UNA-Canada Research Papers> Agendas for Change Papers

The United Nations and the World Economy: Fixing the System

by Roy Culpeper, President of the North-South Institute
May 1997

The opinions expressed herein are those of the author and not necessary of the United Nations Association in Canada.

Introduction

With the appointment of Kofi Annan as UN Secretary-General, reform and renewal of the United Nations are once again at the top of the international community’s agenda. The purpose of this paper is to survey key issues emerging from recent reports on UN reform, including recommendations from the Halifax and Lyon G-7 Summits on the reform of multilateral institutions. The focus of the paper is on the international economy, with a view to facilitating sustainable growth and development throughout the world -- and particularly in the poorer countries -- at a time both when resources for development are becoming scarcer, and when ideas about both the means and ends of development are changing. The paper suggests a more acitve policy-making forum, at the Ministerial level, to replace the present Economic and Social Council (ECOSOC) at the UN, and to assume the functions of the present Interim and Development Committees at the Bretton Woods Institutions.

The paper is organized in three sections. The first addresses what is wrong with the present international institutional framework. The discussion recognizes that there are important disagreements about the nature of the systemic problem, and that these disagreements underlie differences concerning the nature of the appropriate solutions. The second section presents a selective summary of recent reform proposals, concentrating on those that make the most sense in the light of this analysis. The paper also suggests some additional ideas. A brief final section presents some broad conclusions and recommendations for further analysis.

1. What’s wrong with the system?

When one considers the "systemic" role of the UN in social and economic development, two distinct sets of problems are immediately apparent. First, the UN has little or no role in exercising governance, or even oversight, of the global economy viewed as a whole. This is true even if the Bretton Woods organizations (the World Bank and the International Monetary Fund) are included in the definition of the UN, as they should be, since they have been "specialized agencies" of the UN since 1947.

Second, the UN comprises a host of development-oriented agencies, programs and activities, but because these are often poorly co-ordinated, their total effect is at times incoherent. At the very least, it would seem possible to increase the effectiveness of their joint efforts. This observation is even truer if the Bretton Woods organizations and the regional development banks (which are not formally part of the UN system) are factored into the picture.

Of these two sets of problems, the first is more controversial since the notion that the UN should have a key role in overseeing international economic policy does not command a consensus among the critics of the UN. On the other hand, there is a more universally shared perspective that multilateral development operations lack coherence and coordination. It is important to be clear about this distinction since support for any prescriptive proposals to "fix the system" will depend on whether perceptions of what is wrong are widely shared.

The emphasis in this paper will be on fixing the system, in the sense of seeking to resolve the problem of global policy coordination, rather than of operational coordinationsince some progress has been achieved on that front. Even though operational coordination is extremely important, it is actually a "second-order" problem compared to the ("first-order") problem of policy coordination. It is difficult, in other words, to conceive of operational coordination between multilateral agencies in the absence of an agreed-upon, coherent, and consistent multilateral policy framework. Operational coordination is likely to work much better in practice once such a policy framework is in place.

1.1 The Problem of Systemic Oversight and Global Economic Cooperation

The United Nations Charter and multilateral discussions early in the life of the UN clearly demonstrated a belief by the founding members that the UN has a legitimate role in "global governance" -- that is, on worldwide full-employment policies, the prevention of economic instability, urgent problems of economic reconstruction, and economic development and growth. The Economic and Social Council (ECOSOC), one of the six principal organs of the UN, was given particular responsibilities in these spheres¹. In this paper, the term "global economic cooperation" refers to such systemic responsibilities.

From the early 1960s, however, with regard to global economic issues, the Western industrial countries looked increasingly toward the Bretton Woods institutions and away from the UN². Their preference for the IMF and World Bank reflected the fact that weighted voting structures gave (and continue to give) a decisive influence to the industrial countries in those organizations, compared to the UN in which they were a rapidly diminishing minority. For their part, however, the Bretton Woods organizations have never embraced (nor have the industrial powers pressed upon them) the role of international economic policy coordination or global economic cooperation. Rather, their modus operandi has been more akin to economic crisis management at the country or regional level, as during the debt problems of the 1980s and the Mexican peso crisis of 1994-95.

Disagreement between the Western industrial powers and the rest of the world on whether the UN should play any role in global governance took root during the Cold War. East-West ideological differences at the UN were further amplified by growing North-South tensions during the 1970s, as for example in the demands of developing countries for a "new international economic order." Such demands were effectively stalemated by the recalcitrance of leaders such as President Reagan and Prime Minister Thatcher, and North-South discussions ground to a halt after the Cancun Summit in 1981.

