Transcript 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 : 2
Financial deepening
fragility
964 % of World GDP 138 % of World GDP 122 % of World GDP 9 % of World GDP
Derivatives
78 % of Total
Securitized Debt Broad Money Power Money
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 Lower growth
, higher instability
Net transfer of financial resources from South to North 200 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
growth rates to investment, •
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
2 0 -2 -4
Globalization: Parallel fates
8 Developing countries 6 World 4 2003 2004 2005 Developed countries 2006
Preliminary, revised forecast
2007 2008 2009 (P)
7
6% 5% 7% 8%
Aid flows unreliable
LDCs
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
19697 20000 15000 10000 5000 1591 0 G-20 total commitment G-20 fiscal stimulus, 2009 26 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 • Earlier over-invt greater lag 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 2 4 6 8 2009 2010 2011
30 20 10 0 40 50 60
Output, jobs recovery lags, 1991, 2001
Duration of output recovery and job market recovery after the 1991 and 2001 US recessions (in months)
1991 2001 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, post colonial development,
not just financial stability
Systemic reform agenda
• Ensure
macro-financial stability
with
counter cyclical
macroeconomic policies +
prudential risk management ,
including
capital controls
•
Finance
growth (output, employment) with
developmental
• Ensure
inclusive
financial system financial system --
NEW
• Monterrey
policy coherence
: Align IMF, WB with UN development agenda, IADGs • UN: universal, legitimate
comprehensive
lead
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 28