Dear colleagues, 

The attached working document was originally  distributed as usual   by CEFID-AR when it was published in its original Spanish language version. However now, due to the refusal by the US courts of the injunction (“stay”) requested by  Argentina, we have decided to reinforce the distribution of this  work   "Vulture Funds. The trial against Argentina and the difficulties it represents towards the global economy " with an English  version. 
http://www.cefid-ar.org.ar/

The authors make a comprehensive review on the subject, the evolution of the trial against Argentina and the significant negative worldwide consequences associated to the verdict. Also, this essay seeks to illuminate about the harmful role that  these actors represent for the global financial system, and the detrimental and  arbitrary  performance  of American courts in litigations initiated by vulture funds towards  the interests and needs of peripheral countries .

Guillermo Wierzba

Director CEFID-AR
Centro de Economía y Finanzas para el Desarrollo de la Argentina
San Martín 627, 6º piso
Buenos Aires, Argentina
http://www.cefid-ar.org.ar/

Dear colleagues,     

The United Nations Conference on Trade and Development (UNCTAD) is about to deliver a concept for a new debt workout mechanism. The concept has been developed by a multi-stakeholder expert group that has been convened regularly by UNCTAD since early 2013. Thanks to this new concept, the UN system is finally promising to deliver what developing countries have been calling for since the 1971 Action Programme of Lima – namely, orderly debt workouts that explicitly take into account the development implications of a heavy debt servicing burden, and an emphasis on the need to establish a new international mechanism for dealing with developing country debt problems. The final concept is expected to be ready and released in September 2014, in time for consideration by the UN General Assembly

Key pillars: legitimacy and impartiality
The fourth and final thematic session of the expert group took place in New York on 7 July and focused on the legitimacy and impartiality of a new debt workout mechanism. It was strongly influenced by the 16 June Argentina ruling of the US Supreme Court, which strengthened vulture funds and has probably put an end to the traditional ‘non-regime’ of sovereign debt restructuring that mainly built on the voluntary participation of private bondholders.

Legitimacy and impartiality are key aspects that have been identified because the traditional (non-)regime is perceived as creditor-biased and attributes key decision-maker roles to creditor institutions. This might lead to conflicts of interest, as interested parties take on the role of judge. At the New York session, the expert group discussed the choice of elements that would make the new debt workout mechanism most legitimate, and the trade-offs that such choices would imply.

The previous three meetings had addressed the building blocks standstill of debt payments and stay of litigation, transparency and good faith negotiations, as well as debt sustainability analysis.

Source, process and outcome legitimacy
The discussions in New York addressed three legitimacy dimensions of the new debt resolution mechanism – the source, the process and the outcome legitimacy:

- Source legitimacy implies that the new concept as such needs to be put in place by a legitimate process, e.g. by state consent, or even by more participatory and democratic legitimisation processes.

- Process legitimacy addresses the debt workout as such and may include aspects such as impartial decision-making, transparency, a right for all affected parties to be heard, a check on allowance or disallowance of creditor claims, debtor ownership, a comprehensive and fair treatment of different debt categories, and well-reasoned decisions.

- Outcome legitimacy refers to the desired debt workout achievements: the debtors’ return to debt sustainability and to ‘normal’ financing on capital markets, a reasonable recovery of creditor money, and last but not least to minimise the harmful impact of debt crisis and structural adjustment on development and on the human rights of affected countries and people.

Towards development-friendly debt workouts
The fact that human rights and development are explicitly stated as intended outcomes of a debt resolution mechanism reflects the wider mandate of the UN, in contrast to other institutions that are taking part in the reform debate. Earlier this year, the International Monetary Fund (IMF) presented a new proposal for reforming its crisis-lending framework. However, this is mainly intended to reduce the costs of debt restructurings. It turned a blind eye to the devastating impacts of debt crises on the social and economic fabric of heavily indebted countries. The UN’s concept is expected to embed the new debt workout mechanism as an essential building block for a development-friendly international financial architecture. After all, the UN’s mandate comes from various General Assembly resolutions and UN conferences, most prominently the 2002 International Conference on Financing for Development and its Monterrey Consensus. This was prompted by the development damage that debt overhangs and unresolved debt crises have inflicted on developing countries and their populations.