A decade later, with the Cold War retreating into history, the questions of global governance and an enhanced role for a renewed UN reappeared on the agenda of the 1992 Earth Summit in Rio de Janeiro. The UN Conference on Environment and Development did give birth to a "Sustainable Development Commission" to oversee the implementation of Agenda 21 (the program of action emerging from Rio). But that body is best viewed as an interim, ad hoc mechanism, which, in the absence of a more powerful and influential global body, is unlikely to have the clout to implement much of Agenda 21’s far-reaching program of action³.

1.2 The Rationale for a New System

There are compelling reasons why the world community needs a new, competent international authority to oversee and manage global economic cooperation in the late 1990s. Such an authority, needed since the breakdown of the Bretton Woods exchange-rate regime and the oil price and other shocks in the 1970s, intensified with the debt crisis of the 1980s. The vulnerability of the international financial system to panics and capital surges has been demonstrated most recently this decade in the Mexican peso crisis and its aftermath. Despite these destabilizing episodes, global capital flows and markets in financial instruments continue to grow in volume and complexity. It is altogether probable that, even as global markets continue to be integrated, the world economic system will become increasingly volatile and subject to destabilizing shocks.

In the meantime, the world’s leading transnational corporations are becoming so large that, in certain respects, they exceed the economies of most developing countries. For example, if the world’s largest transnational corporations (TNCs) are measured by their sales revenue, only six developing countries (Brazil, China, Mexico, Korea, India, and Argentina) have larger economies; only 10 other developing countries (i.e. 16 altogether), on this measure, rank in the same order of magnitude as the world’s 25 largest TNCs⁴. Discrepancies between the world’s largest corporations and most of the world’s countries can be expected to grow as TNCs invest and expand their assets and sales in global markets.

Nowhere is the growing power and influence of private markets as apparent as in the financial sector. Over the past three decades, the liberalization of financial markets has broken down geographic, functional, and institutional barriers to international capital flows. Short-term capital now flows relatively easily between countries. Derivatives or financial hedging instruments (such as options or futures) enable investors to protect their portfolios against currency and interest-rate movements. And laws that were enacted more than half a century ago to prevent another 1929 stock market crash are being repealed. Banking, securities brokerage, and insurance firms, that were kept apart by a regulatory "firewall," are now increasingly offered by large integrated "financial supermarkets."

The explosion in the volume of international financial transactions has been difficult to track. The daily turnover in currency markets is now estimated to be $1.2 trillion (or $1,200 billion). A large proportion of these transactions -- 40 percent -- involved "round trips" of two days or less, in which a currency is bought and then re-sold⁵. Most of the transactions in derivatives occur in the over-the-counter (OTC) market in which individual buyers and sellers strike deals. According to a survey by the Basle-based Bank for International Settlements, in March 1995, the notional value of outstanding OTC derivatives was $47.5 trillion. There was a further $17 trillion in derivatives traded in stock and mercantile exchanges. In aggregate, the global derivatives market is now twice as large as world output and much larger than the stock of fixed-income securities in OECD countries ($24 trillion). Even the replacement value of OTC derivative positions at $2.4 trillion is three times as large as the capital of the world’s 75 largest banks⁶.

Apologists for financial liberalization like to claim that the vast majority of these transactions are perfectly legitimate means of containing risk in a world of fluctuating currencies and exchange rates. We cannot be certain about such claims. But it is true that the volatility of exchange and interest rates has encouraged speculators to use such instruments to realize quick, and sometimes enormous profits, or suffer devastating losses, as did Nick Leeson when he drove the venerable London merchant bank, Barings Brothers, into bankruptcy in 1994. It is one thing if the damage caused by the actions of such "rogue traders" was limited to their own institutions. However, the scope for "contagion" or spillover effects to other financial institutions caused by the bankruptcy of a large institution is cause for concern.

For example, financial deregulation and policies that have dismantled restrictions to capital mobility have encouraged the growth of what the International Monetary Fund (IMF) calls "high-risk/high return" (speculative) funds⁷. The IMF estimates that capital under the management of such funds grew from $10 billion in 1990 to $100 billion in 1994. Moreover, these funds leveraged their resources by borrowing some $900 billion from the banking system in late 1993. Even though the IMF estimates that the resources available to such funds dropped by a third in the wake of the 1995 Mexican peso crisis, their relative size should be compared with the IMF’s quotas and reserves ($240 billion) or the 1995 Mexican bailout package ($50 billion). How will countries experiencing balance-of-payments crises and speculative attacks against their currencies survive when speculators can muster at least twice as much as the total resources of the IMF, which is supposed to support countries in such situations?

