UN Development Report
January-February 1999

UN Secretary-General Kofi Annan's targeting of international financial instability as a central concern in his end-of-the-year review, and his promise of new initiatives to link the United Nations with business, are among indications that the world body is responding to globalization and its adverse consequences by stepping up participation in international economic dialogue.

How effective the United Nations role will be depends, to a large extent, on resolution of North-South differences. Developing countries have long promoted a stronger voice for the UN in world economic decision-making, while the industrialized world traditionally prefers that policy matters are handled by financial institutions such as the World Bank and the International Monetary Fund (IMF), which the rich countries dominate.

"It might be tempting to leave the economic and social issues to others", Kofi Annan said in his 14 December year-end review, referring to the Organization's heavy work load in areas of political conflict. But along with the perennial UN concern for international peace and security, he said, there is now "the challenge of economic and social crisis, which really means the challenge of globalization and global governance.

"Unless we tackle the underlying distortions and imbalances in the global economy, unless we start the kind of global governance that is needed, we must expect more [political and military] conflicts and even more intractable ones", he added. "Economic and political security are closely interconnected."

The Secretary-General cited the UN's "convening power" -- constituted by its unique role as a universal forum for national governments and its recently strengthened ties with the IMF and the World Bank -- as the means for facilitating dialogue among global "stakeholders".

He gave as examples the discussion of international financial architecture at a high-level meeting of the General Assembly in September 1998, and last April's meeting of finance ministers who had been attending World Bank/IMF board meetings in Washington, D.C., with the UN Economic and Social Council in New York.

The trend toward high-level economic consultations is likely to continue into the next century. A return invitation for finance ministers associated with the Bretton Woods institutions to meet with ECOSOC this year was issued in a resolution on global finances approved by the General Assembly in December 1998.

Also in progress are arrangements for a global UN meeting in the year 2000 on "finance for development" (see Development Update 25). Although some proponents from developing countries have referred hopefully to this meeting as a chance for "Bretton Woods II", i.e., to re-draw the architecture of world financial institutions, industrialized countries favour a narrower discussion of national responsibilities to invest in sustainable development projects and to promote democracy and human rights. The meeting format -- it may be a global conference or a General Assembly session -- and agenda will be determined by an open-ended working group. Assembly President Luigi Opertti has named Austria and India as co-chairs of the group.

In a late-1998 interview with Development Update, Iranian Ambassador Bagher Asadi, the chairman of the General Assembly's Second Committee (dealing with economic affairs) asserted that "the United Nations has a central role to play at the macroeconomic level". Technical operations concerning global finances should be left to bodies such as the IMF, Ambassador Asadi conceded. But these functions, he said, should be informed, if not guided, by political discussion within the United Nations, which has a more universal membership and a broader mandate than the IMF or the World Bank.

A contrary position was voiced in the General Assembly in December by United States Ambassador Betty King. She said that her government did not believe that "international macroeconomic policy-making, globalization and debt relief were proper subjects for consideration in this forum".

It is entirely possible that divisions between the Group of 77 developing countries and the Group of 7 developed countries will produce a continuing stand off: the G-77 increasingly using ECOSOC and the General Assembly as economic forums, while the G-7, with decisive power in global economic affairs, politely ignores them.

But global financial turmoil, among other factors, appears to be opening up North-South dialogue on economic matters. After the breakdown of financial rescue packages in South East Asia in 1997, the Bretton Woods institutions, and the G-7 countries that dominate their boards, realized the need to take greater account of social conditions and the political viewpoints of developing countries (see Development Update 25). And the United Nations provides the most direct access to such input.

Significantly, the December General Assembly resolution on international financial crisis was sponsored by Indonesia on behalf of the G-77, yet its recommendations are strikingly similar to reforms that are being proposed among the industrialized countries themselves. (see article on global financial reform). Viewpoints from diverse quarters in 1998 gave further indications of the possibility of a new consensus on a strengthened UN economic role.

At a December symposium sponsored by the UN Development Programme, free market advocate Jeffrey Sachs, known for his "shock therapy" approach to dismantling state-run economies, reiterated his view that the IMF is too powerful, and too often wrong in its advice. More surprisingly, to many, he advised a countervailing role for the United Nations in economic affairs.

The "failure of the Washington consensus" (referring to policies favouring free markets and fiscal stringency, championed over the last few decades especially by the United States, the IMF and the World Bank) was pronounced by World Bank senior economic advisor Joseph Stiglitz in an October lecture delivered to the UN Conference on Trade and Development, in Geneva. Mr. Stiglitz called for a "new paradigm" that favours full consideration of social well-being and technological capacities along with fiscal considerations, as well as greater "ownership" of development strategies by developing countries themselves . It is a policy mix virtually tailored to UN perspectives.

And in May, the International Chamber of Commerce urged leaders of the industrialized world meeting at the Group of 8 summit in Birmingham, United Kingdom, to do more to support the United Nations, arguing that the Organization requires "sufficient resources and more authority to handle effectively the complex and often interrelated global problems that are emerging as the new millennium approaches".