WORLD NEEDS UNITED NATIONS ECONOMIC AND SOCIAL SECURITY COUNCIL, SAYS NOBEL LAUREATE IN KEYNOTE ADDRESS TO SECOND COMMITTEE

Fifty-eighth General Assembly

Second Committee

Briefing on “Prospects for Economic Growth

and Future of Development Cooperation”

WORLD NEEDS UNITED NATIONS ECONOMIC AND SOCIAL SECURITY COUNCIL,

SAYS NOBEL LAUREATE IN KEYNOTE ADDRESS TO SECOND COMMITTEE

Professor Calls for Increased

United Nations Role in International Financial Issues

The world needed an economic and social security council at the United Nations to help promote a fairer and better global economic order, Nobel Laureate Joseph Stiglitz told the Second Committee (Economic and Financial) in a keynote address this morning.

Speaking on “Prospects for economic growth and the future of development cooperation”, Mr. Stiglitz, a Professor of Economics and Finance at Columbia University, said the United Nations must play an increasing role in international financial issues, rather than leave them to finance ministers and central bank governors.  The proposed economic and social security council would give the Organization a politically legitimate platform to discuss global economic problems.

Globalization had failed to work the way it should have, he said, noting that unfair trade agreements and economic reforms in the 1990s were stunting development.  At first, an attempt had been made to blame bad economic policies in developing countries for current problems, but economic analyses had shown that one of the key problems of the global financial crisis was the opening up of capital markets.

By the end of the decade, 10 years of data had shown that so-called economic reform had resulted in growth that came to only half that of previous decades. What growth there been had gone to the upper 30 per cent of the population, poverty had remained more or less unchanged, and an increasing number of people were working in the informal sector with no social benefits.

The end of the Cold War had underlined the need for a new global economic order, one based on the principles of social justice, he continued.  Instead, the world had received an economic order driven by special interest politics.  Such politics had resulted in the unfair 1994 Uruguay agreement on trade liberalization, with the North insisting that the South open up its markets, but refusing to unlock its own.  Special interests had also driven the International Monetary Fund (IMF) to insist on capital market liberalization, despite evidence that it would lead to more instability rather than economic growth.

Special interests had also set up the current procedure for sovereign bankruptcies, which needed to be managed through a central unbiased mechanism rather than a major creditor like the IMF.

Now special interests were leading reconstruction in Iraq, a country that was moving from a form of socialism to a market economy, he said.  While it was globally agreed that “shock therapy” did not work, that very strategy was being used in Iraqi reconstruction.  Such a strategy, based on ideology rather than economic science, was likely to increase unemployment and lead to instability.

During the ensuing discussion, which was moderated by Second Committee Chairman Iftekhar Chowdhury (Bangladesh), several delegates asked Mr. Stiglitz to shed light on the feasibility of the global reforms he had proposed, including the creation of an economic and social security council, and specific steps to implement them. 

Responding, he said the success of the Monterrey Consensus had been based on global social pressure on all countries to step up their funding to address social ills.  The proposed economic and social security council could serve as a review and monitoring mechanism for the Monterrey follow-up.  It could assess, for example, whether current pledges and estimates of debt relief and Official Development Assistance (ODA) under the Heavily Indebted Poor Countries (HIPC) initiative and other programmes were sufficient to meet short- and long-term objectives.  Regular monitoring would also force countries to fully live up to their pledges, which had not been the case following the Jubilee 2000 debt-relief campaign in Europe.

As for obstacles posed by the $1.2 billion daily agricultural subsidies of industrialized nations and the collapse of the Cancun talks, he said those subsidies exceeded the total income of sub-Saharan Africa.  The developing world had realized there was little to be gained from further trade negotiations unless the imbalances of the past, including dumping and agricultural subsidy issues, were addressed.

The proposed economic and social council, he continued, could commission export reports and serve as a forum where alternative voices could be heard on trade policies and other issues, such as the appropriate economic framework for reconstructing Iraq.  The argument that capital market liberalization was necessary for export growth in developing nations -- which had proven untrue -- could have been addressed in such a forum.  Malaysia and China, for example, had enjoyed robust export growth despite strict capital control policies, he pointed out.

He said the Cancun disaster had, in fact, been a victory for democracy. Trade ministers of the developed nations had said United States farmers had tied their hands to maintain subsidies, while ministers from developing countries had argued that they too were beholden to their people not to be bullied into unfavourable trade arrangements, as had been the case with the Uruguay Round.

The media’s close scrutiny of the Cancun talks had kept both sides on their toes, he said. It was in the best interest of the United States and other advanced countries to establish a better global economic and trade regime.  Public opinion increasingly saw it as a moral obligation, and confident trade and economic officials would eventually bow to that pressure.

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