Overhauling Global Finance

• Published in: Foreign Policy in Focus p. N_A
• Main Author: Wilks, Alex
• Format: Report
• Language: English
• Published: Washington Inter-Hemispheric Resource Center Press 28.05.2009
• Subjects: Conferences; Debates; Developing countries; Economic crisis; Financial institutions; Government; LDCs; Tribunals & commissions; United States > US
• ISSN: 1524-1939

This commission includes 18 researchers, politicians, former officials, and activists from all the world's regions. Their mandate is to recommend "needed institutional reforms required to ensure sustained global economic progress and stability which will be of benefit to all countries, developed and less developed." The body is popularly known as the "Stiglitz Commission" because it's led by Nobel laureate and former World Bank chief economist Joseph Stiglitz. But it's most notable for the participation of high-level experts from developing countries. Developing countries need access to extra sources of funding to plug the hole in their finances which may amount to $200 billion this year for the world's 40 poorest countries. These countries are facing shocks from reduced investment, remittances and export earnings. The commission points out that countries such as China, which have money available, are reluctant to channel funding through existing multilateral organizations such as the World Bank because they don't have enough say on the Bank's board, the institution's decision-making body that's currently dominated by the United States, Europe, and Japan. This is the principle of "no taxation without representation," well-established at the local and national level in most countries, but still lacking at the international level. The commission concludes that the only way forward is to create a new "facility" to transfer money from richer to poorer countries. But it unfortunately recommends that this new facility might be housed in an existing institution, administered by the existing institution's staff, albeit under a new kind of governance arrangement. It's true that - in the unlikely event that significant sums of money are mobilized this year - the most pragmatic way to proceed is the channel them through the World Bank and the International Monetary Fund (IMF). However, there is a clear danger that giving them more money now will consolidate their power. This is worrying, unless accompanied by a transformation of the Bank and Fund's governance and economic policy approach.