Towards a People-Centered Financial System

Social Watch at the UN Conference on the Financial and Economic Crisis and Its Impacts on Development

Last June, for the first time, all of the world’s countries were able to participate in the search for a global solution to the current global crisis at the Conference summoned by the President of the 63rd General Assembly of the United Nations. Civil society in general and Social Watch in particular played a key role in drawing public attention to this Conference. There have been positive outcomes, such the ECOSOC meeting in Geneva making significant advances with respect to the follow-up mechanisms to the Conference, but more decisive action must be sustained in order to implement lasting and just solutions for the current economic meltdown.  

From June 24-26 of this year, a historic Conference took place at United Nations Headquarters in New York, marking the first opportunity since the global implosion of the financial markets in September of 2008 in which all countries (notwithstanding their geopolitical importance or size of their economies) could participate in the search for a global solution to what is truly a global crisis. Civil society in general and Social Watch in particular played a crucial part in drawing public attention to the Conference and in advocating for a consensus outcome that clearly identified the causes and impacts of the crisis and that would provide a framework for this UN-based process to continue.  Although the Conference did not lay the basis for any significant short-term transformations in the world financial architecture, it did revalidate the role that the “G-192”, represented by the member States of the UN General Assembly, can and should play in the construction of a new financial and economic paradigm that guarantees peoples’ fundamental social rights and mitigates the environmental hazards threatening our fragile planet.

This Conference was born out of the global Summits on Financing for Development held in Monterrey, Mexico and Doha; Qatar in 2002 and 2008, respectively.  It was also a product of the initiative and leadership of Father Miguel D’Escoto Brockmann, a Nicaraguan liberation-theology priest and diplomat who holds the post of President of the 63rd General Assembly of the UN. Armed only with a mandate from the Doha summit as well as backing from civil society groups such as Social Watch, D’Escoto was able to pull together this groundbreaking event, despite the active boycott that the mass media and some developed-country governments propagated, in fear that the decisions taken at this Conference would clash with the relatively feeble measures being taken by the exclusionary G-20 and G-8 country groupings. In addition, D’Escoto commissioned a group of experts led by Nobel prize-winning economist Prof. Joseph Stiglitz to draft recommendations on reforms to the international monetary and financial system, which served as policy inputs for the country delegations participating in the Conference. These recommendations were notable, not just for their wide-ranging prescriptions on how to restore global economic stability and prevent future crises, but also due to the fact that they incorporated the points of view of close to 100 civil society organizations and networks who participated in a consultation process facilitated by the UN Non-Governmental Liaison Service. 

In the run-up to the Conference, Social Watch along with other like-minded organizations stepped up advocacy efforts to not only push for high-level participation in the Conference and a robust outcome, but also to highlight the social and environmental impacts of the crisis that had gone largely unrecognized by policymakers and the media. These efforts were in part successful – while civil society was not able to undo the effects of the informal boycott of the Conference which translated into the non-attendance of the summit by the heads of the Bretton Woods Institutions (BWI) and of all but a dozen heads of state, a negotiated outcome was able to be reached by the end of the event. More successful were the civil society attempts to highlight the voices of marginalized communities impacted by the systemic crisis. Specifically, on June 20th in New York at the “Peoples’ Voices on the Crisis” forum, Social Watch and a coalition of over 30 other local, national and international civil society organizations brought together advocates for social, economic, gender, labor and environmental rights representing communities from the Bronx to Benin to give testimonials on how the crisis is impacting their lives and livelihoods. Members of Social Watch national coalitions from Benin, Bulgaria, Nepal, Nigeria, Sudan, Uruguay and the USA contributed to the different thematic panels in the event, which was prefaced by an inspiring keynote address by Father Miguel D’Escoto, who urged the participants to “inject a new spirit of responsibility and solidarity” with the people most affected by the crisis into the debates on possible remedies for the financial downturn. “Peoples’ Voices” was notable not only for the content of the testimonials that were presented at the event, but also for the fact that it provided a platform for New York-based grassroots movements to interact and build alliances with international organizations with extensive advocacy work within the UN system but with few connections to local groups.  It is hoped that these connections can be strengthened in the weeks and months to come, as the political processes related to the crisis continue to play out both in the UN and in other global forums.

From a civil society perspective, the results of the Conference itself were a mixed bag.  The outcome document is particularly strong in its analysis of the causes of the crisis, stating clearly that “regulatory failures, compounded by over-reliance on market self-regulation, overall lack of transparency, financial integrity and irresponsible behaviour” were the major underlying factors that caused the breakdown of the financial system.  In addition, the document places the blame squarely on the world’s major powers by affirming that “developing countries, which did not cause the global economic and financial crisis, are nonetheless severely affected by it.” It also recognizes the differentiated impacts of the crisis, by mentioning how women are more likely to face “greater income insecurity and increased burdens of family care” as a result.  In terms of policy prescriptions, the document recognizes the possibility of further indebtedness faced by developing countries that require stimulus packages to mitigate the impacts of the current economic crisis, and councils that a combination of debt relief, grants, debt standstills and a more structured debt framework in general is needed. The document also condemns the pro-cyclical conditionalities that the IMF has built in to many of its bailout programs, and calls for greater policy flexibility for developing countries. With respect to trade, on the positive side the document decries the effects of protectionist measures on developing countries and advocates for the use of “legitimate trade defense measures” when necessary. However, it also calls for an “early, ambitious, successful and balanced conclusion to the Doha Round” of WTO negotiations as its principal prescription with regards to trade, and makes no mention of how the clauses related to trade in financial services in unfair bilateral and regional trade agreements greatly increased the vulnerability of many developing country economies. 

In particular, many of civil society’s expectations went unmet regarding follow-up mechanisms for the Conference process. Contrary to what was recommended by the Stiglitz commission, no new UN institution to oversee the reform of the international financial architecture such as a “Global Economic Council” was targeted to be established in the outcome document. Instead, the document only includes a mandate to conform an ad-hoc working group within the General Assembly to continue to work on the issues presented at the Conference, and a recommendation for ECOSOC to examine the possible establishment of an ad-hoc panel of experts on topics related to the financial crisis and its impacts on development, which could provide independent technical expertise and analysis and also foster dialogue between policymakers, academics, institutions, and civil society. 

However, it is encouraging that during last month’s meeting of ECOSOC in Geneva, the institution made significant advances with respect to the follow-up mechanisms to the Conference, by requesting detailed reports by September related to the establishment of the panel of experts as well as on improving coherence on policies related to the crisis within the UN system and on implementing the agreements between the UN and the BWI. In addition, the General Assembly already adopted a resolution to formalize the creation of the ad-hoc working group. These are significant steps forward, but even more decisive action must be had in order to construct and implement lasting and just solutions to the crisis that are on par with the true magnitude of the current global economic collapse. In order to make this a reality, civil society must be prepared to raise its voice louder than ever, so that the voices of workers, women and the poor being impacted by the crisis, are not silenced forever.

To access the complete text of the UN Conference outcome document, see: www.un.org/ga/search/view_doc.asp?symbol=A/RES/63/303&Lang=E

To view video clips of the “Peoples’ Voices on the Crisis” event, go to: www.youtube.com/SocWatch