Losing the game (again?)

Transcription

1 Losing the game (again?)

2 Typing error??? Based on current projections of lower growth, preliminary analysis shows that infant deaths in developing countries may be to per year higher on average between 2009 and the MDG target year of 2015 than they would have been in the absence of the crisis. That translates into an additional 1,4 million to 2,8 million infant deaths during this period. (global monitoring report this is a IMF/ Worldbank staff document)

3 a question of time??? The multilateral financial institutions, in particular the International Monetary Fund, need to continue to give high priority to the identification and prevention of potential crises and to strengthening the underpinnings of international financial stability. In that regard, we stress the need for the Fund to further strengthen its surveillance activities of all economies, with particular attention to short-term capital flows and their impact. We encourage the International Monetary Fund to facilitate the timely detection of external vulnerability through well designed surveillance and early warning systems and to coordinate closely with relevant regional institutions or organizations, including the regional commissions.(monterrey consensus 2002)

4 Back to basics? We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared; and that our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries of the world too; and must reflect the interests, not just of today s population, but of future generations too.

5 Lessons learned??? The major lesson from previous crises: - international community has a very short memory - and a very limited learning capacity In this case threefold risk: - falling asleep before action is taken - go half way - take the wrong decisions If we want to act and go for deep structural changes in the financial architecture: use the momentum in the six months (or wait for the next crisis?)

6 The crisis : what we agree on Africa and the crisis: very bad, and probably worse The core elements of the Global remedy A few warning signs Some policy recommendations

7 What we agree on Deep crisis in the heart of the economic system Crisis beyond the financial sector as such Not caused by, but harsh impact (but very differentiated) on developing countries: Credibility crisis of policies and institutions Double power shift (at least partial and temporary) from private to public/ N S : from G-8 to fora including emerging economies Recognition of financial stability as global public good Need for more than business as usual approach A minimal agreement on the types of measures to be taken

8 Africa : bad and probably worse Full impact of the transmission channels : asset devaluation/ investment/ trade (and decrease of trade financing)/ aid/ remittances Extra vulnerability: low reserves/ high commodity dependence Effects of crisis cumulation (food / energy/ finance/ climate) Higher risk of deterioration of structural basis for development in the future

9 And.. Loss of economic and political negotiating power - demand for commodities - political marginalisation in G-20 (risk of formal split in the G77?) - political marginalisation of MDG * but.. Still (cfr commodity reserves, a.o.) huge long term potential.

10 Core elements of the remedy Safe banking: From shadow banking to narrow banking More transparency/ surveillance/ regulation - recognition of risk caused by Tax havens - to be extended to non bank actors (hedge funds, rating agencies) Neo keynesianism (everyone seems to have his own) - bank bail outs (on public interest condionality?) - budget deficit policies - ec stimulus package: countercyclical policies the new buzzword - social safety net function/ social security and labour protection as (buffer against crisis) - supposed to be more or less green Compensation/ prevention package for damaged Developing economies Reform of the international financial/ economic/ political architecture

11 Warning signs Financial crisis not over yet: new or delayed bubbles to burst Unclear commitment for financing in a reliable tradition of non delivery on promises (cfr G-8 Gleneagles on Africa) Underestimating of complexity of new power game in North South and South-South relations Impact of unforeseen or neglected elements (increased currency volatility, etc) Focus on reform of financial architecture could be diluted by measures on second and third wave of the crisis

12 and Deadly institutional mistakes: - IMF totally unqualified (culturally handicaped) for countercyclical policies/ allowing for policy space) - scope for institutional reform totally insufficiënt - institutional allergy to UN Risk (once again, cfr initial PRSPs) of developing unadapted instruments (who is going to pay for countercyclical measures in Africa without creating problematic new debt?) Very predictable debt trap Without public/ political pressure most of G-20 commitments will in the best case go half way

13 Some policy recommendations Get the financial sector really under control: prevention of fin crises is absolute must. Also, and maybe most of all, for economically weakest countries: risky behaviour - prevention of financial crisis through real transparency/ surveillance/ supervision/ regulation - Narrow banking may improve resource allocation to essential needs - End speculation on essential goods and services - End the loss through tax havens (closure of tax havens may be a good tool in the fight against internal corruption).

14 The rest : an emergency for a long long time A well financed optimal use of policy space : - Invest in local social protection systems and labour protection (as a minimal hard core of purchasing power/ life preserver) - Invest in agriculture (quant/ qual/ type of agriculture) - Invest in basic infrastructure (including social) - Invest in internal taxation systems

15 Be serious about MDG 8 Crisis as an opportunity to rebalance emphasis on internal policy and enabling international environment Make aid committments binding Make innovative financing mechanisms operational (the substantive ones : CTT/ FTT/ climate) Invest in developing a real commodity policy (including supply management/ prevention of speculative bubbles/ to be linked directly with climate policy) Get independent arbitration mechanism in place for predictable debt crisis (in 5 to 10 years from now?)/ and immediate moratorium Neutralise the $ effect (chinese had 736 bn $ of US treasury bonds january 2009) Stronger development conditionality on ending of WTO Doha Round Support South South coöperation (new coöperation frameworks/ get in the Chinese)

16 And on the institutions Coördination of debate on new financial architecture and policy in the (reformed) UN in coöperation with deeply refomed BWI and regional groupings - a good start in June - new structure of UN- BWI coöperation - diplomat training adapted to new world Democratise the IMF - more than 0, % shifts in voting power - change policy (within limted mandate) - change culture Bury the G-8 Give the G-20/ the financial stability board a specific but limited task in a (UN) broader framework Etc.

17 Emergency: a new start for the long term Opportunities for needed change and reform of policies and institutions will not materialise without increased pressure (like minded/ Developing countries/ Civil society) Don t let the financial sector get away with it Adapt to a new world - failure of existing model/ institutions/ perfomance - new power balance (lessons in modesty?) - development needs (MDG+) against cumulated crises (food/ energy/ finance/ climate) Active repositioning of Africa in this new framework