UN Hearings: Reforming finance for the MDGs

Within the framework of the Hearings of the UN General Assembly with civil society organizations, which took place from 14-15 June 2010 at the UN Headquarters, Social Watch, Third World Network and UN-NGLS organized the “Reforming finance for the MDGs” seminar.

The panel highlighted practical investment, strategies and approaches to financing the Millennium Development Goals. The discussion focused on the constraints and opportunities to making financial assistance to developing countries more predictable and consistent as well as evaluating efforts to implement programs and mechanisms to advance internationally agreed development goals, including the Millennium Developments Goals.

The speakers in this panel were Bhumika Muchhala and Sanya Reid Smith, Third World Network, Markus Brun, CIDSE – Switzerland and Roberto Bissio, Social Watch coordinator. Elisa Peter, from NGLS, moderated the discussion.

Bhumika Muchhala (TWN) focused her presentation on three key areas of the international financial architecture that play out the current failure of the development model that impedes the achievement of the MDGs and specifically of MDG 8. She based her argument on the assumption that “MDG8 can be seen as a fundamental precondition for the achievement of the first seven goals”.

The first one is the crisis of the model of economic development and global finance; the second one is debt resolution mechanism, and the absence of an international debt restructuring mechanism; and the third one is financial liberalization which allows for the free movement of capital across borders in and out of countries, and where free trade agreements impede the ability of developing countries to control the capital flux also thereby promoting allocations to be speculative instead of productive investment on the real economy.

As she transparently stated, the MDGs strategy needs to significantly reinforce the importance of national development strategies, focused on increasing the productive capacities and the social and economic infrastructure, particularly of the least developed countries in a rapid and inclusive fashion.

She also highlighted that in the big picture of international financial architecture is restricted to two institutions, the International Monetary Fund and the World Bank. She asked about the role of the UN in the global economic governance, basing her reflections on the proposal for augmenting the role of the UN from the South Centre, prepared by Jomo KS, former chief economist for UNCTAD. According to Jomo KS the task is to reform the UN system by setting up appropriate bodies and mechanisms. He proposes creating “a UN body at the level of the General Assembly and the Security Council that has the authority to take bidding decisions in areas of activities of specialized multilateral agencies, such as IMF and WB and to secure consistency compliances and accountability”.

Sanya Reid Smith (TWN) emphasised how trade investment agreements might affect the achievement of the MDGs.

In the Doha negotiations of the WTO and the North-South Free Trade Agreements (European Union developing countries), bilateral investment treaties might also have an effect and even negotiations at the WIPO can affect the achievement of the MDGs. Multiple chapters of these agreements can directly or indirectly affect the ability to achieve any or all of the MDGs. For example, every goal expects the country government to spend money to achieve them (subsidise education or medicine, provide infrastructure) and in developing countries, governments are dependent on tariff revenue, mostly export-import tax because it is a tax easy to collect. But several trade agreements require developing countries to lower their taxes to 0. The trade agreements that are being negotiated make financial crises like the current one to be more likely.

Markus Brun (CIDSE) stated that the MDGs has failed to incorporate human rights principles as well as to pay as much attention to development processes as to development outcomes, their limited ambition and the lack of ownership of those that seek to benefit. Progress is uneven – he stressed – and has little impact on the root causes of poverty.

According to Markus, there are key gaps in financing for development as proposed in MDG 8 – the global partnership for development has proven elusive. International taxation on financial transactions has the potential to contribute to global justice and development objectives by developing key functions of taxation: revenue raising and regulation as well as redistribution of wealth not only within states but at the international level.

He would like the MDGs Summit to recognize taxation as a crucial means for development, not only as an instrument for additional finances but also to strengthen democratic accountability and participation both at national and international level. UN, being universally representative, is the only institution of framework which would have to require legitimacy to administrate funds dedicate to global purpose.

Roberto Bissio (Social Watch) focused his presentation on the key role of Goal 8.  As he clearly stated the non-compliance of developed countries with their commitments under Goal 8 is certainly not unrelated with the insufficient progress on the other Goals. The uneven domestic distribution of resources is another major obstacle. During the first years of the 21st century, many developing countries experienced high levels of economic growth, but poverty reduction and job creation lagged behind. This “failure to deliver on the necessary finance, services, technical support and partnerships1” was “aggravated by the global food and economic crises as well as the failure of various development policies and programmes”. Thus “improvements in the lives of the poor have been unacceptably slow to achieve, while some hard won gains are being eroded”.

“If the poor were a bank, they would have been rescued”, is the sarcastic comment that many people make when the additional money needed to achieve the MDGs (estimated at around $100 billion a year) is compared with the trillions of dollars disbursed in the last two years in the richest countries to rescue failed banks and try to reverse the effects of the financial crisis.

Ten years ago the Millennium Declaration promised “a more peaceful, prosperous and just world”. Social Watch is committed to help citizens from around the world to hold their governments accountable to that promise and we expect the leaders of the world to formulate next September the roadmap to make it real.