Delivering the insufficient?

G20 finance ministers issue another bland statement

Bretton Woods Project, 10 September 2009

Despite spin doctoring that called it a triumph for cracking down on banking bonuses, the G20 finance ministers’ statement in early September produced an accounting for how the G20 met or did not meet existing promises and little new agreement. Once again the UK government excluded critical civil society from the discussions.

The summit, held in London in order to prepare the ground for the G20 leaders meeting scheduled for 24-5 September in Pittsburgh USA, was billed as a battle over bank bonuses, but the final communiqué was mostly a bland repetition of existing statements with plenty of escape clauses and pushing issues to other forums. On the fiscal stimulus and loose monetary policy that have been the mainstay of rich country responses to the financial crisis, it committed countries to continue “necessary financial support measures” but also “agreed the need for a transparent and credible process for withdrawing our extraordinary … support.”

The communiqué was short, with only seven paragraphs. It final two points served to report on the commitments made to strengthen the IMF and World Bank. The G20 hailed the “significant progress in strengthening the IFIs” but also said “more needs to be done”. For the pedantic, the change in language on IMF governance may look like a positive step forward. In April the G20 said “emerging and developing economies, including the poorest, should have greater voice and representation”, whereas in September it read “the voice and representation of emerging and developing economies, including the poorest, must be significantly increased.” A searching look at the accompanying “progress report on the actions of the London and Washington G20 summits” highlights the areas left vague.

SDRs go ahead at the IMF

The report confirms that the $500 billion promised to the IMF has yet to be delivered as it references only the “commitments of more than $250 billion”. Actually delivery has only come from Japan, Norway, France, Canada, China and the United Kingdom, totalling about $195 billion. The US commitment of $100 billion has been agreed through the New Arrangements to Borrow, which requires additional measures to activate. The IMF has committed about $173 billion overall (including loans made before the crisis), but it had about $250 billion in available capital before the agreement to boost its resources. Thus, the boost in resources has not yet been used to support any developing countries.

And while the London Summit called for a “doubling of the IMF’s concessional lending capacity for low-income countries”, this has been reinterpreted to be a simple doubling of concessional lending year-on-year rather than the overall pot of resources available for such lending. The Fund announced in late July an increase in expected concessional lending to $4 billion a year in 2009 and 2010 from about $1.2 billion on 2008.

The commitments on issuing special drawing rights (SDRs, see Update 65), the IMF-created reserve asset, were the most tangible and successful, with full allocation of SDRs as per the G20 communiqué. This included the final ratification of the fourth amendment to the IMF Articles of Agreement, which provides for an extraordinary allocation of SDRs to countries that joined the IMF between 1981 and 2009. Still most of the new SDRs go to rich countries and no progress was made on a method of re-allocation.

Some World Bank changes left vague

While the Bank did raise lending from about $30 billion to $60 billion in the last fiscal year, there was no quantitative reporting on the take up of programmes oriented at social protection and low-income countries. The communiqué indicates that the Rapid Social Response Fund (see Update 65) was agreed, but fails to say how much was provided, likely due to very low take up of the facility.

A paper on increasing the financial capacity of the Bank through a capital increase is promised for the annual meetings, while the Bank is still “developing an approach” to let some low-income IDA-eligible countries borrow more money on IBRD terms usually reserved for middle-income countries. The progress report said that the IMF and World Bank boards were both reviewing the debt sustainability framework, though the IMF board had actually met on 31 August, prior to the G20 meeting. The IMF’s agreed changes were announced on 9 September.

On the promise of increasing trade finance by $250 billion, the G20 produces an unreferenced figure of $65 billion having been taken up, though the only actual programme cited is the one by the World Bank’s International Finance Corporation (IFC), which received commitments of just $7.75 billion (see Update 66).

The promised G20-chair review of the IFI’s role and responsibilities, which was supposed to be personally handled by British prime minister Gordon Brown, is reported to be in “consultation with the G20, external academics and LICs.” There was little to no discussion on the matter with civil society, despite repeated questioning of the prime minsters’ office by NGOs about how a consultation would be run. In the end the exercise was contracted out to London-based think-tank the Overseas Development Institute, which placed a limited discussion note on its website and failed to alert more than its database of researchers about the online discussion forum.

Financial and tax regulation still pending

Despite the hype on bonuses, the communiqué merely asked for “global standards on pay structure” and called on the Financial Stability Board (FSB) “to report to the Pittsburgh summit with detailed specific proposals for developing this framework.” FSB standards are not legally binding and there is no mention in the communiqué of the idea that there should be a cap on the total bonus pool. As the FSB in basically a forum for discussion among the G20 and other governments, countries that have opposed strong regulation on financial sector remuneration such as the UK, will work hard to water down any proposals.

On the fight against tax evasion, there was recognition of the need for “developing countries [to] benefit from the new tax transparency, possibly including through a multilateral instrument.” However the use of the word “multilateral” was left vague. The OECD which has been the lead analytical body on tax matters often uses ‘multilateral’ to mean merely a series of bilateral agreements.

The G20 had previously agreed that all systemically important financial institutions should be regulated, but had left the definition of systemically important to the IMF, Bank for International Settlements (BIS) and the FSB. They promised to do it “by the next meeting of finance ministers and central bank governors.” However they failed to produce the guidelines on the definition by this early September finance ministers’ meeting. They have now promised to do it by November when the G20 finance ministers meet again.

Civil society exclusion

UK-based NGOs, the Jubilee Debt Campaign and Bretton Woods Project, had their accreditation for the G20 finance ministers’ meeting revoked by the UK Treasury just days before the summit. Representatives of both organisations had received notification of accreditation on Friday, 28 August. Both received emails late on 2 September saying “Unfortunately your accreditation has been withdrawn by HM Treasury. Please be aware that you will not be permitted access to the meeting venue or any of the press facilities.” No further information or reason was given for the withdrawal of accreditation for the NGOs.

The UK government also barred NGOs War on Want and the World Development Movement from attending the G20 London Summit in April. Nick Dearden, director of Jubilee Debt Campaign, said “It is outrageous that NGOs such as ours have again been banned again from attending G20 summits. The UK seems to be setting a precedent that it is acceptable to silence voices of dissent and prevent debate from being aired.” Both Bretton Woods Project and Jubilee Debt Campaign had been involved in a 4 September London action calling on the G20 to stop letting money rule the world on the day the summit commenced. UK NGOs Oxfam and ONE, which had not been listed as organisers of the action, were accredited and allowed into the summit venue.

No conditional World Bank fund for climate projects: Bangladesh Prime Minister

Staff Correspondent, NewAge, June 11, 2009

Prime minister Sheikh Hasina on Wednesday said the government would not take the World Bank’s fund, earmarked to help Bangladesh to tackle the adverse impacts of global warming, if it does not agree with conditions imposed by the global lender.
   

She said the government would take up a plan for dredging the major rivers, including the Padma, Meghna, Jamuna and Brahmaputra. 
   