The next steps towards implementation 
Much conceptual work on new debt resolutions mechanisms has been done over the past few years. The UNCTAD expert groups’ work is complemented by additional policy debates held by the UN’s Department of Economic and Social Affairs (DESA). Outside the UN system, the Euro crisis and Argentina lawsuits inspired many academics to rethink the traditional (non-)regime for sovereign debt restructurings. What has been missing until now is the translation of concepts into actual practice through an institution-building process.

The political pressure to get things done is increasing. Both developing countries (through the Group of 77) and the major middle-income countries (through the Group of 24) have recently released bold statements calling on the international community to make the new debt resolution mechanism a priority of the financial architecture reform agenda. It is expected that the EU will join in as soon as the European Commission overcomes its fear of distorting creditor confidence in Euro crisis countries. In light of recent experience, everyone in Europe knows that muddling through debt crises is no longer an option. Major EU players such as Germany have been calling for more than a decade to set up insolvency regimes for sovereign debtors.

What is needed now is an intergovernmental process mandated to reform the international sovereign debt regime.

Bodo Ellmers
Policy and Advocacy Manager - Debt and Responsible Finance Unit
Eurodad, European Network on Debt and Development
Tel: + 32 2 894 46 51
Email: [email protected]
Rue d’Edimbourg, 18-26. Brussels 1050. Belgium

Dear friends, 

Dialogue 2000 - Jubilee South Argentina, is working with other organizations and movements in Argentina to raise attention, in the midst of the vulture attack, on the steps that our government can and must take, if it really wants to defend our rights.  We hope you can support us, joining your support to the following statement launched by Jubilee South / Américas, and sharing it with other organizations and movements.

Beverly Keene
Diálogo 2000 - Jubileo Sur Argentina
Piedras 730 (1070) Bs. As.
Tel. +5411-43071867 // 15-55690140
[email protected]
dialogo2000.blogspot.com
jubileosuramericas.net

Jubilee South / Americas has released the following statement in support of the struggle in Argentina against the many vultures who use the debt as an instrument of domination and illicit gain, in violation of our rights and needs.  Supporters include mothers of the May Square. We invite other organizations to join their support, sending a message to [email protected] - You might also consider presenting this statement to the Argentine embassy in your country, your own government and other relevant institutions. Keep us informed of your actions.

Don´t Owe, Won´t Pay:  YES to life, NO more vultures!

This past June 16th, the Supreme Court of the U.S. announced two highly pernicious decisions not only for Argentina and its people, but for all those who defend sovereignty and the primacy of human rights over the claims of big capital. The Court rejected Argentina´s appeal, leaving firm the lower court rulings which, since 2012, order Argentina to pay 100% of the debt claimed by several investment funds known as vultures - led by NML Capital - and to pay in full before continuing to service the bonds it restructured in 2005 and 2010. Moreover, the Supreme Court upheld those same vulture funds’ demand that Argentina identify the assets it holds outside its own territory, in order to facilitate new actions seeking to collect what the U.S. courts have decided that Argentina owes them.

Both decisions are as reprehensible as expected. In a world where human life, the life of nature, sovereignty and the rights of peoples and nations are increasingly undermined by the actions of big business - the financialization and perpetual crisis of the global capitalist economy, the rise of the casino economy, the intensification of its exploitative and predatory power over human labor and natural goods – these decisions exemplify the consolidation of a legal-political institutionality that recognizes no limit to usury and capitalist greed. A veritable architecture of impunity that, starting with the U.S. Foreign Sovereign Immunity Act which in 1976 established that the sovereignty of nations ends when the market so decides, has been built up over the subsequent years of neoliberal boom through the signing of multiple treaties and agreements of “free trade”, "economic cooperation", investment protection, and the waiver of national sovereignty  to foreign courts and arbitration forums such as the ICSID.

The attack of these hedge funds is not new.

