Yesterday Eurodad organised presentations in Brussels by members of the UN Commission of Experts on Reforms of the International Monetary and Financial System. The speeches by the members of the so-called ‘Stiglitz Commission’ – a senior official from India and a leading academic from China – were a breath of fresh air compared to many of the exchanges that we have heard in this city in recent weeks.

In my introduction I said that the contrast with the EU’s De Larosiere High Level Group could not be clearer. The EU included only people who have been part of the financial system that has now collapsed. The UN General Assembly president convened people with knowledge of the system but independent thinking about its problems.

Speaking yesterday at the Eurodad/Friedrich Ebert Stiftung meeting in Brussels Yaga Venugopal Reddy, Former Governor of the Reserve Bank of India, regretted that politicians are currently stressing the stimulus and “do not want any diversion from that”. He said there deliberations were not just on the short-term, however. Indeed: “the main challenge by the Stiglitz group is to fight for the nature, the fundamental aspects of the crisis response”.

The Commission’s diagnosis in their draft report says “the current crisis has exposed deficiencies in the policies of some national authorities and international institutions based on previously fashionable economic doctrines, which held that unfettered markets are, on their own, quickly self-correcting and efficient. Globalization too was constructed on these flawed hypotheses; and while it has brought benefits to many, it has also enabled defects in one economic system to spread quickly around the world, bringing recessions and impoverization even to developing countries”

Also speaking yesterday Yu Yongding, Director of the Institute of World Economics and Politics and former Member of Monetary Policy Committee, People’s Bank of said that governments were right to be worried about speculative attacks on their currencies. Experiences from the Asia crisis last decade, and more recently showed why reserves needed to be built up. But the large reserves and dramatic imbalances have been deflationary and caused instability. The increasing inequality in many countries also contributed to depressing demand and provoking the crisis.

The Commission’s draft conclusions say that regulatory reform cannot wait and must be accompanied by moves towards “deeper systemic reforms”. These include moves to introduce a new global reserve system, reforms of IFI governance, the introduction of a Global Economic Coordination Council under the United Nations.

Also, and more innovatively, they propose a new credit facility with a more balanced governance than the current World Bank and IMF.  Also a Financial Products Safety Commission, modelled on the Food and Drug Administration and similar agencies, to ensure that financial products are assessed before being put on the market. And, finally, they suggest mimicking the successful example of the Intergovernmental Panel on Climate Change (IPCC), a similar panel could be created to offer consultancy to the General Assembly and ECOSOC, but also to other international organizations to enhance their capacity for sound decision-making in these areas.

These institutional reform proposals go beyond what is currently acceptable to politicians, as our speakers repeatedly recognised yesterday. Francois Houtart, a third member of the UNGA/Stiglitz Commission panel also joined the meeting yesterday, though too late to make a full speech. His question, based on his years of work questioning the ethics of the current globalisation model, was “we need to repair the [economic and financial] machine, but what for?” He urged a much broader debate on the nature of development and the prevailing economic logic. 

We’ve today received a new version of the draft outcome document for the UN summit on the World Economic and Financial Crisis and its Impact on Development. This will take place from 1-3 June. Some of the proposals in the Stiglitz Commission do find their way in there. For example the one for a new credit facility to channel funds to low-income countries, and a new global reserve currency system based on the SDR. There are also proposals on tax havens and on IMF governance as well as a timetable for producing the “Charter for Sustainable Economic Activity” (see our previous post) no later than 15 April 2010. This is something that Eurodad and many allies from across the world will be discussing at a meeting in Italy from 12-14 June. We don’t just want to push for sustainable economic activity, but for sovereign, democratic and responsible finance.

As we reported last week, however, many of the outcome document’s points seem like copy and paste from other documents, and far too modest given the nature and scale of the crisis. It looks like this conference will certainly fall far behind the expectations raised by the Stiglitz Commission or by the UNCTAD preparatory conference this week in Geneva where my colleague Nuria Molina spoke.