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Global financial crisis - An Overview
Introduction
The impact of the financial crisis is affecting the whole world and is threatening long term objectives like the achievement of the Millennium Development Goals (MDGs). Not only the developed countries, but increasingly emerging economies and least developed countries are suffering the effects of this global financial crisis. Financial markets have collapsed, lending and investments opportunities are declining and exports are falling as demand decreases. In addition, developing countries, facing already higher food and energy prices, lack the means and resources to protect their financial institutions or banks from bankruptcy. The results are falling stock markets, rising interest rates, and less government resources for socio-economic investments that benefit the poor.
UN Conference on the World Financial and Economic Crisis and its Impact on Development (24-26 June 2009, New York)
► The UN Conference on the World Financial and Economic Crisis and its Impact on Development (24-26 June 2009, New York) brought together world leaders to assess the worst global economic downturn since the Great Depression and identify emergency and long-term responses to soften its many impacts. The Conference saw the attendance of 60 Member States at the cabinet level and the participation of more than 170 Member States during the plenary sessions. Over 200 representatives of civil society organizations from around the globe also attended and participated in the Conference.
The mandate for the United Nations Conference on the World Financial and Economic Crisis and its Impact on Development was decided at the International Conference on Financing for Development in Doha in December 2008 (paragraph 79 of the Doha Declaration A/CONF.212/L.1/Rev.1)
After five days of debate, the United Nations Conference on the world financial crisis concluded on Tuesday, 30 July, with General Assembly President Miguel d’Escoto Brockmann urging delegates to be inspired by the work they had done on the outcome document “and sustain the same sense of urgency and commitment as we translate this bold new framework into effective action”. On 26 June, delegates adopted a wide-ranging Outcome Document that contained recommendations to fight the global recession and follow-up processes that may open the doors to promoting deeper reforms of the global financial and economic architecture. The nearly 60-paragraph text , which will be forwarded to the Assembly for adoption during its current session, expresses world leaders’ belief that the crisis, “which began in the world’s major financial centres, has spread throughout the global economy [and is] negatively affecting all countries, particularly developing countries, threatening the livelihoods [and] development opportunities of millions of people.”
To access further documents and background papers on the conference please click here.
Also see:
South Center Bulletin: Reflections and Foresights, dated 7 July 2009, which is a special edition focusing on the outcome of the UN Conference on the Financial Crisis
► Civil society participation at UN conference:
Over 200 representatives of civil society attended and participated in the UN Conference on the World Financial and Economic Crisis and its Impact on Development. Representatives participated in round table discussions, side events and observed the proceedings. They also organized a Civil Society Forum on the eve of the Conference after which they released a set of ‘key recommendations.’
In a statement on 26 June, the Global Social Economy Group (GSEG), representing more than 200 trade unions, social movements, and non-governmental organizations evaluated the result of the Conference and expressed ‘serious disappointment’ the official outcome document.
The United Nations Non-Governmental Liaison Service also organized a press conference with Gemma Adaba, of the International Trade Union Confederation (ITUC);John Foster of the North-South Institute; Magda Lanuza, of the Women’s Working Group on Financing for Development; and Vitalice Meja, of the African Forum and Network on Debt and Development.To access the DPI Summary of Press Conference click here. For the Webcast of the conference please click here.
See also:
Women’s Working Group Statement on the Outcome
Center of Concern: Conference outcome endorses UN role in global financial reform
Bretton Woods Project: Economic crisis: rich countries block reform at UN summit
Our World is Not for Sale: Rich countries block UN treatment of causes of the global economic crisis
Eurodad: The UN conference on the financial crisis and development: outcomes and follow-up prospects
An archive of civil society statements and activities around the Conference can also be found at: http://tendays.socialwatch.org/ and www.ffdngo.org
Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System and NGO Consultation
In the wake of the global financial and economic crisis, the President of the UN General Assembly, Miguel d’Escoto Brockmann, set up a commission of experts chaired by Nobel Prize Laureate Joseph Stiglitz, whose mandate is to reflect on the causes of the crisis, assess its impacts on all countries and suggest adequate responses to avoid its recurrence and restore global economic stability. The “Stiglitz Commission” (formally entitled the “Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System”) is composed of leading economic specialists from developed and developing countries.
