UNCTAD rejects austerity measures and receives support from civil society
Civil society was crucial for the success of the 13th Ministerial Meeting of the United Nations Conference on Trade and Development (UNCTAD XIII) this year, said the Secretary General of the agency Supachai Panitchpakdi to representatives of key non governmental organizations and networks. In their turn, they expressed their appreciation for the UNCTAD’s most recent annual report, which concludes that austerity measures did not lead to economic growth, and recommends supportive government policies to get over the crisis.
In a meeting held in Geneva on 27 September 2012, the representatives of non-governmental and civil society organizations active in the field of trade and development committed themselves to continue supporting the UNCTAD. They also reasserted their intention to remain closely engaged in the implementation of its mandates and the work program emanating from of the UNCTAD XIII, held in Doha, Qatar in April.
In the briefing on UNCTAD’s work and on the state of the world economy Supachai gave at the meeting, he remarked that the reform of global economic governance is a defining issue in the period leading up to the next conference (UNCTAD XIV) in 2016. The South needs to be given more say, but also to take more responsibility.
Policy advice, including from international organizations, may, for example, avert losses of trillions of dollars in losses, but that such advice is not always considered a measurable deliverable and is therefore not supported by some donors, the Secretary-General said.
Global value chains need to be looked at from the point of view of how a country can develop its own local industry, create employment, and diversify; and there is also merit countries allowing more imports as they expand their exports, according to Supachai, who also stated that the quality of investments is important, and that each country need to have their own national strategy for attract them.
He warned about prejudice that still exists against unconventional thinking and in favour of orthodox approaches, and forecasted that next year could see an even worse downturn, because of both inaction and the enactment of inappropriate policies; growth via stimulus packages is unsustainable.
It is crucial to build up a correct understanding of the state of the world economy, and that is why research and analysis on key topical issues are of great importance, as UNCTAD received a strong mandate at the Ministerial Meeting in Doha, Supachai said.
On the governance of UNCTAD, the Secretary-General explained that the multi-stakeholder participation that defines its functioning must include NGOs. He also remarked their advocacy work, which was critical to the success of UNCTAD XIII, and that the Civil Society Declaration issued in Doha was both forceful and substantive.
In their turn, civil society representatives expressed appreciation for the research and analysis work presented in UNCTAD’s Trade and Development Report 2012, which deals with austerity, the causes of the financial crisis, and the current trade rules, among other issues. The study was also considered very helpful with regard to the least developed countries. In particular, the representatives commended the Report for explaining well what is happening on the ground.
They also urged UNCTAD to be more present at the regional and field level, and for UN agencies to strive for coherence in the policy advice they give, and suggested a greater advocacy role for the agency in the area of trade by helping developing countries “to change the global economic rules” and providing advice on economic partnership agreements and regional trading arrangements. The shift in emphasis towards sustainable development with the new investment framework was appreciated by the representatives.
In terms of further collaboration with civil society, Mr. Georgios Altintzis of the International Trade Union Confederation urged to continue and to increase the funds that the CSOs receive in order to participate in civil society activities (including the Public Symposium).
The agency divisions could consult with civil society before major reports are released and published, and the organizations and networks could be granted more time to share their views with TDB plenary sessions, and could have some kind of status as observers on different committees, Altinzis added.
He proposed to mobilize funds to keep the UN-Non-Governmental Liaison Service (NGLS) functioning, and to continue holding consultations such as the current one (e.g. around the time of the Public Symposium).
The civil society and non-governmental organizations which participated in the consultations were the following: Arab NGO Network for Development (represented by Kinda Mohamadieh); Center for Economic and Policy Research (Ms. Deborah James); Initiatives for Dialogue and Empowerment through Alternative Legal Service (Mr. Tony Salvador); International Trade Union Confederation (Mr. Georgios Altintzis); Instituto del Tercer Mundo / Social Watch Network (Mr. Roberto Bissio); Public Citizen (Ms. Melinda St. Louis); Southern and Eastern African Trade Information and Negotiations Institute (Mr. Nathan Irumba); Third World Network (Ms. Sanya Reid Smith).
Developing countries cannot avoid an economic slowdown
As predicted by UNCTAD economists, fiscal austerity and wage compression are further weakening growth in developed countries without achieving the expected results of reduced fiscal deficits, job creation, and renewed confidence of financial markets, the Trade and Development Report 20121 says.
Global growth fell from 4.1 percent in 2010 to 2.7 percent in 2011, and is expected to decline to below 2.5 percent in 2012, according to the Report, subtitled “Policies for Inclusive and Balanced Growth” and focused especially on income inequality. Reducing widening gaps in wealth and income will not only have social benefits, but will also lead to higher economic growth, it says.
The study notes that many developing countries are supporting domestic demand and growth with countercyclical economic policies. But it contends that they cannot avoid a slowdown and are vulnerable to a continuing deterioration in advanced economies.
Developing countries are still vulnerable to weakened demand for their exports from the developed economies, the report says, and that is likely to be the case as austerity programs continue, especially as they bite more deeply in Europe. The trend is already reflected in stagnating export volumes to developed-country markets and in a declining trend in commodity prices since the second quarter of 2011.
According to the UNCTAD, the paradigm of labor-market flexibility has not only failed to reduce unemployment, but tends to exacerbate it. By relying on wage compression as the main tool for expanding employment, such labor market reforms dismiss the important contribution of income distribution to demand growth and employment creation.
If overall productivity grows without a commensurate increase in wages, demand will eventually fall short of the production potential, thereby reducing capacity utilization, profits and investment, the report says.
Kinda Mohamadieh, Director of Programs at the Arab NGO Network for Development, remarked that the report stresses the centrality of reducing income inequality as a key factor to achieve development and a sustainable economic growth, as well as the development of local markets.
According to Mohamadieh, the report recommends the importance of reconsidering the basis of national economic policies and the role of productive capacities and policies of redistribution, including the role of fair income and progressive tax policies and existing policies to boost local demand.
“Such recommendations are of great importance to the Arab countries that are witnessing political leadership changes and that require a wide democratization process and re-establishment of political policies,” Mohamadieh affirmed. This development in the Arab world contributed to the deepening of disparities and inequalities and; therefore, must be addressed as part of re- establishment of their economic policies.
She concluded that “it is surprising how we are still seeing recommendations by financial institutions calling on Arab countries to strengthen their flexibility in wages and jobs protection as a means to rejuvenate the economies.”
On his part, the Director of UNCTAD’s Division on Globalization and Development Strategies Heiner Flassbeck warned the UN General Assembly last month that “misguided” steps are limiting recovery from the global slowdown. While briefing the Assembly on the Trade and Development Report 2012, he urged to take measures to boost income equality so that consumer demand is stimulated.
“I know that my colleagues in the economics profession like to say that we are at a critical juncture,” said Flassbeck. “But this time it’s really true. If you look at the extraordinary measures that the world’s largest central banks have been taking for the last two years, and then consider that the world economy is continuing to slow down while unemployment stagnates at very high rates in both the developed and developing countries, and investment remains flat, you understand that we are living in truly extraordinary times.”