PHA-Exchange> Study urges overhaul of U.N., IMF, World Bank

[Claudio Schuftan]

 - The U.N., World Bank and IMF today operate on badly outdated political
and economic foundations and need to be overhauled before a crisis induced
by globalization forces the changes required.

Prepared by the World Institute for Development Economics
Research of U.N. University, with support from the U.N. and the gov. of
Finland, the study calls for a repeal of the Security Council veto accorded
the five major post-war powers and the addition of other countries as
permanent members of that body.

The U.N. suffers from a "democratic deficit" that was "an integral
part of the original design" but needs to be remedied now. The U.N.'s moral
authority is "seriously undermined because its laws or principles are
enforced selectively when it suits the interests of the rich and the
powerful."
Circumventing the veto granted to the five permanent Security Council
members and enlarging the membership of that body are "imperative" for the
U.N.'s continued credibility.

 "The responsiveness of the United Nations to the globalization issues
of our times has been limited to global meets such as the Earth
Summit or the Social Summit," useful fora for public concern, but
insufficient as solutions to the problems at stake.

The U.N. needs to become more representative, fostering
the participation of global civil society to a greater degree, and
more democratic in its decision-making, involving greater
participation, transparency and accountability.

Reform of the U.N. has stalled as its legitimacy, effectiveness and the
credibility erodes. "The unipolar world has eliminated the competition
between systems."  "As competition has vanished, the urge
for cooperation has diminished."

In addition to Security Council reforms, the study proposes:

1)      Full or partial independent U.N. financing to "loosen the
 political control now exercised by the powerful member-states"
and "ease the pressures of resource constraints of the UN." The financing
issue "is less about money and more about political control," the study
says, calling for "some version of the Tobin tax on international
foreign exchange transactions or stock market transactions, and
some charges on the use of the global commons."
2)   Establishment a Global People's Assembly, modeled on the
European Parliament, to run parallel to the General Assembly but
serve as "the voice of global civil society."
3)    Creation of an Economic Security Council, "essential as a
means of governing globalization. It would ensure consultations on
global economic policies.
4)    Establishment of a high quality Volunteer Peace Force to "de-
politicize intervention by the United Nations" and enable it to
provide a prompt collective security response wherever
humanitarian emergencies arise.

"There is still no system in place to take care of, let alone prevent,
complex humanitarian emergencies. Some new problems are a direct onsequence
of globalization."

IMF and World Bank: "It's time to reform the reformers"

The IMF and World Bank "have been the most ardent advocates of economic
reforms in recent times. It is time to reform the reformers".

"The world has changed since the mid 1940s.  But these institutions'
concerns have become much narrower," "Their orthodoxy has not
resolved the economic problems of borrowing countries. Indeed, the
solution has often turned out to be worse than the problem."

The study argues that the IMF and W B are incapable of
exerting needed management influence on today's international
financial system.
"The essence of the problem is international capital flows without
any international controls. The failure in promoting development,
which is reflected in persistent poverty and growing inequalities, is
another. The crisis of development has, in fact, been accentuated
in the era of globalization.

"These flaws are, in part, attributable to the virtual ideology of these two
 institutions, which do not recognize the importance of public action in
coping with and correcting market failures.

Reform the IMF: "We need to redefine the governance of the IMF.
It needs greater transparency. Its operations are shrouded in secrecy. The
absence of public scrutiny means that there are few checks and balances." We
need a system of disclosure of information and an
independent evaluation of operations. The accountability of the IMF
is limited, at best, to finance ministries and central banks, which,
in turn, have close connections with the also secretive financial community.
"There is now ample evidence that its stabilization programmes lead to
adjustments that contract output and employment."

Redefining the World Bank: The WB "should cease to be a moneylender" and
"transform itself into an institution more concerned with
development."
As with the IMF, greater representation and accountability are
"imperative."  "A very large proportion of the voting rights are vested in a
very small number of industrialized countries,  the principal shareholders
in terms of paid-up capital. But it is developing countries that are the
principal stakeholders sinse their interest payments provide most
of the income of the WB!  "The need to restructure such a voting system is
obvious."

The study calls for "independent evaluation" of WB supported projects as a
way to begin improving accountability to people.

The Bank nees to re-orient its thinking about development: Simple
prescriptions that emphasize more openness and less gov. intervention and
that advocate a rapid integration into the world economy, and a minimalist
state that simply opens space for the market, have not proven to work.

Missing Institutions:  New financial architecture needed to manage global
macroeconomics.

The study calls for new institutional arrangements to cope with the
complexity of macroeconomic management, including inflation
control, restoring full employment, stimulating investment and dealing with
crisis management and crisis prevention. A greater supply
of emergency financing to assist in times of crisis is needed, as well as
orderly debt workout procedures.

The study also calls for an international system of governance for
transnational corporations.   "The economic space of their activities
extends way beyond the geographical space of nation states."  "International
regimes should be concerned with the obligations and restrictive business
practices of these corporations, and effective anti-trust laws."

Cross-border movements of people: Globalization is creating demand for
greater labour mobility across borders. "There is a potential conflict
between the laws of nations that restrict the movement of people across
borders and the economics of globalization that induces the movement of
people across borders."
"The almost complete absence of international institutions, or rules,
in this sphere is a cause for concern (especially to protect the rights of
migrant workers and protect illegal migrants from exploitation and abuse).

International 'public goods' and 'public bads':
Globalization has reduced the power of national governments in
economics and politics "without a corresponding increase in
effective international cooperation or supra-national government
which could regulate this market driven process,"

"In a world where the pursuit of self-interest by nations means
uncoordinated action or non-cooperative behaviour, sub-optimal
solutions, which leave everybody worse off, are a likely outcome."

Without effective international oversight, international problems (such as
international crime or trade in drugs, guns, people and organs) will
increase while international public goods (world peace, sustainable
development) will be undermined.  Needed here are institutional mechanisms
for cooperation between nation states.

It is essential to create institutional mechanisms that give poor
countries and their people a voice in the process of global
governance.  "Even if they cannot shape decisions, they have a right to be
heard."

Several chapters of the study "New Roles and Functions for the
U.N. and the Bretton Woods Institutions,"can be accessed online
at http://www.wider.unu.edu/publications (WP188.pdf; wp189.pdf;
wp190.pdf; wp194.pdf; wp195.pdf)