On 20 March 2009, the Commission released an interim report. It is intended to serve as an input to the United Nations Conference at the highest level on the world financial and economic crisis and its impacts on development, called for in the final document adopted at the 2008 Doha Conference on Financing for Development. This Conference will be organized under the auspices of the President of the UN General Assembly.
In order to discuss the report in the General Assembly and to ’kick off’ the process leading to the UN Conference, the GA President convened an Interactive Thematic Debate of the General Assembly on the World Financial and Economic Crisis and its Impact on Development from 25-27 March 2009. For more information on this meeting, click here
For more information on the Commission, including its membership and background documents, please click here.
Also see Interactive Panel on the Global Financial Crisis
NGO consultation
The Office of the President of the General Assembly asked NGLS to consult with civil society groups across the globe and compile their views into a single report for the Commission as an official input to their deliberations. To accomplish this NGLS set up a three-week online consultation (26 January-13 February) that sought feedback on the four working themes of the Commission (financial regulation; multilateral issues; macroeconomic issues and addressing the crisis; and reforming the global financial architecture).
For further information on the methodology of this consultation please click here.
To read the final report (pdf) of the Civil Society Consultation on the Work of the President of the UN General Assembly’s Commission of Experts on Reforms of the International Monetary and Financial System please click here.
Doha Review Conference
From 29 November to 2 December 2008, the Follow-up International Conference on Financing for Development took place in Doha, Qatar. The primary purpose of this Conference was to measure progress in the implementation of the Monterrey Consensus. The Monterrey Consensus - adopted in 2002 by UN Member States - covers several agreements on Financing for Development, including the mobilization of domestic and international financial resources, international trade, official development assistance (ODA), external debts and systematic issues. The Doha Conference came after a year of preparatory meetings and negotiations on the outcome document. Member States and other stakeholders discussed progress of implementation of the various issues mentioned above as well as barriers for further progress. The outcome was the Doha Declaration on Financing for Development.
As the recent global financial crisis affects all nations and in particular developing countries; threatens previous development achievements; and demands a new global financial architecture, it had an impact on the discussions held in Doha. One of the most notable aspects of the Doha Declaration is its call on UN Member States to determine the modalities of a UN Conference at the highest level to discuss the impacts of the global financial crisis on development by March 2009.
The Doha Review Conference was preceded by a Civil Society Forum (26-27 November) and a Business Sector Forum (28 November). The Civil Society Declaration can be accessed here.
For an overview of statements and evaluations made by civil society organizations and other actors regarding the outcomes of the Follow-up International Conference on Financing for Development, visit NGLS’ special webpage.
In the run-up to the Doha Conference FFDO/DESA and NGLS launched ’The Road to Doha’, a monthly newsletter on the most recent developments and events related to the Doha conference. Issues include contributions from members of civil society as well as government and UN officials. To access the issues or to receive more background information on Financing for Development (FfD) in general or the Road to Doha in particular, click here.
Related Intergovernmental Events
On 2 April 2009 the leaders of the worlds twenty leading economies met in London at ’The London G-20 Summit’. This meeting brought together leaders of the Group of 20 , the UN Secretary-General, regional leaders and representatives of the Bretton Woods Institutions, in an attempt to formulate an integrated approach, and coordinated action for reviving the global economy. A series of meetings of Finance Ministers and central Bank Governors took place in preparation of the London Summit.
At the conclusion of the Summit, the leaders released a ’communique’ which laid out their points of agreement. In the communique, members of the G-20 announced a commitment of US$1.1 trillion to aid the global economy. They also pledged increased support for regulation of the financial industry, control of illegal tax havens and fairness in compensation of financial executives.
Resources pledged at G-20 Summit:
Increased resources for the International Monetary Fund (IMF): $500 billion
New Special Drawing Rights allocation, shared among the 185 IMF members: $250 billion
Increased lending by multilateral development banks: $100 billion
Increased support for trade finance: $250 billion
Additional lending to poorest countries, financed by IMF gold sales: $6 billion
TOTAL: $1.1 trillion
Other Commitments
To establish the Financial Stability Board (replacing the Financial Stability Forum), whose purpose will be to assess weaknesses in the global financial system and oversee action to correct them.