‘We will not take the fund from the World Bank if we have to accept their conditions,’ said the prime minister in reply to a question in the parliament. ‘They will have to give us the fund as per our terms.’ 
   

She said that Bangladesh would get enough funds to face the adverse impacts of global warming.
   

As the developed countries are responsible for global warming, they will give Bangladesh funds to face the climatic catastrophes, said Sheikh Hasina. 
   

She said the government would propose allocation of Tk 300 crore in the new fiscal year’s budget to initiate adaptation measures to face the impacts of global warming. 
   

‘A guideline titled Bangladesh Climate Change Strategy and Action Plan has been formulated to face the probable disasters caused by climate change. A cabinet committee is working to finalise the action plan. Another cabinet committee is finalising the formation of the Climate Change Trust Fund with budgetary allocation,’ she informed the House. 
   

Sheikh Hasina said the government plans to dredge the major rivers in order to prevent desertification and facilitate flood control and land reclamation. 
   

‘I myself will head the committee to be manned by ministers for some related ministries including finance, planning and agriculture. It will require a huge amount of money for dredging the rivers, but we will do it,’ she said. ‘Regular maintenance dredging will also be continued.’ 
   

She said the government had already started discussion with the World Bank, the Netherlands and other lenders to get assistance for river dredging.
   

‘In the past the lenders were unwilling to provide funds for dredging, but now they are responding to our requirements. I signed a file today to send a representative to the World Bank to discuss various programmes including dredging of the rivers,’ said the prime minister. 
   

Answering another question raised by independent lawmaker Mohammad Fazlul Azim, the prime minister said the government had a plan to form marine police as part of the existing police force to root out pirates and forest bandits in the deep sea and Sunderban.
   

‘There is also a plan to increase the manpower of thana police and provide speedy vessels to them for the same purpose,’ she said.
   

The prime minister said the law enforcement agencies under the home ministry were carrying out their responsibilities with utmost sincerity and integrity to ensure safety and security on river routes, and check smuggling in coastal areas, piracy, trawler robbery and abduction of fishermen.
   

‘These agencies like Coast Guard, BDR, RAB and police are engaged in checking smuggling and piracy and also ensuring safety of the fishermen,’ she said. 
   

Hasina said the present government had undertaken steps to further strengthen the Coast Guard and make it more effective.
   

She said the river patrol teams of police were active in eliminating pirates, forest and land robbers in the rivers and char areas of the coastal districts.
   

She also told the house that setting up of river police outposts and investigation centres in coastal char areas was under process. ‘Security of life and property of the people there will be ensured if the outposts and investigation centres are established,’ she said.

WB finds its projects vulnerable to graft

Tanim Ahmed, NewAge, June 7, 2009

The World Bank does not have sufficient mechanism to prevent fraud and corruption in projects it funds in different developing countries, an internal report of the multilateral lending agency revealed.
   

The ‘Review of IDA Internal Controls’, released in April this year by the World Bank’s Internal Evaluation Group, analysed internal procedures and mechanisms of the International Development Agency, the soft loan window of the World Bank group, which disburses most of the concessionary loans to developing countries like Bangladesh.
   

The relevant section of this report (Annex D of the second volume) indicates that despite the World Bank’s rhetoric, including high-sounding sermons on governance and corruption, the agency is yet to craft a sound mechanism for itself to prevent corruption in its projects.
   

The report states that the multilateral donor agency lacks specific tools to prevent fraud and corruption in its operations.
   

Based on the evidence and agreed criteria, the evaluation group concluded that weakness in existing framework of controls to address fraud and corruption issues give rise to corrupt practices when it comes to implement projects in the developing countries.
   

‘While commitment to integrity has always been and remains a central feature in the Bank, there are also aspects of the culture that have resisted dealing openly with the potential for F&C at the local level in Bank and IDA operations.’
   

Mehrin A Mahbub, public information associate of the World Bank’s Bangladesh office, told New Age on Monday that governance was indeed one of the pillars of the agency’s ongoing work.
   

She said the new disclosure policy of the World Bank would bring in major changes. ‘The consultations are fully open and ongoing.’
   

Mehrin also pointed out that the lending agency had a strong procurement guideline that was strictly enforced.
   

The agency’s internal report observed that such gaps would remain unless the recommendations of the Volcker report, which are apparently ongoing, are implemented fully to become operationally effective.
   

The Volcker report was an independent evaluation of the World Bank’s Department of Institutional Integrity conducted by a panel headed by Paul A Volcker, former chairman of the United States Federal Reserve Board.
   

Released in 2007 amid notable media hype, the report stated that although the department of integrity had achieved some success, ‘there were serious operational issues and severe strains in relations with some operations units have arisen, at times contributing to counter-productive relations between the Bank and borrowers and the funding partners’.
   

There have also been previous reports regarding corruption at the World Bank. In a series of hearings in the US Senate Foreign Relations Committee in May 2004, witnesses testified that as much as US$ 100 billion might have been lost to corruption in World Bank projects.
   

Corruption within the lending agencies take on added significance in the context of the global financial crisis and the initiative to strengthen and enlarge their lending programmes in the developing world.
   

Mustafizur Rahman, executive director of Centre for Policy Dialogue, a Dhaka-based civil society think tank and research organisation, said that he thought the issue of lenders’ accountability and transparency was crucial in that context.
   

‘We have severe limitations of funds and resources and therefore are almost compelled to seek assistance from these agencies. But in order to ensure appropriate and effective utilisation of those funds, these lending institutions will also have to ensure their own accountability and governance.’
   

Mustafiz also said that the lending agencies, where the developing world has very little voice, should bring about structural reforms within them. ‘It is important that countries like Bangladesh get to have a voice in these reforms and how these agencies are run.’
   

Anu Muhammad, a professor of economics at Jahangirnagar University, also secretary of a citizens’ platform critical of the neo-liberal establishment, said corruption was actually inherent to the World Bank programme. ‘I have held it for long that it is only because of corruption that the World Bank is able to operate in Bangladesh. It would be impossible to run the kind of projects that these agencies support without a corrupt system in place.’
   

He said that without exception the World Bank was openly critical of countries or regimes that even strived towards a system genuinely free of corruption. ‘This is a vicious cycle. These lending agencies promote corruption through their projects and on the other hand, pontificate us on the evils of corruption.’

Half of the 74 Privatised State Owned Enterprise (SoEs) Closed Down in Bangladesh

NewAge, April 25, 2009

Almost half of the 74 state-owned enterprises divested in the past were closed down that raised question about the quality of ‘so called privatisation’.
   

A total of 74 state-owned enterprises belong to textiles, jute, manufacturing, chemicals, food, leather and banking sector were sold out since the establishment of the Privatisation Board in 1993 and thereafter the Privatization Commission in 2000.
   

A closed state-owned jute mills. — New Age photo

Of them, 54 were divested through outright sale and 20 through off-loading of shares by suggestion of the lending agencies especially the World Bank.
   

Among the privatised enterprises, which are still in business limp badly, they said.