Moreover, despite the fact that the world somehow muddled through the Mexican peso crisis, certain "systemic risks" that major banks in the international financial system will fail, leading to a financial collapse, have increased. According to participants in the international markets, it is not uncommon for major international banks to have unsecured overnight foreign exchange exposures that exceed their capital. The risk that a major bank will fail and be unable to settle its debts from one day to the next would send a shock through the world’s banking system. Such "settlement risks" are compounded by the fact that transactions in the foreign-exchange market are highly concentrated among a small number of banks. For example, the ten most active foreign exchange dealers in London (all banks) account for nearly half of all trading in London -- and the London market accounts for 30 percent of global foreign exchange turnover.

The current state of affairs leaves much to be desired for all members of the world community. The industrial and more advanced developing countries would benefit from a world in which interest and exchange rates are more predictable and stable, and local economic and social policies are not subject to the vagaries of international financial markets. Meanwhile, the poorer countries, which are desperate to share in some of the benefits of international investment and trade, are too often willing to bear costs (in the form of foregone taxes, or labour and environmental standards below internationally defensible thresholds) that erode longer-term domestic development objectives.

The fundamental dilemma in resolving this problem is finding a political solution -- ideally, one in which the UN is central -- that will win the support of both industrial and developing countries. The clear preference of the established industrial countries (i.e. the G-7) is to continue to find piecemeal solutions to problems as they crop up, on a case-by-case basis, and in a way that does not threaten their interests. This approach has led to the tendency, mentioned above of first diverting responsibility away from the UN to the Bretton Woods organizations, and more recently (as discussed below) of diverting responsibility away from the Bretton Woods institutions to yet others, including those based in Basle.

1.3 The Current Institutional Framework

There are at present four deliberative bodies that take on the task of international economic and social cooperation: the Group of Seven (G-7) industrial countries; the Interim and Development Committees, which are informal, deliberative organs of the International Monetary Fund and the World Bank; and the UN’s Economic and Social Council (ECOSOC). Perhaps a fifth body could also be added to this list, the World Economic Forum that now annually brings together private sector CEOs and heads of government at Davos, Switzerland.

None of these bodies really exercises oversight over international economic cooperation. The G-7 exists as an informal coalition of industrial countries that have come together since the late 1970s to discuss problems of mutual concern. A few of these problems are strictly internal to the G-7; most, however, such as the debt problems of developing countries, and the problem of international financial stability, involve the world community. The problem with the G-7 is its exclusiveness: it deliberates issues of vital concern to the world community, yet only about 12 percent of the world’s population is represented at the table. In recent years, the G-7 has recognized that it cannot pretend to be a representative coalition of countries when it comes to resolving truly universal problems. Therefore, it cannot take the place of a more truly representative body that is able to speak with authority on behalf of all the world’s people and countries.

Since their creation in 1976, the Interim and Development Committees have anchored their policy discussions on the mandates of the IMF and World Bank. As the world’s pre-eminent international financial institutions, they are inevitably involved in problems of international economic coordination, such as the debt crisis and problems of currency instability. Thus, in any institutional restructuring, it will be crucial to ensure that these bodies, or the discussions that take place within them, are "folded in" and become part of the newer body. This is explored at greater length below. As things presently stand, however, these committees and the Bretton Woods institutions have no formal authority over, or linkage with the United Nations, even though UN organizations have observer status in the Development Committee. The now-universal membership of the Bretton Woods institutions means that all countries are represented, directly or indirectly, on the Interim and Development Committees. Moreover, the committee membership is typically at the level of Finance Minister: Finance Ministers on the committees generally give high priority to attending meetings twice a year, so that the deliberations typically carry considerable weight. However, the structure of the Committees (based on the shareholder constituencies of the Bretton Woods institutions) means, in effect, that most smaller countries are inevitably represented by the Finance Minister of larger constituency members (for example, Canada always represents the countries of the Commonwealth Caribbean).

