Civil Society Background Document on the UN Conference on the World Financial and Economic Crisis and its Impact on Development

We are facing a global systemic financial and economic crisis, which originated in the increasing financialization of the global economy, coupled with deregulation, over-reliance on trade liberalization and the use of financial instruments that created systemic risks and asymmetries. These factors have resulted in a financial industry disconnected from the real productive economy and in a severe slow-down in the real economy, with tremendous human and social costs. Before the financial crisis, the world was already suffering from a food crisis, and facing environmental challenges of historic dimensions. With this Conference, the UN as the most comprehensive intergovernmental forum, has a historic opportunity to start a longer-term inclusive process for a fundamental transformation of the economic and financial system and to make social and gender justice and the fulfillment of human and environmental rights the key objectives of all crisis-related measures. As a first step, global fiscal stimulus measures are crucial, both for industrialized countries, economies in transition, and developing countries, to stimulate their economies in a sustainable manner, and implement counter-cyclical policies, without, however, reverting to the same export-led growth model based on unsustainable over-production and over-consumption patterns. However, equally important are concrete commitments for an intergovernmental time-bound process towards long-term structural reforms to prevent future financial bubbles and economic busts. This UN Conference must be the beginning of a process for systemic change, crisis resolution and economic justice between developed and developing countries and economies in transition.

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UN takes the ball on global economic policy

The UN agreement on the financial crisis takes important steps toward a global consensus on response to the crisis, according to CIDSE, an international alliance of 16 Catholic development agencies working together for global justice. Member nations have already agreed the text of a final declaration of the conference, which ends today in New York. The document includes the recognition that the UN should have a role in ensuring in ensuring that the global economic and financial system should work for developing countries.

“Global economic policy should be like the World Cup, with every nation playing – not a tournament for rich countries and their invited guests. With this agreement, the UN took the ball,” said René Grotenhuis, President of CIDSE and Director of Dutch organization Cordaid. “The US ought to be particularly commended for supporting economic justice – anyone at the Bush or Bill Clinton State Department would have been fired for approving this. Agreement for countries to impose capital controls is a total reversal of Clinton and Bush-era policies. And US support for World Bank and IMF hiring according to geographic and gender diversity moves them part of the way from G8-dominated clubs towards accountability to the world,” said Aldo Caliari, Director of the Rethinking Bretton Woods project at Center of Concern, the US member of CIDSE.

Progress includes:
* Trade: Developing countries earn half their GDP from exports, and trade is the main way the financial crisis is hitting them. The document recognizes many countries will need to change trade and investment rules or impose capital account restrictions, to implement crisis recovery measures.
* Debt: Developing countries face more than $3 trillion in debt maturing this year. The agreement includes temporary standstills on debt payments for countries in crisis, and agreement to go beyond existing ad hoc responses to a structured mechanism for sovereign debt settlements.
* Stimulus: The agreement calls on countries with stimulus spending not to impose rules that hurt third countries.
* Continuing mandate: While some countries opposed follow-up to the conference, the UN will have a continuing working group to implement these measures and an expert group to provide “independent technical expertise and analysis” on the subject of the conference.

“This is slow progress for more than 50 million people are expected to lose their jobs, and 100 million newly hungry in the world. But the UN is asserting influence on the global economy, and that’s good news for the majority of people who aren’t represented at the G8 or the World Bank and IMF they control,” said René Grotenhuis.

Voices on the UN financial summit in New York

* Head of South Centre: Most collateral damage in developing world
The United Nations should be the place that “educates the innocent and the victims” on how to deal with the world economic and financial crisis, Martin Khor, Executive Director of South Centre, said at a press conference in the run-up to the UN conference on the impact of the global crisis on developing countries in New York. He said that, having played no role in causing the crisis, the developing countries had suffered the most “collateral damage”, with losses averaging 6% of gross national income as their economic growth was expected to fall from 8.3% in 2007 to 1.6% in 2009.
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* ITUC: Global crisis needs global coordination
As the United Nations kicks off a major three-day Conference in New York, the International Trade Union Confederation (ITUC) is drawing the attention of world leaders to the severe human costs of the deepening slowdown in the global economy. This is most evident in the jobs crisis, with increasing income inequality, rapid increases in unemployment, and growing hunger and poverty in developing countries. Women are bearing a disproportionate share of the hardships brought on by the global crisis.
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* CIDSE: Global crisis requires global reform
According to CIDSE, an international alliance of Catholic development agencies working together for global justice, the worlds’ poor risk being let down once more as no leaders from developed countries are expected to attend. Their constructive engagement in inclusive fora like the UN is needed for structural changes like a Global Economic Council, to address economic issues the way the Security Council addresses security-related ones, and in keeping promises like the development finance agreements made in Doha.
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Finance Ministers must find funds to secure climate deal

The G8 must commit $2bn to help poor countries adapt to a changing climate Oxfam urged ahead of a meeting of Finance Ministers in Lecce, Italy, on 12 and 13 June. The international agency also called for European Finance Ministers meeting in Luxembourg today to back a proposal from European experts for poor countries to receive €100bn ($142bn) a year to help them reduce emissions. Putting money on the table to fund least developing countries' most urgent adaptation needs would be an important first step by rich countries towards delivering on longstanding promises of assistance. At least $50bn per year is needed to assist poor countries deal with the impact of climate change and at least $100bn to help poor countries reduce their emissions.

