DANGERS, LIABILITIES OF GLOBAL ECONOMIC TRENDS DISCUSSED BY ECONOMIC AND SOCIAL COUNCIL
Press Release
ECOSOC/5705
DANGERS, LIABILITIES OF GLOBAL ECONOMIC TRENDS DISCUSSED BY ECONOMIC AND SOCIAL COUNCIL
19970702 Countries, in Policy Dialogue with Chiefs Of Financial Institutions, Seek Assurances in Face of Stiffening Competition(Reissued as received.)
GENEVA, 2 July (UN Information Service) -- Country representatives putting questions this afternoon to a panel of high-level officials from world financial and development institutions expressed fears that free market reforms and intensified economic competition could leave the globe's poorest countries further marginalized, accelerate declines in development aid and augment already high levels of unemployment.
The remarks came as the Economic and Social Council concluded a day-long policy dialogue on the subject of "an enabling environment for development".
Today's panellists were Michel Camdessus, Managing Director of the International Monetary Fund (IMF); Renato Ruggiero, Director-General of the World Trade Organization (WTO); Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD); and Jean-François Rischard, Vice-President of Finance and Private-Sector Development of the World Bank.
Mr. Camdessus remarked in response to questions from the floor that overseas development aid was still necessary, and in fact probably more so than ever. Its role was to make sure that poorer countries could attract investors and participate in world markets through such programmes as development of infrastructures and advances in training and education, he said.
Mr. Ruggiero said that economic growth, it was true, did not necessarily decrease unemployment. It was necessary to improve the economic environment in ways that did lead to job growth, he said, and world financial institutions were striving for that kind of progress. But meanwhile, he pointed out, it was certainly true that unemployment would never decline without economic growth.
Mr. Ricupero told the meeting that the recent declines in development aid could and had to be reversed -- that otherwise a sense of compromise and consensus that had emerged between advanced and poorer countries would be threatened. To address the root causes of the problem it was necessary, among other things, to improve the performance of development programmes and also to spread the news about those that were effective and successful, he said.
And Mr. Rischard said that marginalization of the world's poorest countries included gaps involving awareness of changes and opportunities offered by the world economy; gaps in competitiveness; and gaps in "connectivity" or communications -- there were more telephones in Manhattan, for example, than in sub-Saharan Africa. The bank was launching programmes to bolster the abilities of such countries to respond to the prevailing situation, he said; including projects to improve rapidly their communication systems by using advanced and cheaper "wireless" technology.
Summing up the day's discussion, Council President Vladimir Galuska (Czech Republic) said the dialogue had been stimulating and of a very high quality. It was imperative to respond to the challenges posed by globalization, for if world economic growth had reached 3 per cent last year -- and even 6.5 per cent for developing countries -- not everything was well. Some 25 per cent of the world's population still lived in poverty; the gap between rich and poor was quite large, and unemployment was high in both developed and developing countries. That was why international cooperation was more necessary than ever. Globalization demanded greater solidarity, and official development assistance was more essential now than ever.
Among those asking questions to the panel were representatives of China, Bangladesh, Germany, United States, Russian Federation, United Kingdom, Japan, Gambia, Netherlands, Republic of Korea, The former Yugoslav Republic of Macedonia, Nepal, Swaziland, Egypt, Peru and Ethiopia, as well as a representative of the International Labour Office,
The Economic and Social Council will continue its high-level segment at 10 a.m. tomorrow, 3 July, with the participation of Secretary-General Kofi Annan and General Assembly President Razali Ismail (Malaysia).
Discussion
Country delegations, in putting questions to the high-level panel representing world financial and development institutions, expressed concern about declining levels of development aid -- as opposed to free-market reforms mentioned by the panel, which were aimed at stimulating trade and economic growth in the form of an "enabling environment". They also voiced worries as about possible continued "marginalization" of the world's poorest countries, and about high levels of unemployment, which they said would not necessarily
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be lessened by economic growth. Nations raising these issues represented developing and developed countries alike, including China, Bangladesh, Swaziland, Germany, and the United Kingdom. The representative of Swaziland asked about what he called "unworkable" conditions imposed on non- democratized developing countries by the IMF and World Bank.
Officials of some developed countries -- including the United States -- however, stressed the opinion that development aid alone would not promote extensive or long-lived economic growth in the world's poorest countries, and asked how international financial institutions were seeking to strike a balance between development funding and such measures as trade and free-market programmes.