Serious questions can be raised about the privatisation process itself, said Bangladesh Enterprise Institute president Farooq Sobhan. He suggested changes to the existing privatisation process.
   

Industries minister Dilip Barua, has, however, favoured a provision to halt privatisation of the state-run entities.
   

He made his intention clear while unveiling the draft of the new industrial policy on Saturday at local hotel.
   

’Many privatised factories remain inoperative or non-functional under new ownership. In some cases, land is sold off after take-over,’ he said.
   

Apart from 74 SOEs, some 24 SoEs have already been listed by the commissions to get them disposed off under a World Bank’s multi million ‘bank modernisation and enterprise growth’ project.
   

Tenders have already been called for three SoEs.
   

Around 305 state owned enterprises comprising industrial, commercial and financial institutions were put under public ownership in 1974-75.
   

The size of the public sector enterprises have reduced considerably after the paradigm shift in the government’s economic policy towards privatisation.
   

However, in name of privatisation successive governments sold out many viable SoEs at very cheap rate, said an official of the Bangladesh Forest Industries and Development Corporation.
   

He said Wood Treating Plant at Daulatpur in Khulna was divested to private entrepreneur although the organisation was running on break event and employed more than 200 workers.
   

A relative of the than privatisation commission chairman purchase the plant and curtailed more than 150 workers.
   

The abortive attempt to privatise Rupali Bank, country’s fourth largest commercial bank, has added further burden on the government exchequer, said the finance ministry officials.
  

 The three-year long unsuccessful bargaining with A Saudi prince deteriorated the financial position of the loss making bank that was put on sale in 2005.

World Bank loses legal battle to sacked official in Bangladesh

Staff Correspondent, NewAge, April 7, 2009

The World Bank lost for the fourth time a legal battle in Dhaka, as the Appellate Division of the Supreme Court on Monday upheld the High Court’s verdict that had ordered a Dhaka court to dispose of a case filed in 2001 by a fired local official against the World Bank within six months.
   

The Appellate Division rejected the petition filed by the WB to seek permission to appeal against the High Court’s verdict delivered on June 5, 2008.
   

The High Court bench of Justice SK Sinha on June 5, 2008 delivered the verdict, rejecting a petition filed by WB for dismissal of the case on grounds of inadequate court fees.
   

This was the latest of a series of rejections by the court of the WB’s petitions filed in the last seven years since the former external affairs officer of the bank’s Dhaka office, Ismet Zerin Khan, sued it, challenging her termination in 2001.
   

‘The suit relates to service matter. It was instituted in the year 2001 and a suit of this nature deserves preference to other suits in the matter of disposal,’ observed the High Court in its verdict, and ordered the trial court to dispose of the case in six months, ‘taking into consideration the fact that in the meantime about seven years have elapsed and no witness has yet been examined’.
   

The international lending agency appealed to the High Court in 2001, claiming that it should enjoy immunity from any lawsuit in Bangladesh, and secured a stay order on the case.
   

On 9 August, 2005, the Appellate Division of the Supreme Court rejected an appeal filed by the WB and ordered the trial court to hear the suit. It also ordered the trial court to dispose of the case in six months.
   

The WB had also tried to get a law enacted which would provide it with immunity from any lawsuit in the country. No such law, however, has yet been enacted.

Govt control over climate change funds must not be compromised

Editorial, NewAge, March 16, 2009

WHEN the finance adviser of the immediate-past interim government declared last September that Bangladesh’s estimated $5 billion climate adaptations fund would be managed by the World Bank, there was broad opposition to this plan within the government, and among NGOs and civil society groups. We warned at the time that the bank’s involvement would not only undermine our government’s control over the funds but also compromise the country’s position at UN negotiations, where the LDC group, of which Bangladesh is a key member, are demanding that funds stay outside of the control of multilateral lenders. This danger has sadly become relevant once again, as negotiations may once more be ongoing to task the bank with the responsibility of managing the multi-donor trust fund. According to a New Age report published on Sunday, the Campaign for Sustainable Rural Livelihoods — a network of over 150 local NGOs involved with climate change — has warned that the UK government, one of the major donors, may be pressuring the government to task the bank as manager, despite its reassurances earlier that it was the Bangladesh government’s prerogative to choose the mechanism through which this fund would be administered.
   

Our reservations with the World Bank and its activities are based on the knowledge of decades of bitter experiences that Bangladesh and a large number of least developed countries can speak of in their dealings with the bank. For one, the World Bank suffers from a serious lack of transparency in its decision making and its financial dealings, leaving scope for massive internal corruption which has, time and again, been exposed from within the Bank’s own books. Secondly, the bank has a record for imposing secret and unrelated conditionalities that governments of least developed countries are often expected to satisfy before they qualify for funds. Such conditionalities have received widespread criticism for causing fragile economies to collapse through the dismantling of a nation’s tariff regimes, to give one example, often causing local industry and agriculture to lose their markets to cheap exports. If the World Bank is the manager of this massive fund, conditionalities will no doubt have to be met on how the funds are spent, when, and to buy what. These are all decisions that the government of a sovereign people’s republic of Bangladesh should be free to decide, and not a multilateral lender with a shameful record for economic predation and corruption. Thirdly, the World Bank will no doubt charge a fee for the management of the fund — even a seemingly paltry 1 per cent is $50 million — which could comfortably finance a national equivalent management body for much more than a few decades.
   

Given these realities, we believe it is in the national interest of Bangladesh to assert the government’s — and hence the people’s — right to control and administer funds raised for Bangladesh’s efforts to combat the fallout of manmade climate change. It is important to remind the donors that climate funding is largely seen as a compensation for the industrial excesses of the west over the past century and the traditional donor-recipient formula is not acceptable under these circumstances.

Climate Change Fund Management Committee: Bangladesh government urged not to include World Bank in the body

Staff correspondent, NewAge, March 15, 2009

The leaders of the Campaign for Sustainable Rural Livelihoods, an alliance of more than 150 local, national and international development agencies, have urged the government not to incorporate the World Bank in the climate change fund management committee of the government.
   

Although the government of the United Kingdom had pledged to donate funds for combating the impact of climate change following the suggestion by the Bangladesh government, the UK government now is preferring the ‘multi donor trust’ in the name of the WB, claimed the forum leaders.
   

Their demands were presented at a press briefing organised by the CSRL at the Dhaka Reporters Unity on Saturday. Member secretary of the forum, Ziaul Haque Mukta read out the demands.
   

The national plan on climate change and its financial disbursement system should formulate a well-coordinated system with the participation of different public and private development organisations and the civil society, combining the efforts of the affected people. But it should not be led by any donor countries, agencies or the WB, they argued.
   

They also urged the government to form a national board on climate change, incorporating all the private and public sector agencies, concerned ministries and the affected people to face the overall impact of climate change.
   

The national board should also formulate a comprehensive plan on climate change and coordinate all its programmes including ratification of the project, fund collection, monitoring and evaluation, they said at the briefing styled ‘climate change : national plan and financing.’
   

