24-26 June 2009 and is being convened by the United Nations General Assembly. CIDSE is monitoring discussions regarding the convening of the conference, particularly the question of space for civil society contributions to its preparations and during the event itself. Ahead of the Conference, a group of experts led by Nobel Prize laureate Joseph Stiglitz has been commissioned by the President of the UN’s General Assembly to make a series of proposals on reform of the economic and financial system. CIDSE fed into the deliberations of this group through an input it sent for its consideration.
Read more
- 'Strong, Sustainable, and Balanced Growth' for whom? , CIDSE analysis of the outcomes of the G20-Pittsburgh Summit
- Pittsburgh G20 summit - "Mission Accomplished"?, CIDSE news release, 25 September 2009