They asked, among other things, about whether intensified international competition was resulting in a "reduction in solidarity", as evidenced by declining funding in the form of overseas development aid, and what role agencies such as the IMF could play in reversing that trend; if the growing importance of trade was resulting in habits among some developed countries of applying "pressure" on developing countries linked to trade opportunities; about other efforts that might be made to prevent further marginalization of least-developed countries; about what was being done to increase employment, including employment of women, as recent years had shown that rapid economic growth did not necessarily lead to rapid employment growth; and if intensified economic competition was necessarily good for everyone, or if economic growth could be controlled so that it was the kind of growth that mattered to the world's poor.
Among the responses of Mr. CAMDESSUS of the IMF were that overseas development aid was still necessary, and in fact probably more so than ever; the onset of the era of globalization was also the time to make sure that all could benefit from economic globalization and the current upturn in the world economy. There were some things that markets could not and would never do; the role of development aid was to make sure that poorer countries could attract investors and participate in world markets through such programmes as development of infrastructures and training and education. "Solidarity" was more than development funding, he said; advanced countries that managed their economies so that there were low interest rates, and that pursued other sound economic policies, made those interest rates and economic progress available to countries all over the world -- while, on the other hand, high interest rates in advanced nations would create such problems for poor countries that all the development aid in the world would not make up for them. Unemployment rates in much of Europe, including his home country of France, were almost "pornographic", he lamented; this made it very clear that unemployment benefits and other social-welfare programmes were important and should be well-designed and "proactive".
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Mr. RUGGIERO, the WTO Director-General, said, among other things, that it was true that economic growth was not necessarily good for everyone; nonetheless, in the current world economic environment, with the trend towards economic and political liberalization, many Asian and African countries were doing better. It was necessary to think how to manage the system. Economic growth, it was true, did not necessarily decrease unemployment, and it was necessary to improve the economic environment in ways that did lead to job growth. Meanwhile, it was certainly true that unemployment would not decline without economic growth. The current system set up for resolving trade disputes was working, he contended; it did provide a method for resolving disagreements, but in addition it tended to spur countries to compromise before reaching the stage of WTO mediation, and that kind of result was the best of all.
The UNCTAD Secretary-General, Mr. RICUPERO remarked, among other things, that the recent decline in development aid could and had to be reversed; such aid played a central role in UNCTAD programmes, moreover. The emerging consensus on development that had emerged in recent years, in which a balance was being struck -- a "compromise" -- between internal reforms and free-market changes and the provision of development funds, was threatened by the drop in financial support for such development. UNCTAD was trying to address the roots of the decline, he said -- one of the causes was the political climate in donor countries, but another was a sense of "fatigue" and a loss of faith in the efficiency and value of development programmes; it was necessary to improve the performance of such programmes and also to spread the news about those that were effective and successful.
Some trends were disturbing, especially in Africa, Mr. RICUPERO said -- the number of less-developed countries, as internationally defined, had not decreased but had grown, and of late only one, Botswana, had "graduated" out of the group. Nonetheless, among other developing countries some were doing better, and those tended to be the ones that had been successful in attracting investment and technology and had the potential to compete in world markets but had some problems with access -- they needed help in improving that access. For many other developing countries, however, there were many challenges to creating an "environment" that would allow economic growth and better competitiveness; they needed training for entrepreneurs, better educational systems, better Government guidance. And for them, development aid was vital and appropriate. Unemployment was perhaps the key economic issue of the end of the century, and the matter deserved greater study, because it was complex, Mr. RICUPERO said; it was hard to be entirely certain what to do, and yet answers to the dilemma could and should be obtainable.
And among the replies offered by Mr. RISCHARD of the World Bank were that it was sad, if not shocking, that development aid flows would go down at precisely a time of economic globalization and at a time when so many
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countries were willing to reform their economies. There was in fact a positive link between development aid and economic progress; in the past, studies had not necessarily shown that to be true, but now it was felt that their criteria were questionable; more recent investigations had showed, for example, that development aid had led to better economic decision-making and better policies in developing countries. There was, moreover, an apparent consensus on the part of developing countries on the need and willingness to adopt good economic and development policies; that meant that the climate for development aid had improved, and there probably was never a better time for increasing such funding, rather than decreasing it.
He said marginalization of the world's poorest countries included gaps in such countries involving "awareness" of changes and opportunities offered by the world economy; gaps in competitiveness; and gaps in "connectivity" or communications -- there were more telephones in Manhattan, for example, than in sub-Saharan Africa. Launching of awareness-raising programmes was one effort the World Bank was making to improve the ability of such countries to respond to the prevailing situation. There also were programmes, for example, to improve communication systems in developing countries, using advanced and cheaper "wireless" technology.
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