Although Bangladesh has already formulated a national strategy and an action plan on climate change, based on the consultation between the government officials and the representatives of the non-government and donor organisations, the action plan has ignored participation of the affected people, political parties and the experts, they said.
   

Although the national strategy and the action plan put emphasis on the adaptation method, it did not consider the issue of possible loss of homesteads by several crores of people at the coastal regions and the necessity of local and international migration as an adaptation strategy under the plan, they pointed out.
   

Among others, the chairperson of the CSRL, Shirin Akhter and climate expert, Ahsan Uddin attended the briefing.

Put People First

Bretton Woods Project, March 13, 2009

Ensuring a response to the economic crisis that delivers democratic governance of the economy for jobs, justice and climate

Download: The PDF version can be downloaded from the Put People First website. 

The global financial and economic system is in crisis. Existing economic policies and institutions have overseen an economic system scarred by high levels of poverty and inequality, which is contributing to an environmental catastrophe.

Blind faith in the virtues of markets, and inadequate public control, regulation and accountability of finance are at the heart of the financial crisis. Before the financial crisis, people across the world and in Britain were already suffering from the effects of rising food prices, inadequate essential services and the threat of climate chaos.

There can be no return to business as usual.Fundamental change is needed.

This paper is the result of an unprecedented collaboration between a wide spectrum of civil society organisations with millions of members from across the nation. We call on the UK government to show its commitment to putting people first by signalling an historic break with the failed policies of the past, and the start of a new system that seeks to make the economy work for people and the planet.

We call on the government to prioritise the essential changes listed below, as the first step towards building this new system.

Put People First: Ensure democratic governance of the economy

1. Compel tax havens to abide by strict international rules.
2. Insist on fundamental governance reform of the World Bank and International Monetary Fund (IMF).
3. Make all financial institutions, financial products and multinationals transparent and publicly accountable.

Jobs: Decent jobs and public services for all

1. Ensure a massive investment in a green new deal to build a green economy based on decent work and fair pay.
2. Invest in and strengthen public provision of essential services.
3. Work to ensure sufficient emergency funding to all countries that need it, without damaging conditionalities attached.

Justice: End global poverty and inequality

1. Deliver 0.7% of national income as aid by 2013, deliver aid more effectively and push for the cancellation of all illegitimate and unpayable developing country debts.
2. Ensure that poorer states are allowed to take responsibility for managing their economies, including controlling cross-border capital flows.
3. Stop pushing developing countries to liberalise and deregulate their economies, and do not attempt to rush through a completion of the Doha trade round, a deal that developing countries have rejected several times.

Climate: Build a Green Economy

1. In addition to the green new deal (recommendation 4), introduce the robust regulatory requirements and financial incentives needed to deliver a green economy.
2. Push for a deal at Copenhagen to agree substantial, verifiable cuts in greenhouse gases, which will limit temperature increases to well below 2°C.
3. Commit to substantial new resource transfer from North to South, additional to Overseas Development Assistance (ODA), to support adaptation and sustainable development in poor countries.

These recommendations provide an integrated package to help world leaders chart a path out of recession. Creating a fair, functioning global economy means rapidly addressing climate change. Building a low-carbon economy requires massive public investment in decent green jobs and public services. A new green deal cannot be financed without significant tax reforms. Democratic, transparent and accountable financial institutions are necessary to deliver the changes required.

The first step will be a transparent and accountable process for reforming the international financial system. This will require the consultation of all governments, parliaments, trade unions and civil society, with the United Nations (UN) playing a key role.

We call on the UK government and other countries to seize this opportunity to start building an economy that puts people and the planet first. The policies set out in this paper offer the essential building blocks for undertaking this transformation.

Introduction

Existing economic policies and institutions have failed to deliver stability. They have overseen an economic system scarred by high levels of poverty and inequality, which is contributing to an environmental catastrophe that will also cause massive economic damage. The notion that ‘the market always knows best’ has been shown to be fundamentally flawed.

The global economic recession caused by the financial crisis will cost millions of men and women their jobs and livelihoods. In Britain, unemployment is already approaching two million,¹ and forecasters expect this figure to rise to over three million or even higher by 2010.² The best estimates are that the number of people living below the global absolute poverty line of $1.25 per day will rise by over 200 million.³

Before the financial crisis, people across the world and in Britain were already suffering from the effects of rising food prices, inadequate housing and other essential services, and the threat of runaway climate change. As always, the poorest suffer most, particularly women. However, this crisis also threatens to damage the lives of those on middle incomes, and will harm living standards in rich as well as poor countries.

It is time to put people first:

• To rebuild our economies so they finally deliver decent jobs and public services for all.
• To eradicate the scourge of global poverty and inequality.
• To build a green economy that preserves our global commons and the natural life-support systems of the planet, prevents runaway global warming and ensures a safe, clean environment for our children.

Putting people first also means reasserting democratic control over the policies and institutions that guide our economy at global, regional and national level, and making sure companies are accountable for their actions. This is not just a task for international officials or financial experts; it must involve us all. The market must be made to work for the many, not just the few. This requires government action, regulation, and oversight, with democratic accountability.

The first step will be to ensure that the process for reforming the international financial system is transparent and accountable, with consultation of all governments, parliaments, trade unions and civil society, with the UN playing a key role.

This paper is the result of an unprecedented collaboration between a wide spectrum of civil society organisations with millions of members from across the nation. It sets out practical steps that the UK government should take to signal its readiness to lead a process of fundamental change to put people first: to deliver decent jobs and public services, global justice and a green economy.

1. Put People First: Ensure democratic governance of the economy

Blind faith in the virtues of markets, inadequate public control and regulation of finance, lack of transparency and accountability of financial institutions, and the secrecy provided by offshore financial centres are at the heart of this crisis.

Governments, national regulators and international financial institutions failed to do their job. Ideologically driven policy-making, which assumed that the market always knew best, allowed the development of a culture of secrecy and the proliferation of complex and ‘innovative’ financial products and practices. These have proved highly damaging. Uncoordinated and floating exchange rates, and the massive balance of trade deficits and surpluses accompanying them, have encouraged speculation, instability and inequality in the global economy over the last 30 years.

Fundamental change is needed

Two basic principles should guide all reforms. First, financial institutions must be held accountable publicly and transparently and financial institutions, markets and products must be adequately regulated to ensure that they support a sustainable fair economy. Second, governments must cooperate to prevent a regulatory race to the bottom, and to ensure that rogue jurisdictions cannot undermine efforts to regulate, tax and hold accountable all financial institutions and multinational companies.

Significant changes are needed in the way the global economy is managed, with fundamental reform of the governance of international financial institutions, including the World Bank and the IMF. Voting weights should recognise shares of population, and citizens, both women and men, must be able to hold these institutions accountable and voice their concerns. One first step for the current round of World Bank governance reform will be to ensure that developed and developing countries have a parity of voice and vote. These institutions must alter policies and behaviour to fully respect international standards on human rights, the environment and labour. Strengthened UN oversight over the management of the international economy is needed.