Notwithstanding the backing they have now received from the US’ highest court, it is part of a process of bloody, illegitimate, and illegal indebtedness whose high cost the people of Argentina have been paying for far too many years. Without going back any further in  history, the bonds now in the claws of these vultures can be traced directly to the odious debts accumulated by the dictatorship ('76 - '83) and the debt imposed during the '90s, under the extorsive power of those same debts and the decisive support of the IMF, World Bank, Paris Club, and others. A debt that was found to be fraudulent and arbitrary (Olmos Case, Case No. 14.467, Federal Court No. 2 for Criminal and Correctional Matters, Federal Capital, July 13, 2000) and which is still the subject of ongoing judicial investigations in other Argentine courts.

30,000 peoples disappeared, the privatization and denationalization of public patrimony, the successive structural adjustments and the economic collapse of 2001 with its horrendous consequences in terms of impoverishment, unemployment, exclusion and the reorganization of the economy, deepening its exploitative and extractive nature so as to be better able to service a debt which, for its proven illegalities, long ago should have been declared null and void.  These are just some examples of the human, social, economic, and ecological cost that will only continue to grow if the underlying problems are not addressed.

So far, the Argentine government has tried to "win" the game of debt, playing with the same rules established by its purported creditors. Its aim is to return to international capital markets in order to borrow more and continue its dependency and submission to the domination exercised by those very markets.  While the government keeps betting on a "more humane" capitalism however, that same capital keeps reaffirming that its very nature is exploitative and predatory. The results are clear: despite the fact that Argentina has made debt service payments of more than USD 400 billion since the end of the dictatorship in 1983, and more than USD 174 billion in the last decade alone, over that same period the debt has increased from USD 43 billion to more than USD 240 billion. The fact that the partial moratorium on debt payments, after the collapse of 2001, allowed Argentina to begin a process of economic recovery, clearly shows that there are alternatives to paying over and over for a debt that is not even owed.

Do not let the vultures continue flying!

We call on peoples, movements and organizations, governments and institutions of integration, especially here in our America and throughout the South, to join forces to stop this onslaught and the possibility that the vultures of any ilk, continue to live off us.  In particular, we call for support of the demands and actions expressed by numerous Argentine organizations and popular leaders, as in their declaration VULTURES NEVER AGAIN:

• Support the Argentine people in their struggle to stop paying what they do not owe. Whatever measures are taken by the government now, for the people of Argentina the cost of continuing to recognize and pay debts that have been proven to be fraudulent is already too high. Let us unite behind their demand that the Argentine government suspend all payments until a participatory and comprehensive audit of the various claims can be completed, building on the criminal investigations already realized or in process. This would help to separate out those debt claims that are illegitimate and illegal and enable priority to be placed where it should be: on payment of the social debt to the only proven legitimate creditors: the Argentine people.

• Support the right of the Argentine government to not give into these hedge funds or vultures of any kind, notwithstanding the unfair backing of the U.S. judiciary or wherever. It is important to remember that not all laws are just, and unjust laws should be resisted until they are overturned. The Guiding Principles on External Debt and Human Rights reaffirm that human rights, including in particular economic, social, and cultural rights, take precedence over any commercial agreement or debt contract. They underscore for lender and borrower states, financial companies and investors, and multilateral institutions directly involved in the processes of indebting sovereign nations, that it is the right and obligation of States to take the necessary measures to comply first and foremost with the human rights of their populations, as well as to not pay debts that are odious or whose legitimacy and legality have not been established. They also reaffirm the obligation of all States to fulfill, and enforce, these rights.

• Call on the Argentine government, and all governments that want to protect their populations and prevent new vulture attacks, to put an end to the privileges and impunity of such transnationals, by:

·         Annulling and ending further recognition of the waivers of sovereignty imposed in debt contracts and the extension of jurisdiction to foreign courts and extra-judicial arbitration forums such as ICSID, where other vultures nest;

·         Denouncing and stopping further negotiations and the signing of free trade and investment protection treaties and agreements which involve the surrender of our sovereignty to big business and the merchants of capital.