To ensure regul;ators have necessary access to financial information
To require that hedge funds be registered and regularly disclose their financial information, including leverage, to national regulators.
To develop means to control the use of illegal tax havens, in part by increasing disclosure requirements for taxpayers.
To support greater transparency in the reporting of financial executives’ compensation, and ensure that boards of directors play a greater role in the setting of executives’ pay.
To increase oversight of credit ratings agencies.
For more information on the Summit please click here.
The stage for the London Summit was set in November of last year, when the then US President George W. Bush convened the leaders of a group of 20 countries, the UN Secretary General, and key players from international financial institutions such as the World Bank, the Financial Stability Forum (FSF), and the IMF, for a Global Summit in Washington DC. The aim of the summit was to achieve international cooperation in dealing with the financial crisis, and strengthening the global economy through reform of the financial system.
To access the Washington Declaration- the outcome statement of the meeting - please click here.
To access the Action Plan formulated at Washington please click here.
Springs Meeting of the World Bank and IMF
The World Bank and the International Monetary Fund held their annual joint ’Spring Meetings’ from 25-26 April, 2009 in Washington, DC.
To read the joint communique - the outcome of the meeting - can be read here
Economic and Social Council (ECOSOC) Annual Special High-level Meeting with the Bretton Woods institutions (BWIs), the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD)
“Coherence, coordination and cooperation in the context of the implementation of the Monterrey Consensus and the Doha Declaration on Financing for Development” was the theme of the annual Special High-level Meeting of the Economic and Social Council (ECOSOC) with the Bretton Woods institutions (BWIs), the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD), held on 27 April 2009.
United Nations Secretary-General Ban Ki-moon, at the opening of the meeting, urged reform of the world economic system, stressing that taking concrete steps towards that goal was a matter of life and death for countless people living in poverty and facing even greater hardship in today’s tumultuous times.
For further documentation, and statements from the conference please click here.
To read a summary by the President of the ECOSOC of the special high level meeting please click here.
UNCTAD Symposium on Global Economic Crisis and Development - the Way Forward, 18-19 May 2009, Geneva
UNCTAD, in cooperation with NGLS, organized a public symposium on ‘The Global Economic Crisis and Development - the Way Forward’ on 18-19 May 2009, in Geneva.
Among the issues and proposals discussed in the run-up to the UN Conference were: the global jobs crisis (and the proposal for a global jobs pact); specific problems for LDCs in the crisis; problems with trade/investment agreements in effective crisis response; financing recovery in developing countries (including problems with conditionality); and global financial architecture reform, including the idea of a new global reserve system and UNCTAD’s proposal to stave off currency speculation .
To access the provisional program please click here.
Also read:
January 2009 NGLS interview with UNCTAD Chief Macroeconomist Heiner Flassbeck on this topic.
The financial crisis and the MDGs
On 24 October 2008 Secretary-General Ban Ki-moon expressed his concerns and held a session with five eminent economists in New York to discuss the economic situation and the challenges for the achievement of the MDGs. These economists were Nancy Birdsall, of the Center for Global Development, Dani Rodrik and Kenneth Rogoff of Harvard University, and Jeffrey Sachs and Joseph Stiglitz of Columbia University. During this session, it was agreed upon that a continuing commitment towards the MDGs is essential and that it is unacceptable that the poor would bear the costs of a crisis that is outside of their control.
On the same day, the Executives Heads of UN Specialized Agencies Funds and Programmes, the World Bank and the International Monetary Fund (IMF) met to assess the ongoing crisis and to express the UN’s full commitment to support the international community in its fight against the negative repercussions of the global crisis. They stressed that global norms should be respected and that the poor and marginalised should not become the casualties of this crisis. "We must ensure that norms and agreements in the economic, social, environmental, labour, and human rights area are fully respected and are at the heart of a new global solidarity that is needed for us to weather this storm together while protecting those among us that need help the most." The Chief Executives Board(CEB) also called for broader inclusiveness through the UN system and advocates the full engagement of all member states at the Doha Conference on financing for development.