Major changes to the financial system are also needed if it is to play its role of supporting a fair, sustainable economy. Four priorities are clear. First, the ‘shadow’ banking system must be removed so that all institutions and products, including investment funds such as hedge funds, sovereign wealth funds and over-the-counter products,become properly regulated.

Second, damaging speculation should be limited by controlling derivatives trading, credit securitisation and other complex financial instruments in a globally coordinated way. Rules must be formulated to discourage or ban short-term, non-productive or damaging investment, while promoting longer term socially productive and environmentally sustainable investment. The inflated bonus culture must be tackled.

Third, tax havens must be compelled to cooperate to lift the veil of secrecy that allows firms and individuals to avoid international standards, and that makes illicit capital flight and tax evasion possible. They should be compelled to abide by strict international rules, and place all data on beneficial ownership and trading of entities registered in their domains on public record. This will also help efforts to combat money-laundering and other criminal activities. Transition measures will be needed to help small economies that have become economically dependent on their tax haven status to diversify and adjust.

Fourth, multinational companies must be compelled to report in a transparent and accountable manner. This will include introducing country-by-country international accounting standards to disclose profits made and taxes paid in each country, and making governance arrangements, human rights, social and environmental assessments part of the listing and reporting requirements for all multinationals. Investors should follow the UN Principles of Responsible Investment and include social, environmental and governance risk assessment in their investment practices.When UK companies operate abroad they should be held to account if they breach international human rights and environmental standards, for example, through the creation of a UK Commission for Human Rights, the Environment and Business.

Recommendations for the UK government

The British government can signal its commitment to democratising economic governance by supporting the following key actions in the UK, the European Union (EU) and at international levels:

1. Tackle tax havens, particularly those with strong connections to the UK such as Crown Dependencies and UK overseas territories, by compelling them to abide by strict international rules and participate in systems of automatic exchange of information.
2. Insist on fundamental governance reform of the World Bank and IMF, to ensure that they are properly democratised, and made fully transparent and accountable, and respect international standards on human rights, the environment and labour.
3. Make all financial institutions, financial products and multinational companies transparent and publicly accountable. This will include removing the shadow banking system through proper regulation, introducing country-by-country international accounting standards, and making governance and social and environmental impacts part of listing and reporting requirements for multinationals.

2. Jobs: Decent jobs and public services for all

We need a recovery plan that defends jobs, mitigates the human cost of the crisis and protects the poorest, while protecting the planet.

Developed and developing countries must use the funds at their disposal to enable them to stimulate their economies, protect jobs and livelihoods, and provide social protection schemes to support poor people, in the North and South. Where necessary, they should be provided with emergency funds by the international community. It is the poor who are bearing the brunt of the crisis, and it should not be forgotten that 70% of the poorest people in the world are women.

In the UK, schemes to prevent unemployment, and to get the unemployed rapidly back to work through improved training, support for viable companies in crisis and the expansion of government led projects to provide work and help build a green economy, will be particularly important.

Developing countries must be given the emergency funds necessary to pursue the kinds of counter-cyclical policies currently being used by rich countries. This should be done without the economic policy conditionality that has characterised interventions in developing countries over the past three decades. Insisting on deregulation, liberalisation and privatisation has interfered with domestic decision-making processes, has frequently led to serious and damaging impacts on poverty and the environment, has undermined core labour standards, and has contributed to the spread of the financial crisis. Funding is needed to mitigate the immediate impacts of the global economic crisis, especially on poor and economically vulnerable people, including through social protection programmes.

Governments should use the investments they are making in response to the economic crisis to rebuild a low-carbon economy, based on justice and equality. A ‘green new deal’ is needed to create decent employment, offer extended social safety nets to workers, build public services and invest in green infrastructure for sustainable development. Governments should bring forward green infrastructure investment programmes that can stimulate demand growth in the short term and raise productivity growth in the medium term. New jobs can be created in green construction, green energy, green transport and green financing. Private savings and pension funds can also be incentivised to be at the heart of funding a green new deal. The principle of ‘just transition’ is essential to protect the living standards and well-being of those at risk of unemployment or those who face a reduced income as a result of the shift to a green economy.

Governments should invest in and strengthen public provision of essential services to ensure universal access to education, basic health care, water, sanitation and housing, and to increase secure jobs and pensions within the public sector. In the context of the financial crisis, the role of private finance and reduced social provision in housing markets has been a key factor, prompting insecurity and indebtedness for low and middle-income earners. It is therefore imperative that we work towards universal achievement of the human right to adequate housing. Governments in the North should create jobs in the construction industry by investing in ecologically sustainable social housing to meet historic, current and future need. Governments in the South must be supported to do the same.

Recommendations for the UK government

1. Ensure a massive investment in transformative action to deliver a low-carbon economy and push other developed countries to do the same. A green new deal is needed to create jobs based on decent work and pay through alternative energy development, sustainable transport systems, and energy saving and conservation. This shift to a low-carbon economy must be a ‘just transition’ based on democratic involvement of those groups most affected by that shift.
2. Invest in and strengthen public provision of essential services to meet universal human rights, including by massively increasing public investment in ecologically sustainable social housing.
3. Work to ensure sufficient emergency funding to all countries that need it to enable them to stimulate their economies, protect jobs and provide social protection, without damaging conditionality attached.

3. Justice: End global poverty and inequality

The international political and financial system needs to be restructured so that all countries have the space and resources they need to invest in public services, human security and sustainable development. International cooperation will be needed so that national efforts at social protection are not undermined. Renewed efforts to achieve and exceed the Millennium Development Goals (MDGs) are an urgent priority.

Meeting the 1970 aid pledge of 0.7% of Gross National Income (GNI) is now more important than ever. Governments in the North should accelerate their increases, and deliver better aid. Meeting these long-standing aid commitments will require only a tiny percentage of the huge sums used to bail out the banking system.

Servicing unjust and unsustainable debts has eroded developing countries’ control over their economies in recent decades. A comprehensive, fair and transparent international debt workout mechanism is needed to deal with sovereign debts and prevent future debt crises. Illegitimate and unpayable developing country debts that have either accrued through irresponsible lending, or that are repayable only at the cost of the basic rights of the people in the borrowing country must be cancelled.

There is a need for a new economic regime that ensures balanced real wage growth in line with productivity increases, whilst respecting the ecological limits of the planet. It must ensure fairer, sustainable growth in the global economy to reduce inequality between regions, as well as within countries, between capital and labour, between high and low income earners, between rich and poor, and between men and women. Fair, responsible and progressive taxation should curb excessive inequality, remove incentives for the pursuit of speculation, and contribute to sustainable development. 
Internationally, oversight and far greater transparency could be provided through new taxes, particularly in the foreign exchange market, in order to control damaging short-term speculation on currencies and to raise funds for development and climate change adaptation.