Finally, the World Economic Forum held at Davos does not present another institutional model of international economic cooperation. Rather, it is more like a modern version of the medieval fair, in which vendors (typically TNCs) and buyers (heads of government) meet to discuss business. If anything, Davos represents the antithesis of international economic cooperation: it provides a forum in which the major players can meet and compete with each other⁸.

2. Recent Proposals for Systemic Reform

As we approach the turn of the century, there appears to be little international consensus on the need for a global body to provide the kind of world leadership envisaged in the UN Charter to address long-term problems rather than simply reacting to crises. Indeed, the divisions of the 1970s and 1980s appear to be hardening.

2.1 The G-7: Halifax and Lyon Summits

Recently, the leaders of the G-7 countries addressed the question of multilateral reform in their Summit meetings at Halifax (1995) and Lyon (1996): the first focused on the International Financial Institutions (the Bretton Woods organizations and the regional development banks) while the second concentrated on the UN system.

The Halifax and Lyon G-7 Summits did little to alter the relationship between the Bretton Woods institutions and the UN on the subject of global economic cooperation. Rather, the Halifax Summit more or less reaffirmed the status quo, in which the Bretton Woods institutions have a (but not the) leading role on such issues as economic policy coordination and exchange market cooperation; financial stability in a globalized economy; and sustainable development.

It is worth noting, however, that the Halifax meeting deflected the resolution of some issues (in particular, financial market supervision and regulation) away from the Bretton Woods organizations to a group of Basle-based institutions: the G-10 Finance Ministers and Central Bank Governors; the Bank for International Settlements; the Basle Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO)⁹. Such decisions lend themselves to a dilution of international capacity to mount effective global economic cooperation since responsibility will be scattered among a wide array of organizations, some of which (notably, the Basel-based institutions) are far from universal in their membership.

As to the Lyon Summit, the communiqué "deemed significant" the recent decision to strengthen the coordinating role of ECOSOC¹⁰, but UN reform was discussed only in the limited context of "enhancing the effectiveness of multilateral institutions for the benefit of development"¹¹. The discussions at Lyon on strengthening economic and monetary cooperation, on promoting trade and investment, and on resolving employment problems were directed not to the UN but to the G-7 governments, the IMF, the World Trade Organization, and the Organization for Economic Cooperation and Development (OECD).

The record of the Halifax and Lyon Summit discussions suggests that the G-7 industrial powers are resistant to the very idea of a world body uniquely responsible for global economic cooperation, rather than to the more specific notion that such a body, even if desirable, should be part of a renewed UN. Indeed, they seem uncomfortable even with building upon the present responsibilities (and hence the powers) of the Bretton Woods organizations.

Dispersion of responsibilities for global economic cooperation among a number of disparate, and to some extent competing international organizations may be a predictable response of a group of countries whose individual and collective hegemony is gradually declining at the end of the 20th century. Emerging economic powers in east and southeast Asia, and perhaps Latin America, present a growing challenge to the leadership of the established industrial countries, even in the Bretton Woods organizations where their voting majority can only erode over time. In contrast, the Basle-based organizations (and organizations such as the International Organization of Securities Commissions, IOSCO) to which decision-making power and influence have recently shifted are still largely dominated by the OECD countries¹².

As mentioned, however, this kind of dispersion represents institutional change in a direction which is entirely opposite to what is required. Global economic integration suggests that what is needed is one global centre of policy coordination. At the very least, a "nested" structure, in which there is a clear hierarchy among international bodies, would be preferable to the current situation in which such bodies have overlapping and competing mandates.

It is crucial to understand the underlying dynamics if such an institutional solution, one that is satisfactory both to the established industrial powers (the G-7) and the more dynamic developing countries, is to be found. Essentially, the solution has to accommodate the desire of the G-7 to maintain their relative authority and status -- at least in the medium term. The trick is to find a formula that appeals both to the current G-7 and to the rest of the world community. This challenge is taken up below.

First, however, it is worth surveying other recent proposals on UN reform in order to discover common threads. The proposals presented below have all resulted from broad-based panels consisting of prominent individuals from both developed and developing countries.