• Call on all governments, particularly in Latin America and the Caribbean and the rest of the global South, on the institutions of integration such as UNASUR, ALBA, CELAC, the G77, to support Argentina in the direction indicated and to advance together in the creation of new policies, instruments and institutions that break once and for all with the neoliberal, capitalist schemes imposed and allow us to build on the basis of what is ours, including for example a South Solidarity Bank and the adoption of national, regional, and international laws and policies of control over capital movements and transnational corporations in general, in order to effectively subject them to sovereignty and respect for all human rights.

The vultures will not find it so easy to continue flying over us if our countries do not allow them to pass. Together we can move forward in the building of new realities of life and bien vivir, putting an end as well to the impunity with which the international economic and financial system works and ensuring that those responsible for the crimes committed make reparations, paying the debts they have accumulated to us.

Isabel, 

Here is something I think will interest the list serve.

Argentina is likely to be called into default on Thursday as the funds it has deposited with a New York bank to be distributed as the next interest payment to its bondholders will remain in the bank thanks to a federal judge in New York. Judge Thomas Griesa had found for a group of hedge funds and says Argentina cannot pay its other bondholders without also paying its holdout creditors who did not agree to swap original Argentine bonds for new bonds, worth less but at least payable and regularly paid.

As this unnecessary default looms (payment must be made by Thursday), it seems Judge Griesa has begun to realize what a mess he has made of things. At least, that is the reading made by The New York Times premier business columnist, Floyd Norris, who wrote about Judge Griesa in Friday's paper.

Here is his conclusion:

"As Wednesday approaches, the judge has a lot to think about. It would be better if he had done some of that thinking before he issued his order, or if the appeals court or the Supreme Court had forced him to do so."

Read the whole column at http://www.nytimes.com/2014/07/25/business/rulings-add-to-the-mess-in-argentine-bonds.html?module=Search&mabReward=relbias%3Aw%2C{%221%22%3A%22RI%3A8%22}&_r=0.

Barry Herman
Julien J Studley Graduate Program in International Affairs
Milano School of International Affairs, Management, and Urban Policy,
The New School
72 Fifth Avenue, Room 624
New York, NY 10011, USA
Mobile: +1-212-671-2480
Email: [email protected]
Faculty web page

Dear colleagues,

The African Union, in collaboration with the Government of South Africa and UNICEF hosted an AU Expert Consultation on Children and Social Protection Systems, Cape Town, April 28-30th. This consultation gathered delegates from more than 40 countries across the continent to discuss the state of the evidence on Social protection in Africa, lessons from design and implementation, as well as the way forward, in terms of scale-up and financing. The Recommendations  out of the Cape Town meeting focused on political will and expansion of coverage, development of a minimum social protection package, systems development and allocation of national resources to social protection. These Recommendations were adopted at the Fourth Session of AU Meeting of Ministers of Social Development -CAMSD4 took place May 26-30 in Addis.

Link to Expert Consultation and Press releases:

http://www.cpc.unc.edu/projects/transfer/news/au-expert-consultation-on-social-protection-and-children

Link to the Cape Town Recommendations: http://sa.au.int/en/sites/default/files/Recommendations%20from%20the%20Expert%20Consultation%20SP%20for%20Children%20-%20Final%20-%20ENG-%20clean%20-%207%20May%202014.pdf

This is without doubt a critical regional recognition of the role of social protection in children’s and families’ rights, development, as well as to the region’s inclusive growth.

Warm regards

Natalia

Natalia Winder Rossi
Senior Social Policy (Social Protection) Specialist
Regional Social Policy Advisor (OIC)
UNICEF Regional Office for Eastern and Southern Africa
P.O. Box 44145-00100, Nairobi, Kenya
Tel: +254 20-7622350
Email: [email protected]
Skype: nwinder.unicef

Dear friends, 

Below another contribution to the global debate, part of the Campaign for People's Goals for Sustainable Development
http://peoplesgoals.org/

The Road to Development Justice

This video makes the case for why we need a new development model to address the double crises of inequality and environmental collapse. We would like to acknowledge the use of data on wealth flows between rich and poor countries from "Global Wealth Inequality" by therules.org. If you'd like to use this video and for citations on statistics used in this video, please contact us. If you would like to dub this video in your language, email [email protected] and we can send you the undubbed copy.
https://www.facebook.com/photo.php?v=281768325339818&set=vb.273638536152797&&theater