Attempts by world leaders to use the global recession as a spur for greater trade liberalisation through a conclusion to the Doha Round of the World Trade Organisation (WTO) or through bilateral and regional free trade agreements must be reassessed. The UK and all world leaders must take this opportunity to step back and develop a fresh approach to the global trading system that prioritises justice and equity, including labour and environmental standards. This approach should build economic relationships fit to deal with the financial, climate and food crises of the 21st century. This new approach to global trade must work in the interests of people and environment whilst strengthening local and regional supply chains and ensuring dialogue and cooperation at international level.

Recommendations for the UK government

1. Honour the commitment to deliver 0.7% of national income as aid by 2013 at the latest, deliver it more effectively and push for the auditing and cancellation of all illegitimate and unpayable developing country debts.
2. Ensure that poorer states are allowed to take responsibility for managing their economies. In particular, they may need to control cross-border capital flows, and should not be penalised or discouraged from doing so.
3. Stop pushing developing countries to liberalise and deregulate their financial services industries, alongside industrial, agricultural and wider service sectors, via the WTO or EU regional and bilateral trade negotiations. There should be no attempt to rush through a conclusion to the WTO Doha Round – a deal that developing countries have rejected several times due to concerns at the potential impact on their economies.

4. Climate: Build a Green Economy

We need management and regulation of the economy, at national, regional and global levels: to ensure that environmental services are fully valued to promote equity for all nations and the protection of fundamental economic, social and environmental rights for all and to avoid short-term profit being prioritised ahead of long-term sustainability.

Even before the current crisis, the demands of the global economy have led us dangerously close to the planet’s environmental limits. Ever increasing levels of consumption have eaten into our ecological capital. This trend will continue unless we divert from a ‘business as usual’ approach. Inequitable distribution of wealth and consumption has compounded this problem. Three to five planets would be needed if everyone on earth were to consume as much as an average person in a developed country. Meanwhile, the poorest consume the least but suffer most from the impacts of climate change. The economic costs of inaction are unthinkable. Conservative estimates say doing nothing about climate change will cost the world economy at least 5% of Gross Domestic Product (GDP) each year, and potentially more than 20%.⁴

Until now, economic development has been accompanied by the accelerating accumulation of human-made greenhouse gases in the atmosphere and the risk of runaway climate change. The unprecedented scale of public investment made across the world in response to the financial crisis provides a major opportunity to prevent catastrophic climate change, if it is focussed on facilitating the required cuts in emissions globally, and helping developing countries to adapt.

The rich countries of the world have built their economies on the back of ever increasing greenhouse gas emissions. These countries have a moral obligation to ensure that those who will feel the greatest effects of climate change – poor countries and the poorest people, the majority of whom are women – have the financial and technological resources to enable them to pursue their paths to sustainable development, whilst adjusting to the inevitable impacts of climate change and restructuring their economies to respond to a low-carbon world. A commitment is urgently needed to provide sufficient, substantial, measurable, verifiable and reportable new resource transfer from North to South, additional to ODA, to support resilient adaptation and sustainable development in poor countries. The UN estimates that over $80 billion per year will be needed for adaptation alone.⁵ Better and more coherent governance arrangements for climate finance are needed, which make the UN Framework Convention on Climate Change central.

At Copenhagen, governments of developed countries must agree substantial domestic cuts in carbon dioxide (CO2) and other greenhouse gases to meet the imperative of keeping global average temperature increases as far below 2°C as possible. These cuts must respect principles of social justice, as well as being measurable, verifiable, reportable, and met by reducing domestic emissions. The Intergovernmental Panel on Climate Change (IPCC) estimates that – even to achieve a temperature rise of between 2-2.4% – cuts in the range of 25-40% below 1990 levels by 2020 would be needed.

Experience has shown that an over-reliance on free markets and a commitment to low levels of regulation will not lead to the changes required to build a fair and sustainable economy. Market-based mechanisms, including carbon markets, need to be overhauled if they are to have a role to play in delivering the required transformation in the global economy. Governments need to intervene to a much greater level than has previously been the norm to address market failures, including through regulation.

Recommendations for the UK government

1. In addition to ensuring a massive investment in transformative action to deliver a low-carbon economy (recommendation 4), create robust regulatory requirements and financial incentives at national level and push for them at international level to create a green economy.
2. Demonstrate global leadership by pushing for a fair and adequate global deal at Copenhagen to agree substantial, verifiable cuts in greenhouse gases, with rich countries leading the effort, which will limit global average temperature increases to well below 2°C.
3. Commit to sufficient, substantial, verifiable new resource transfer from North to South, additional to ODA, to support resilient adaptation and sustainable development in poor countries.

Conclusion

These recommendations provide an integrated package to help world leaders chart a path out of recession. Moving towards a fairer global economy cannot happen without addressing climate change; a transition to a low-carbon economy cannot happen without massive public investment in decent green jobs and public services; a new green deal cannot be financed without significant tax reforms; and a shift towards democratic, transparent and accountable financial institutions is necessary to deliver the changes required.

The starting point for change must be understanding and acceptance. Understanding that an unfairly regulated global economy has increased vulnerability for the world’s poor, threatened jobs and livelihoods globally, created financial and social instability, undermined public service delivery, wreaked havoc upon the biosphere and ultimately damaged the fabric of the economy itself. Acceptance that governments must rediscover their role in proactively delivering an economy that is fair and just, and that lives within its environmental means.

The purpose of government is to defend and enhance the personal, social and economic security of its people. The purpose of an economy is to enable the greatest number of people to meet their material needs over the long term, without compromising the ability of future generations to meet their needs. Continuing with a financial model that primarily services the short-term greed of a few at the expense of the long-term job and livelihood security of the many, and of the planet as a whole, would be a betrayal of the principal role of both governments and the economy.

The organisations backing this proposal represent millions of people across Britain who believe that tinkering at the margins of a broken economy will not get us out of the current overlapping crises of massive private debt, banking meltdown, rising poverty and unemployment and looming climate chaos.

We call on the UK government and other countries to seize this opportunity to start building a global economy that puts people and the planet first. The policies set out in this paper offer governments the essential building blocks for undertaking this transformation.

1 The Office for National Statistics figure for December 2008 was 1.97 million.

2 The Confederation of British Industry (CBI), the Trades Union Congress (TUC), Ernst and Young and Item Club have all forecast over three million unemployed by 2010.

3 International Labour Organization: Global Employment Trends Report 2009.

4 Stern Review: The Economics of Climate Change, 2006.

5 United Nations Development Programme: 2007/2008 Human Development Report. Fighting climate change: Human solidarity in a divided world, 2007.

Related Resources: The London Summit

The UK Government and the World Bank set out proposals for an urgent injection of new aid money to prevent 2 million deaths in developing countries as leading experts on development, including Sir Bob Geldof (above), gathered in London for a conference on eliminating world poverty. The proposals will be put forward at next month’s London Summit on 2 April, 2009. 