2.2 Commission on Global Governance

In early 1995 a blue-ribbon panel of international experts, co-chaired by Swedish Prime Minister Ingvar Carlsson and former Commonwealth Secretary-General Shridath Ramphal, brought down their report, Our Global Neighbourhood. The report was both visionary in scope and far-reaching in its recommendations, most prominent among which was the creation of an Economic Security Council (ESC) to provide political leadership and promote consensus on international economic issues and on balanced and sustainable development, while securing consistency in the policy goals of multilateral economic institutions. The suggested council would be a representative body, including the world’s largest economies ("as a matter of right"), but of no more than about 23 members. The Council would meet annually at the Heads of Government level, and otherwise at the Finance Minister level. The IMF, World Bank, World Trade Organization, and similar agencies would report regularly to the ESC. The Council would be supported by a secretariat (staffed by recruits from outside as well as inside the UN), headed by a Deputy Secretary-General for International Economic Cooperation and Development¹³.

2.3 The Uppsala (Childers-Urquhart) Proposals

Two retired senior UN civil servants, under the sponsorship of the Ford and Dag Hammarskjöld Foundations, put forward sweeping recommendations for UN reform, including some aimed at renewing United Nations leadership in international economic cooperation. Their proposals are aimed more at the machinery of the UN itself, rather than at redesigning the "principal organs" (notably, ECOSOC) or creating new deliberative bodies. Accordingly, they suggest creating a new post of Deputy Secretary-General (DSG) for International Economic Cooperation and Sustainable Development. The DSG would be second only to the Secretary-General in rank, and have a line-responsibility over all UN economic and social research, analysis, policy development and programming, both within the UN Secretariat and among the operational funds and programs. On behalf of the Secretary-General, the DSG would chair an Inter-Agency Board for International Economic Cooperation and Sustainable Development, whose members would be the chief executive officers of all the UN specialized agencies¹⁴, including the IMF, World Bank, and World Trade Organization. The report also makes recommendations extensively restructuring operational development activities in the field¹⁵.

2.4 Report of the Independent Working Group on the Future of the United Nations.

Another eminent persons’ group sponsored by the Ford Foundation, this one co-chaired by Moeen Qureshi, former Prime Minister of Pakistan and Richard von Weizsäcker, former President of Germany, brought down its report on the future of the United Nations in May 1995. This panel recommended that ECOSOC be replaced by two parallel councils, an Economic Council and a Social Council, which together would constitute a Global Alliance for Sustainable Development. The Economic Council would focus on coordinating monetary, financial and trade policies at the global level, as well as on economic aspects of sustainable development including poverty alleviation and job creation. It would be empowered to formulate guidelines to integrate the work of all UN agencies and international institutions, programs and offices engaged in economic issues. Like the Commission on Global Governance, it recommended a body of about 23 members to allow wide enough representation, yet allow effective dialogue and debate. It would meet at the level of senior representatives of Permanent Missions to the UN for regular business, but at the level of Ministers (of Finance or Trade) on special occasions. Individual UN agencies and the Bretton Woods organizations would report to the Council. The Council would also establish a standing Advisory Committee comprised of distinguished individuals from the private and public sectors¹⁶.

2.5 A Synthesis and a Proposal

There is a remarkable degree of consistency, and some complementarity, between these proposals. They all suggest re-establishing the pre-eminence of the United Nations insofar as international economic coordination and development are concerned. Two recommend replacing ECOSOC with a new Council. They recommend similar secretariat support structures, headed by a senior Deputy Secretary-General. As well, they recommend bringing the Bretton Woods organizations more formally into the UN fold. Interestingly, however, they do not squarely address the issue of the Interim and Development Committees, although the Commission on Global Governance hints that (if an Economic Security Council were created) governments should examine whether these two ministerial-level Bretton Woods committees should be continued¹⁷.

Yet, it is difficult to imagine how a new UN deliberative body -- let us call it an "International Economic Council" -- with ministerial-level membership could effectively establish its pre-eminence over the Bretton Woods organizations, if at the same time the ministerial committees overseeing those organizations continue to meet independently. Moreover, since the agendas of the Interim and Development Committees (IC/DC) typically address the leading global economic policy issues of the day, there would undoubtedly be overlap, and perhaps friction, between the new body and the IC/DC.

A proposal to wind up the IC/DC would undoubtedly meet with considerable resistance from the G-7 and perhaps other industrial countries. Therefore, a compromise is necessary to persuade the industrial countries to accept a new organizational and institutional order. The most obvious is simply to make the present Interim and Development Committees the nucleus for the new pre-eminent UN Council, replacing the present ECOSOC. Even though votes are rarely taken in the IC/DC, they are taken on occasion, according to the weighted voting pattern of the IMF and World Bank. This system of ranking and representation would give the G-7 and OECD countries priority and an implicit veto if they cared to exercise it. Such an assurance is necessary, at least in the medium term, if the established industrial countries are to place their confidence in the new body. Moreover, both committees have only 24 members (a number similar to that proposed by the Commission on Global Governance and the Independent Working Group).