In 2001, the Least Developed Countries Fund was set-up, and the poorest countries were invited to prepare National Adaptation Plans of Action to address their most urgent adaptation priorities. These plans need $2bn to implement; however, rich countries have committed less than 10% of the money to date. European Finance Ministers, meeting on 9 June, could also address a crucial issue threatening to undermine hopes of a global climate deal by backing a proposal which contains concrete figures on the level of support poor countries need to tackle their emissions. To date rich countries have not said how much public funding they think should be made available.

Rich countries are responsible for two thirds of green house gas emissions currently in the atmosphere but it is the world's poorest people who are being hit first and hardest by the changing climate. In Africa, changes to rainfall are already affecting food production, and rising temperatures are boosting the spread of disease. Antonio Hill, Senior Policy Advisor for Oxfam International said: "Funding to help poor countries adapt to a changing climate has been promised by G8 leaders - but it has largely failed to materialize. These politicians found the determination and $8tr to save the banks. They must now deliver the immediate financing which is needed to help the most vulnerable developing countries adapt to a changing climate."

Bernard Kouchner suggests a tax on foreign exchange transactions

As French Foreign Minister Bernard Kouchner stressed, development aid is a crucial tool to fight the impact of the recent financial turmoil on developing countries but not enough. According to him, innovative development funding is decisive, especially in the areas of education, health and environment. A pilot group in charge of thinking about solidarity contributions in favour of development was established in 2006 following an initiative from France, Brazil, Spain and Norway. The pilot group is a kind of think-tank and gathers 58 countries to which NGOs and international organisations are associated. France is currently chairing the group which gathered on 28 and 29 May in Paris.

Following a suggestion by Bernard Kouchner, a working group has been created to evaluate the technical and legal feasibility of a tax on foreign exchange transactions. The implementation of this tax could save millions of lives as well as facilitate the funding of global common goods in order to resolve the economic, social and environmental issues created by globalisation. This tax would not really affect the global economy as only 0.005% would be taken from foreign exchange transactions. According to Alain Joyandet, the French Secretary of State for Cooperation, between $30bn and $60bn per year could be raised through such a tax.

France and Belgium have already established a legal framework: France passed a law in December 2001 imposing this tax, but it will come into effect only if it is enforced at the European Union level; Belgium did the same in 2004. Civil society actors, mainly NGOs, are supporting the proposal: According to Jean-Louis Vielajus, president of Coordination SUD, "NGOs have asked the implementation of a tax on foreign exchange transactions for several years. We rejoice with the support of Bernard Kouchner and Alain Joyandet and urge them to bring this question at the European level and within the United Nations."

However, much effort remains to make the proposal a reality. The proposal of Bernard Kouchner has met the opposition of the French Economy Minister, Christine Lagarde, who declared that "nothing is prepared for the moment". Instead, she encouraged governments to implement taxes on airplane tickets (also known as "Chirac Tax") which is currently working. The proposal has also met the opposition of Great Britain and the United States, two of the biggest financial markets of the world.

Adapting to a changing climate: it’s time to talk technology

CIDSE and Caritas Internationalis, the largest networks of Catholic development and relief agencies in the world, say UN climate change talks in Bonn will fail the poor unless they provide the tools to deal with the dire consequences of climate change. They call on governments negotiating a new global climate change agreement not to forget about adaptation in their efforts to strike a deal on technology. In their joint report launched at the UN climate change negotiations taking place in Bonn since last week, Reducing Vulnerability, Enhancing Resilience: The importance of Adaptation Technologies for the Post-2012 Climate Agreement, CIDSE and Caritas Internationalis highlight the need for urgent enhanced action on adaptation technologies, which are key for adapting to climate change, reducing poverty and promoting sustainable development.

A substantial increase in investment and international cooperation on technology is one of the keys to reaching consensus amongst developed and developing nations on a new global agreement. Up until now, however, the negotiations have focused on high technologies for reducing emissions in developed and industrialising countries and technology for adaptation has received little attention.

“The negotiations must ensure a coherent and coordinated approach to technology and adaptation under the new agreement, and dedicate the financing and institutional capacity necessary to support them”, said Sol Oyuela, policy expert from the CIDSE and Caritas networks. “The negotiating text which has come out contains some promising language which can be built on in this direction, but there still is a need for more focus on the adaptation technologies, vital for the future of those most exposed to the effects of climate change,” she added. Sustainable afforestation projects in the Satkhira district of Bangladesh demonstrate how communities in developing countries are successfully implementing adaptation technologies. These projects not only protect riverbanks from erosion in face of increasing floods, the fruit provides additional income for the local community and the trees contribute to mitigation by absorbing CO2.

Please find the report >>> here.