World Bank’s fingers in Bangladesh’s climate fund pie

NewAge, March 13, 2009

Experts have good reason to fear that as the multi-donor trust fund manager, the World Bank will tangle projects in bureaucracy and ulterior agendas, so that the money raised by Bangladesh to combat the fallout of climate change remains beyond the control of its own government, and may be used to against its political and economic interests, 
writes Mahtab Haider*


MANY will remember the high-profile summit that the UK’s Department for International Development hosted in London in September last year, where UK secretary of state Douglas Alexander committed a £75 million grant over the next ten years in support of Bangladesh’s efforts to tackle climate change. At the time, while the UK’s initiative to draw attention to Bangladesh’s plight and make a generous pledge were being feted, there was also considerable controversy over how the ‘multi donor trust fund’ would be managed and operated. The Climate Change Strategy and Action Plan that the Bangladesh delegation presented at the summit projected the country’s adaptation financing needs at $5 billion over the next ten years, with other governments of the industrialised west also contributing to the fund instead of a series of efforts that might result in duplication and wastage.
   

In the week before the summit, rumours were rife that the DfID had verbally agreed to allow the World Bank to institutionally manage the fund for Bangladesh – an idea that had more or less unanimous opposition among climate change researchers, environment ministry officials and NGOs and civil society members in Bangladesh alike. In London, tensions ran high when the then finance adviser Mirza Azizul Islam twice overruled environment adviser Debashish Roy’s observation that the Bangladesh government has the capacity to manage this fund on its own, saying it would be the bank that would be tasked with the responsibility. But in the wake of the summit, it was learned that the World Bank itself was reluctant to take on this role (insiders cited the wholesale opposition at the national level and the bank’s lack of any real expertise in handling climate change projects) so the furore died down. Meanwhile, though the DfID remained silent on its preference of the bank in handling the fund, the defence it offered through backchannels was that Bangladesh did not have a representative government at the time, and it may be wiser for the bank to manage the fund in the interim period.
   

Nonetheless, the concerns that opponents of the bank in the role of the fund manager have raised were immensely significant. For one, they argue that the Bangladesh government would lose a great deal of control over how the funds are spent, and in what quantities, once it was in the World Bank’s control. It is not just in Bangladesh but across the world that the bank has a reputation for arm twisting destitute governments into institutionalising the neoliberal economic policies that it advocates, as a precondition to the release of sometimes desperately needed funds to build infrastructure, for example. In fact, the ideal example already exists in the form of the Global Environment Facility within the auspices of the bank, which has for much of the past decade been responsible for managing the Least Developed Country Fund created by the UNFCCC – the UN body for global climate change negotiations. Though the fund was created to help LDCs adapt to climate change, almost all of the LDCs have encountered incredible difficulty in getting the GEF to approve adaptations projects. According to one source, ‘out of 15 NAPA projects that Bangladesh designed in 2005, only a single project actually obtained the approval of the GEF council. The cost of this project was estimated as $23 million. But what was submitted to and approved by the GEF was reduced to $9.18 million’. Experts have good reason to fear that the World Bank will have a similar record as the multi-donor trust fund manager, tangling projects in bureaucracy and ulterior agendas in equal parts, so that the money raised by Bangladesh to combat the fallout of climate change will remain beyond the control of its own government, and may be used to against its political and economic interests.
   

It has also emerged in recent years that World Bank consultants and managers in different parts of the world have often been involved in massive corruption, cocooned in the security of opaque and unaccountable financial practices, some of which would put third world governments to shame. In most countries the bank and its employees also have immunity from legal prosecution, extending the impunity with which these crimes are committed. Also, given the fact that some 10-15 per cent of the $5 billion that the MDTF will amount to will possibly become a management fee for the bank (between $500–$750 million) and the fact that the bank will likely direct a significant portion of the fund to overpriced consultancies of its choice, Bangladesh will see few national interests served to have the World Bank as the fund manager.
  

Seven months since the September summit in the UK, this discussion has once again taken on an immense significance as reports start to emerge that the bank is being tasked as MDTF manager by the DfID after all. Worse still, the Economic Relations Division under the finance ministry – the gatekeeper for foreign aid, grants and loans coming into Bangladesh – is also playing a part in backing the World Bank. This is not new. The ERD has in the past repeatedly compromised Bangladesh’s interests by indicating that the country is open to the idea of multilateral loans to finance climate change adaptations – anathema to the LDC group’s negotiating position at the UNFCCC that all adaptations funding must be in the form of loans and grants. An undated internal document, created in the wake of the London summit, now indicates that the ERD envisions the World Bank as the administrator of the secretariat which will control the multi donor trust fund in question. With a government comprised of elected representatives now in place, perhaps it is time that the finance ministry takes the ERD to task over the role that it is playing, in not only compromising Bangladesh’s position at UN negotiations, but also in undermining the idea of a national representative authority to oversee the fund, rather than a multilateral lender with an abysmal record of corruption and ineptitude. Most of all, if the World Bank is indeed reluctant to manage the fund, as bank insiders are claiming, and with the DfID’s reservation of an unelected government no longer valid, there is little reason or rationale on their own parts to be continuing secret negotiations to this end.
   

The MDTF is only one of several funds that the Bangladesh government will have access to in the coming years, in implementing its climate change adaptations programmes. Apart from bilateral and multilateral funding, the country will also have its own budgetary provisions at its disposal as well as UNFCCC funds created for the LDC negotiating group. Under these circumstances it is of utmost importance that the government convenes a national authority — comprising people’s elected representatives, donors, NGOs and civil society — to coordinate these funds and bring some coherence in their utilisation. The idea is to avoid duplication of bureaucracy and programmes, in order for the most efficient use of the billions of dollars in question. The government of Sheikh Hasina deserves plaudits for already laying the groundwork for such a national authority through the creation of two separate cabinet committees that will not only decide on the country’s climate change policy direction, but also oversee the fund flow. This principle should now be extended to include a broader section of the stakeholders in the climate change arena, not the least of them being members of parliament from areas likely to be worst affected by climate change, but also including leading Bangladeshi academics on the issue, as well as the donors and civil society. Such a body could play a tremendous role in ensuring the appropriateness of the country’s climate change policies, and the effectiveness of the funds flowing in to help tackle rising sea levels, an increasing intensity and frequency of floods and cyclones, and a myriad of other debilitating fallouts of global warming.
   

*mahtabhaider@gmail.com

Overhaul of international institutions: Is the G20 willing to deliver?

Bretton Woods Project, February 13, 2009

With bleak economic news dominating the headlines, the IFIs are gaining prominence but also attracting renewed criticism. We cover the political response to the financial crisis, the IMF’s lending programmes (see Update 64), the World Bank’s boost in lending (see Update 64 on Bank lending and IFC lending) and reform of the international architecture (At Issue).

In the wake of a November summit (see Update 63) of the G20 leaders, a grouping of roughly the largest 20 economies in the world, an international work programme of financial reform is taking shape. But the ambition of the discussions will be dependant on both how vocal citizens become and the depth of the economic gloom.