The developing countries might also be expected to support such a body. First, there is now universal representation in the Interim and Development Committees, and the leading developing countries (measured by population or by economic importance) are generally directly represented. Moreover, the "constituency" basis of representation in some cases brings about a measure of rotationality in the membership (particularly among the African and Latin American chairs), and in other cases (Belgium, Netherlands, Canada and Australia) brings together countries that are developed, developing, or in transition -- itself a noteworthy feature, since it encourages the sitting member to be acquainted with, and speak on behalf of, other very different constituency members¹⁸.

Consistent with the recommendations of the reports cited above, the International Economic Council would have, as its chief executive officer a Deputy Secretary-General (DSG) who is second only to the UN Secretary-General. The DSG could chair meetings of the Council, but to preserve the representative nature of the Council it might be better for the Council to elect its own Chair. Meetings of the Council would be organized by the DSG supported by a small secretariat (as suggested by the Commission on Global Governance).

The DSG would have line-responsibility (as suggested by Childers-Urquhart) over all UN economic and social research, analysis, policy development and programming, both within the UN Secretariat and among the operational funds and programs. The DSG and the secretariat would be guided in its work (again as suggested by Childers and Urquhart) by an Inter-Agency Board for International Economic Cooperation and Sustainable Development, whose members would be the chief executive officers of all the UN specialized agencies, including the Bretton Woods institutions, the regional development banks and the Bank for International Settlements.

An International Economic Council that replaced the IC/DC would continue to meet twice a year. The spring meetings could be held in New York, while the autumn meetings could be held, as they are now, on the margins of the World Bank/IMF Annual Meetings, in Washington, or wherever those meetings are held. Instead of preserving the present nomenclature, the Council would meet over two days, the first being taken up by financial and monetary issues, and the second by issues of sustainable development.

Unlike the present agendas of the IC/DC, however, the Council’s agenda would not be focused exclusively, or even primarily on the programs of the Bretton Woods organizations, but would regard the programs of all multilateral economic institutions (whether or not they formally belong to the UN) as within its competence. The principal objective of the Council would be to act as a forum to bring about coherence on international economic policies. It would address issues such as financial stability, monetary reform, and enhancing the effectiveness of international organizations dedicated to sustainable development. With such a mandate, the Council could adopt a program of work to address the problems of operational coordination among multilateral agencies, as well as problems of financing those agencies.

The composition and constitution of the Council could be permitted to evolve over time. After three years, the formal link with the Bretton Woods institutions could be broken, although the same or modified rules could be used to elect members.

3. A Brief Conclusion

Reforming the United Nations, it need hardly be said, is no easy task. But the task is made easier by recognizing the obstacles, and particularly the competing agendas, in the path. Once recognized, the essence of a solution consists in giving something to both or all contending parties, rather than proposing win-lose arrangements in which the interests and concerns of one side are sacrificed for the benefit of the other.

The developed countries (in essence the G-10¹⁹) would, in the medium term, be reaffirming their position of relative priority in the international system. Over time, the membership of the Council would be subject to review, and the constituency system would allow certain members to be in the chair periodically²⁰. In addition to maintaining their pre-eminence in the Bretton Woods organizations, there would be the attraction of folding the role of the UN agencies and their relationships with the World Bank and IMF into their discussions. Given the recent acknowledgment by the G-7 that the group cannot claim to be a representative body, a new International Economic Council in which membership is more genuinely universal, but in which they have a leading role, might induce the industrial countries to discuss more freely issues such as the impact of their own economic policies on the welfare of other members of the world community.

For their part, the developing countries would have to be convinced that such an arrangement would not represent a "takeover" of the entire United Nations family by the Bretton Woods organizations and their leading shareholders. Rather, it would offer an opportunity, at long last, for the programs and policies of the UN family, the Bretton Woods institutions, and other multilateral agencies, to be harmonized. It would also present an opportunity to resolve the long-standing financial constraints facing all these organizations, on the grounds that once such a coherent structure is in place, the obstructions to full and timely funding by the United States and other delinquent members would be more easily removed. Last but not least, a single, pre-eminent economic policy forum would give developing countries something that they do not have today: they would get seats at the G-7 table, in the sense that they would be able to discuss and debate the policies of the industrial countries themselves, and the impact they have on the developing world.