On 4 November, during a lunch organized by the Permanent Mission of San Marino on "How the Financial Crisis is Affecting Small and Medium States,” the SG stressed that now is the time to respond. He called for better compensatory financing mechanisms, better social safety nets, stand-by lines for credit and an adequate flow of financing for development. He also referred to the CEB response and emphasized the need for a new multilateralism that is more inclusive and effective. In addition, he stressed that the United Nations offers the framework to facilitate and lead this multilateral process. To read this statement, please click here.
Read also:
World Bank’s background paper Global Financial Crisis: Responding Today, Securing Tomorrow and news release on the implications of the financial crisis for developing countries.
The statement of the UN Independent Expert on the question of human rights and extreme poverty, Magdalena Sepúlveda, for the commemoration of the International Day for the Eradication of Poverty on 17 October 2008.
WorldNews’ news release.
See also The Guardian’s Editorial from 10/29/2008.
GCAP Virtual Conferenceon "The Financial Crisis and Microfinance: Experience, Insights, and Implications" (18-20 November 2008). Click here for further information.
Civil Society statement on the proposed “Global Summit” to reform the international financial system
Bretton Woods II The crisis urges the world to rethink and rebuild its international financial architecture, including its institutions and its governance. The Bretton Woods Project, an independent initiative by a group of British non-governmental organizations (NGOs), supports earlier calls by the UN and some leading European countries for a so-called Bretton Woods II - a global summit for financial institutional reforms. It has therefore launched a webpage to strengthen civil society organisations in their response to this potential summit.
UK seminar: A coherent civil society response to the financial crisis On 28 October 2008 representatives of NGOs, development organizations, labour unions, think tanks, academia and the media came together in London to discuss how to take forward demands for a fundamental redesign of the international financial system. At the seminar, researchers held presentations on the causes and consequences of the financial crisis. In addition, a statement on the global summit was presented, signed by more than 630 civil society organizations around the world demanding: "a major international conference convened by the UN to review the international financial and monetary architecture.”
To avoid that only the G-20 countries have a say in the development and structuring of the new financial architecture, civil society movements have launched a global sign-on letter. With this letter they ask for a participatory and transparent process to form a new financial architecture. All governments as well as civil society organisations should be involved and not only the countries that belong to the G-20. The letter takes note and calls for string outcomes at the Doha Review Conference.
Read also Aldo Caliari’s recently released article for Eurodad-"Institutional arrangements to deal with sovereign debt: did the Doha FFD Review make any progress?"
Other NGOs, among others Care International, Amnesty International, Oxfam International, World Vision International, PLAN international and Greenpeace have expressed their concerns on the financial crisis in respect to human rights violations. In a press release they argue that the financial crisis diminishes poor peoples’ access to social protection and services, affects their right to housing, health and education, and creates social tensions, violence and instability. They also stress that the financial crisis should not be an excuse for rich countries to cut aid and trade budgets. It should rather lead to sustained attention, international cooperation and political will to pick up the challenges of the crisis.
Viewpoints of UN Specialized Agencies and intergovernmental bodies
UNCTAD
In March 2009, UNCTAD released a report on ‘The global economic crisis: systemic failures and multilateral remedies’. This report examines some of the areas thatUNCTAD considers to be the core areas to be tackled immediately by international economic policy-makers because they can only be addressed through recognition of their multilateral dimensions. The report can be downloaded at: http://www.unctad.org/Templates/webflyer.asp?docid=11200&intItemID=1397&lang=1&mode=downloads
With world markets absorbing the first waves of the continuing financial crisis, attention is shifting to ways to collectively manage the unwinding of global imbalances and prevent systemic turmoil. UNCTAD has released the following Policy Briefs:
’Rebuilding Financial Multilateralism’ that argues that global cooperation and global regulation are imperative in both trade and finance, and that the United Nations is the most credible international organization to spearhead the design, discussion and launching of such efforts. It can be accessed here.
“Will we never learn?” argues that multilateral coordination is the only viable solution to save the world economy from a synchronized downturn. It can be accessed here.
“Keeping ODA afloat: no stone unturned” draws a correlation between the financial crisis and shrinking ODA. As a possible solution UNCTAD in this policy brief recommends safe, ODA-specific endowments funded by the interest on the assets.To access the policy brief please click here.
ILO
The Director-General of the ILO has stated that the financial crisis could cost as many as 20 million jobs and offered four actions to help stabilize the ’real economy’. You can access the full statement here. See also his speech during the October IMF/World Bank meeting.