The next G20 leaders’ summit is planned for 2 April in London. It will be preceeded by a specially planned G20 finance ministers meeting in mid-March in Sussex, UK. Britain is the 2009 host country for the G20, which is usually a process only involving finance ministries. The G20 finance ministers’ meeting is normally scheduled for November, but because of the extraordinary circumstances it is expected that several meetings of finance ministers will occur this year.

The meeting in London is increasingly being billed as the “London Summit” rather than a G20 summit, because some rich country governments are worried about the G20 supplanting the G7 as the forum for global economic decision-making.

The G20 working groups tasked with making proposals for financial and economic architecture reform have been announced, covering: accounting regulations and transparency; international cooperation on financial regulation; reforming the IMF; and reforming the World Bank and other multilateral development banks. Each working group is co-chaired by officials from a developing and a developed country. The full composition of the working groups has not been made public. The groups will issue their recommendations to the finance ministers at the March meeting. Inside information indicates that consensus on financial regulation is only likely on narrow changes.

The parallel process initiated by the United Nations General Assembly president Manuel D’Escoto (see Update 63) is also under way. The UN commission, chaired by former World Bank chief economist Joseph Stiglitz, also has four working groups – on regulation, multilateral issues, macro-economic issues and reforming the global financial architecture. It met at the beginning of January and issued its first recommendations. They noted the deficiencies in the actions taken so far by developed countries and the need to learn lessons from countries that have avoided instability. A second meeting is planned in early March in Geneva.

More money for the IMF?

The UN commission pointed out the “large asymmetries in global economic policies” and called it “imperative that developing countries be provided with funds to enable them to undertake … policies, to stimulate their economies, to provide social protection, and to ensure a flow of liquidity to their firms.” It was also careful to demand that the money “be provided without the usual conditionalities, especially those that force these countries to pursue pro-cyclical policies or to adopt the kinds of monetary and regulatory policies which contributed to the current crisis.”

The IMF has already agreed nearly $50 billion in loans but with heavy conditionality (see page 2). That leaves the Fund with only $200 billion in available capital, plus another $100 billion that Japan agreed to lend it. IMF managing director Dominique Strauss-Kahn admitted that the IMF might need an injection of capital: “If in six months from now the crisis has worsened and many other of our members need our help, the demand may be above what we have.” The IMF deputy managing director, John Lipsky, indicated that the IMF wanted to raise its available resources up to $500 billion. The G20 is likely to announce an increase in IMF resources, though it is not yet clear where these will come from.

It’s the power, stupid

Everyone seems to agree – from African finance ministers and the UN financing for development process, to US president Barack Obama – that one element of any reform must be IMF governance.

A coalition of 15 mostly US-based academics wrote to the new US treasury secretary Timothy Geithner at the end of January calling the IMF governance reforms of 2008 (see Update 60) “inadequate particularly in light of the ongoing global economic and financial crisis.” They urged Geithner and Congress to “reopen the package starting in discussions with other governments in advance of the meeting of G20.”

But even broad agreement that global governance is problematic has not led to discussions on international reform being democratic or open. Civil society organisations in several statements and letters have condemned the G20 process for being exclusive and secretive. Biaggio Bossone, a former Italian IMF executive director, noted the legitimacy of the original Bretton Woods agreement. “It is fundamental that world leaders walk the same path that was traced in Bretton Woods precisely not to leave anyone out. They need to renew that same obligation to engage all.”

The British government has different objectives: shoring up support for liberalised economic models. After a call to return trust to the financial markets, a letter from the UK finance minister to other G20 finance ministers states: “Open, innovative financial markets are critical in driving forward economic growth. … Our second objective, therefore, must be to retain and build on the benefits that open financial markets bring to the world economy.”

However the US administration seems more keen on discussing exchange rate policy rather than legitimacy, as the US and China have been trading barbs over the value of the Chinese currency, the yuan. China has been incensed over perceived IMF meddling with the Chinese exchange rate (seeUpdate 57), while the US has been frustrated that the IMF did not do more.

This does not bode well for the proposals from the UN Conference on Trade and Development (UNCTAD). Just before Christmas, UNCTAD issued a policy brief stating: “Multilateral or even global exchange rate arrangements are clearly necessary to achieve and maintain global monetary and financial stability.” The idea to return to globally managed exchange rates is unlikely to find backing in the West where interested parties prefer floating rates; nor in Asia, where governments do not trust the IMF to oversee such arrangements fairly.

Continental Europeans have been singing a different tune altogether, talking about stricter regulation and greater international oversight. At a January conference in Paris hosted by the French government, French president Nicolas Sarkozy and German chancellor Angela Merkel called for a “new capitalism,” with Sarkozy leading calls against “immoral capitalism”.

Merkel reiterated her idea for a UN economic council that would sit in parallel to the UN security council. It would presumably oversee international economic institutions such as the World Bank and IMF. However the German leader did not specify what sort of governance arrangements would be supported for such a council, leading to fear that, like the security council, it will be dominated by a few large rich countries. The UN’s existing body, the 54-seat Economic and Social Council (ECOSOC) with diversified regional representation, was described by Merkel as not viable.

Merkel has now called for a summit of European members of the G20 – including Germany, France, Italy, the European Commission and Turkey – to take place in Berlin at end-February. She also has invited Spain and the Netherlands to participate. This will be an important venue for European countries to consolidate their position in advance of the London summit, especially to develop their strategy to deal with a US administration that is likely to be uninterested in ceding sovereignty over economic issues to an international organisation

The president of the UN general assembly proposes that a fully inclusive UN conference on the financial crisis take place from 26-29 May in New York. He wants it to include plenary meetings of heads of state as well as ministerial working group meetings.

NGOs’ uphill battle

Civil society organisations have been trying to make their voices heard in these debates. The most noticeable intervention has come from the International Trades Union Congress (ITUC), a global labour umbrella organisation. . In January it organised an 85-member international trade union delegation to meet with the Bank and Fund. As a result, “commitments to strengthen social programmes for workers hit by the economic crisis and to increase action on core labour standards were made by World Bank president Robert Zoellick and IMF managing director Dominique Strauss-Kahn,” according to the ITUC.

At the World Social Forum, held in Belem, Brazil at the end of January, there were dozens of workshops and meetings about a response to the financial crisis. The social movements and NGO’s gathered at the event in the end authored a one-page call to action, saying “Let’s put finance in its place!” The statement makes nine specific demands, including a call for a reformed and democratised UN to be put at the heart of any process for reform of the financial system and the implementation of “a global mechanism of state and citizen control of banks and financial institutions.”

In the UK, a coalition of environment, social and development charities is joining with trade unions to launch a mass mobilisation on 28 March under the slogan “Put People First: Jobs, Justice and Climate”. Solidarity actions are being organised in other cities around the world.

John Hilary, director of UK NGO War on Want said: “The governments meeting here in London must realise that this is not just a banking crisis but an indictment of the entire economic model. We’re calling on them to commit to an open and democratic process for rewriting the global financial architecture so that people and the environment are served by finance, and not vice versa.”