If such an approach -- indeed, any approach to renewing the UN system -- is to succeed, it will need to be seen as attractive to the UN member-states and to the multilateral institutions that form the fabric of the United Nations family, as well as some that are presently outside of it, such as the regional development banks and the Bank for International Settlements. This will require further analysis and discussion by political leaders, heads of multilateral organizations (including the new Secretary-General), and members of civil society throughout the world.

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Endnotes

^*President, The North-South Institute, Ottawa. I am grateful to the following for helpful comments on an earlier draft, without implicating them in the final product: Andrew Clark, Barry Herman, Michelle Hibler, John Robinson, Clyde Sanger, and Alison Van Rooy.| BACK |

¹ Childers and Urquhart, 55-59. The Second Committee of the General Assembly subsequently became a forum in which economic and financial issues are discussed. | BACK |

² Perhaps as early as 1960, when the Western powers deflected the proposal for a special UN Fund for Economic Development to the World Bank, with the creation of the International Development Association. See Commission on Global Governance, 263-4, and South Centre, 9. | BACK |

³ Canadian Committee for the Fiftieth Anniversary, 34. | BACK |

⁴ The world’s largest TNC, Mitsubishi Corp. , had gross sales of almost US$176 billion, smaller than Brazil’s 1994 GDP ($555 billion) or Argentina’s ($282 billion), but larger than Indonesia’s ($175 billion). Using the same data, some of the other nine developing countries offer some startling contrasts: Turkey is smaller than General Motors; Saudi Arabia is smaller than Ford; Colombia is smaller than Matsushita; and Venezuela is smaller than Mobil. | BACK |

⁵ Mahbub ul Haq et al, The Tobin Tax: Coping with Financial Volatility. (New York: Oxford University Press, 1966), 3. | BACK |

⁶ Source: IMF, International Capital Markets, 1996. | BACK |

⁷ Macro-hedge funds, proprietary trading by the major financial houses, and risk-tolerant mutual funds. | BACK |

⁸According to its own publicity material, the Davos Forum was founded in 1971 and by 1997 was bringing together some 2,000 business and political leaders, experts, academics, and members of the media, "to set the global agenda for the coming year." Press reports indicated that the registration fee for corporate participants in the 1997 Forum was US$20,000. ("Money name of the game in Davos," Globe and Mail, Feb. 3, 1997). | BACK |

⁹ See Culpeper 1996, p. 281. | BACK |

¹⁰ Lyon Summit Communiqué, para. 40. | BACK |

¹¹ Lyon Summit Communiqué, section V. | BACK |

¹² The following survey is necessarily very selective. It omits certain proposals (e.g. Secretary-General Boutros-Ghali’s Agenda for Development) on the grounds that they do not offer (in this author’s view) enough in the way of genuine institutional renewal. It also focuses only on the parts of the reports dealing with economic co-ordination, since they also address security and other issues. | BACK |

¹³ Commission on Global Governance, 149-162. | BACK |

¹⁴ These include the ILO, FAO, WHO, IFAD, and could also include the Presidents of the four regional development banks. | BACK |

¹⁵ Childers and Urquhart, Chapters IV and V. | BACK |

¹⁶ Report of the Independent Working Group, 29-34. | BACK |

¹⁷ Commission on Global Governance, 161. | BACK |

¹⁸ The nationality of members of the Development Committee, in 1995, was as follows. From the OECD: France, Switzerland, U.K., Italy, Canada, Belgium, U.S.A., Spain, Germany, Japan, Finland, Australia, Netherlands. From the developing countries: Saudi Arabia, Bahrain, Nigeria, Malaysia, Paraguay, Philippines, Morocco, China, Côte d’Ivoire, India. Other: Russia. It should be noted that there were several "mixed" constituencies: Spain represented eight Latin American countries including Mexico and Venezuela; both Belgium and Netherlands represented several "countries in transition"; and both Canada and Australia represented several island microstates, and Australia. Development Committee, 1995, 77-80. | BACK |

¹⁹ The G-10 is actually a group of twelve, consisting of the G-7 (USA, Japan, Germany, France, UK, Italy, Canada) plus Belgium, Netherlands, Luxembourg, Sweden and Switzerland. | BACK |

²⁰ The tradition in the IC/DC is to allow all constituency Finance Ministers to attend, but only one constituency member can occupy the chair. | BACK |

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