Read also the Press Release for ILO’s recently published Global Employment Trends Report 2009. This report predicts a dramatic rise in the numbers of people joining the ranks of the unemployed, working poor and those in vulnerable employment, as a consequence of the global economic crisis. The report lists ILO recommended policy measures (already being applied by many governments) to minimize adverse social impact of globalization in times of crisis. To access the pdf version of the Global Employment Trends Report 2009 please click here.
Read also ILO’s recently published study “The Financial and Economic Crisis: A Decent Work Response” that shows demographic projections suggesting that nearly 90 million net new jobs would be needed over 2009-10 to absorb new entrants in the labour market and avoid a prolonged jobs gap.
UN-DESA
UN-DESA Policy Brief No. 13: The Trillion Dollar Plan, released on March 2009, calls on an urgent global responses to redress the asymmetry in stimulus provided in the wake of the financial crisis, between developed and developing nations. The Policy Brief suggests that this would require providing sufficient financial resources to developing countries to engage in counter-cyclical measures. , through the mobilization of additional resources for compensatory financing through issuance of special drawing rights (SDRs), unused special borrowing facilities of the IMF and through the mobilization of reserves and resources accumulated in sovereign wealth funds from surplus countries.
UN-DESA Policy Brief No. 11 was released on 30 January on Massive, globally coordinated fiscal stimulus is needed: going from the drawing board to swift action. The brief analyses initial national policy responses to the financial crisis and stresses the importance of a coordinated global fiscal stimulus. The fact that even such coordinated action is not risk-free points to the need for more fundamental reforms of the international financial architecture, including by a move away from the US dollar as the major global reserve currency
UN-DESA Policy Brief No.8 called "Don’t forget the food crisis: New policy directions needed," shows its concern that insufficient attention is being paid to the food crisis as a result of the global financial crisis. And that while "between 109 and 126 million people may have fallen below the $1 per day poverty line since 2006 due to the increase in food prices," the brief notes. The key challenge identified by UN-DESA is to rebuild a financial architecture that limits the negative effects of the crises and that ensures food security by securing sufficient resources for agricultural and rural development.
Also on the food crisis, see:
the press release on the 24th meeting of the Sixty-third General Assembly Second Committee (Economic and Financial), which addressed agricultural productivity and food security.
FAO’s press release from 15/10/2008 - Financial crash could deepen food crisis.
UNCTAD’s press release from 18/09/2008 - Food and financial crisis debated by NGOs and private sector.
Also read:
World Economic Situation and Prospects(WESP)2009. An annual publication, which in this issue analyzes the evolution, and fundamental factors that lead to the global financial crisis during 2008.The report reviews policy actions taken worldwide so far, and recommends more forceful fiscal policy stimuli in an internationally concerted manner in order to prevent the world economy from falling into a much deeper and more prolonged recession.
UN-HABITAT
At the launch of the "State of the World’s Cities 2008/2009" report on 23 October, Anna Tibaijuka, Executive Director of the United Nations Human Settlements Programme (UN-HABITAT) warned that the global financial crisis is also a "housing finance crisis" for the urban poor. Click here to read the press release.
In relation to the housing finance crisis, read also the statement of the Special Rapporteur on adequate housing, Raquel Rolnik and the press release on the 19th and 20th meeting of the Sixty-third General Assembly Second Committee (Economic and Financial), during which the Committee decided to take up human settlements in the Sustainable Development Debate.
WHO
On January 19th, 2009 the WHO released “The Financial Crisis and Global Health Report of a High-Level Consultation”. To read the report click here.
South Centre
The Intergovernmental Policy Think Tank of Developing Countries, South Centre, also calls for revamping the global financial architecture and proposes six lines of action. Read the statementby the Board Members of the South Centre .
Other publications on the global financial crisis
The Overseas Development Institute (ODI) launched a Background Note on The Global Financial Crisis and Developing Countries, written by Dirk Willem Te Velde.
The morning after the night before: the impact of the financial crisis on the developing world - Christian Aid, November 2008
"The Doha Conference - Missed Opportunities at a Decisive Moment"- Social Watch,23 January, 2009.
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