THE UN has called for fundamental reform of the global financial system as a part of a new deal that can “lift all boats” in rich and poor countries alike.
Supachai Panitchpakdi, secretary general of the UN conference on trade and development (UNCTAD), said in a report published on Tuesday, that the idea of a “global new deal” alludes to the measures taken in response to the Great Depression in the 1930s. In the US, public investments in energy, agriculture and social infrastructure, along with strong regulation of financial and labour markets, and with expansionary economic policy laid the foundations for a return to full employment.
The report, Development-led globalisation: Towards sustainable and inclusive development paths, sets out the theme for the UNCTAD XIII conference in Doha, Qatar, in April, the first major UN ministerial conference on trade and development since the fallout from the economic crisis.
The first priority under the global new deal, said Supachai, is “taming finance” amid alarming signs of a reversion to business as usual.
“Financial sectors have already returned to many of the old practices, even as public finances deteriorate and the recovery stalls,” he said. “Austerity measures are back on the agenda and resistance to financial regulation has begun in earnest.”
In terms of financial reform, Supachai calls for an urgent alignment and stabilisation of exchange rates, particularly among the G3 currencies — dollar, euro and yen.
“This will likely involve moving away from a dollar-based payments system, stronger surveillance of the macroeconomic policies of reserve currency countries, the promotion of capital controls, and the possible use of exchange-rate target zones,” said the UNCTAD secretary-general.
The UNCTAD has strongly opposed policies advocated in the past by the International Monetary Fund and the World Bank in favour of unregulated financial markets. In the 1990s, UNCTAD warned of the emerging financial crisis in Mexico, flagged the systemic risk from derivatives markets and cautioned against rapid financial liberalisation in east Asia.
In other proposed reforms, Supachai called for a more balanced approach to sovereign debt restructuring. — The Guardian, London
