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Bretton Woods II conference: limited expectations
13 November 2008
Debt and Development Coalition Bretton Woods II protest
On November 15 the leaders of 20 nations and the major multilateral financial institutions will gather behind closed doors in Washington to discuss the future of the global economy. This group includes many of the people, governments, and institutions whose policies are responsible for the current financial meltdown. Civil society groups and many governments have called for a process that is much more inclusive of other nations and the peoples of those nations.
Not surprisingly, the level of ambition of the meeting is rather low. With the host of the meeting on his way out from the White House; a divergence of perspectives on what should be done to fix the financial crisis; and the lack of solid and inspiring proposals on how to reform the financial system; no wonder that the expectations for the meeting are not too high.
The European Union heads of state and government met in Brussels last week to try to agree on a common position to put forward proposals for the 15 November meeting in Washington. Unfortunately, while strongly making the case for regulation, tax coordination and an end to "havens", Europe is still determined to keep control of world finances through the IMF – where Europe appoints the managing director and has, collectively, more voting power than the USA.
Even though the Europeans expressed their intention to build a new financial system to redress the shortcomings faced by the outdated Bretton Woods Institutions, they only made passing mention of the need to pay attention to long term economic concerns, such as ending hunger, fighting poverty, and slowing climate change.
Despite rhetoric on the need to address the needs of developing countries, some European governments seem satisfied by extending the IMF’s role in guaranteeing world financial stability, and maybe enlarging the Financial Stability Forum and placing it under the IMF umbrella. An even more striking contradiction is the EU’s failure to make any commitments in the negotiations leading up to the Financing for Development conference that will be held in Doha at the end of this month. This week EU development ministers delivered a further bad sign at their meeting in Brussels where they failed to agree how to finance a billion Euro package that they had previously agreed to make available for African countries suffering from the food crisis.
The G20 Finance Ministers meeting in Brazil over the weekend was no better. The ministers issued a communiqué stating their governments’ "determination to take all necessary steps to foster non-inflationary growth in a stable and sustainable manner according to the needs and available instruments in our respective countries, including through monetary and fiscal policy". Poverty is only mentioned twice in the five-page statement. And the Bretton Woods institutions are uncritically considered to “have an important role to play...in helping to stabilise and strengthen the international financial system, advancing international cooperation for development and assisting countries affected by the crisis.”
Despite rich government’s insistence on the fact that the G20 is not the place to talk about development, it is hard to see how they aim at fixing the international financial system without taking into account the effects that the crisis will have – and is already having – in developing countries and on poor people.
In an article published this week, Dean Baker of the Center for Economic Policy Research, made a striking metaphor that perfectly describes the difficulties in trying to disentangle any proposal to fix the financial system from the impacts that the crisis is having on developing countries: “imagine that the United States was researching biological weapons and it inadvertently allowed a deadly bacteria to get into the atmosphere. The bacteria quickly spread around the world, leading to sickness and death everywhere. Fortunately, US scientists have developed a drug to treat the disease, which the United States generously shares with the other wealthy countries and a select group of developing countries. Unfortunately, there are a number of developing countries with whom the United States does not choose to share the drug. This picture would pretty well describe the world financial crisis as the G-20 prepares to meet in Washington this week.” The cure that the wealthy countries have for their financial crisis actually makes the situation even worse for the developing world, he suggests.
The massive infusion of money, coupled with the government guarantees, gives the banks in the wealthy countries an enormous competitive edge over their counterparts in the developing world. All developing countries are going to get is limited funds from the World Bank and IMF which are going to come with strings attached – probably requiring further liberalisation while the wealthy countries turn to protectionism.
The reality is that unless a much more inclusive approach is followed, giving an institutional platform for the voice of all developing countries, it is unrealistic to expect decent results for the world’s 900 million people who face starvation. Such a platform is available. Only two weeks after the 15 November summit, world leaders will meet in Doha, Qatar, to review progress in implementation of the 2002 International Conference on Financing for Development. Reform of the international financial system is a key item on the agenda. Indeed, the current draft outcome document contains a breakthrough call for a major review of the “international financial and monetary architecture, and global governance structures”. The Doha review clearly provides a much better forum to launch a long-term discussion on reform, one that gives some voice to the poor and vulnerable and that garners the broadly based knowledge, ownership and political support that needs to be behind such reform.
Governments have the opportunity to redress a flawed international financial systems which has not even worked for the wealthy but whose consequences are going to hit the poor hardest. This is just the first stop of the Bretton Woods reform process which is certainly going to unfold in the next few months. Rich countries could either take the opportunity of the United Nations Financing for Development conference in Doha, and of other inclusive processes where developing countries would have a say, or they could just continue business as usual. Leaders meeting in Washington on Saturday should be well aware that, having built up expectations for major reform, limited announcements by them could do more harm than good. Citizens’ groups – including many Eurodad members - will mobilize across the world on 15 November to put pressure on leaders to keep the process open, involve more governments and agree fundamental, not piecemeal reforms.
Links and resources:
CSO call to action
Civil society organisations from around the world have been working together in drafting position statements to push forward their demands with regards to reforming the international financial system. Among other efforts, two statements have been recently released: the first asking for an inclusive negotiation process (already more than 2500 signatures) and a second one calling for new principles and rules to build an economic system that works for the people and the planet.
The statements are available in English, Spanish and French
CSOs around the world have issued a call to action ahead of the G20 summit in Washington on Saturday 15 November.
The call is urging
all people's movements, organizations, coalitions and networks worldwide to organize Citizens' Actions in the days leading up to and on November 15.
More information
You can find more about the events being organised here.
Communiqués from country groupings
Policy debates and briefings
Financial regulation
Reform the international financial architecture
CSO proposals for regulating financial markets