Best regards

Paul Quintos
IBON International
3rd Flr., IBON Center
114 Timog Avenue,
Quezon City 1103
Philippines
Telefax: +63 2 9276981
Websites: iboninternational.org
peoplesgoals.org

 

Dear all, 

I would like to follow on Vinicius email on the Outcome Document of the Open Working Group (OWG). Having followed the year and a half long process and the final intensive negotiations, the fact that the group managed to agree on a set of goals and targets, in spite of many disagreements and sensitive issues, is already an achievement.
I would like to make a few comments on some of the goals and targets based on the findings of a recent participatory research project on sustainable development, which reached over 2,000 people worldwide, the majority living in poverty carried out by the International Movement ATD Fourth World.

The Open Working Group made civil society engagement a real priority in their work. Taking advantage of new technologies, the UN system was able to hold constant consultation and through certain initiatives was able to reach a significant number of people living in poverty. These participatory initiatives should be further developed so that, eventually, the most marginalized will be permanently engaged in policy-making processes at all levels. This possibility is reflected in the emphasis on Civil Society engagement in the Open Working Group’s ‘chapeau’ and under Goal 17 on Means of Implementation.
Let's hope that this spirit of openness will be kept all along the remaining negotiations of the Post 2015 agenda.
To access the participatory report: http://www.atd-fourthworld.org/IMG/pdf/Challenge_2015_-_ATD_Fourth_World.pdf

Kind regards,
Cristina Diez
Main representative to the UN
International Movement ATD Fourth World
172, First Avenue, NY 10009
Cell: 646 639 1605
Phone:212 228 1339

Dear Colleagues,

Please find below here our latest Third World Network analysis on the agreement of the Sustainable Development Goals text by the Open Working Group in the UN, which followed heated negotiations between governments last week.

The focus is on one of the most contested area of the text, the means of implementation, which constitute the foundation of the SDGs, and the ultimate test for the credibility of the goals in developing countries.  

The article below highlights the worrying green light given to the private sector through “multi-stakeholder partnerships,” the ways in which the concept of universality was distorted during the negotiations, the tactic of forum-shifting to avoid structural decisions and discussions in global trade, finance and macroeconomic policies, the missed opportunities (as well as some key gains) in addressing international finance and trade policy reforms and the systematic weakening of the role of the United Nations in the implementation of the SDG and post-2015 development agenda.

TWN has been producing analyses and articles of various processes in the UN, including the various Rio+20 follow-up processes and the SDG process over the last two years.    

Our articles can be accessed here: http://www.twn.my/title2/unsd/unsd.new.htm

Best regards,

Bhumika

Bhumika Muchhala
Finance and Development 
Third World Network (TWN) 
[email protected]
www.twn.my

Dear colleagues

Thanks to Barbara and Stephany for sharing this. My optimism is somewhat more tempered. 

My disappointment with the CRA is that it continues to require a country that takes recourse to it to enter into a surveillance arrangement with the IMF to access more than 30 per cent of country quota from the Fund. . This is not desirable and continues to endorse the unsuitable existing governance arrangements and methods of valuation that the IMF uses to declare a country " sustainable " Their new DSGE model is even worse than what preceded it; the DSGE  has been "validated" in Rwanda and declared fit for global application and to my horror, is the flavour of the month amongst many technocrats in India, China and Brazil. 

It's regrettable that, as reflected above, the economic leadership in  even large emerging economies  continue to be intellectually subservient to the IMF orthodoxy when they are in a historic position to do and act otherwise. " It's better than nothing" is not a good enough argument for me. Oliver wants more!



Rathin Roy

Director and Chief Executive

National Institute of Public Finance and Policy

Delhi 110067, India 
Sent from my iPad

Dear friends:

A short footnote on Barbara's mail and her short but stimulating joint paper. Re: "It seems to be important that this mutual support comes without conditionalities", I should
like to recall that the IMF was founded to operate WITHOUT conditionality at Bretton Woods (although conditionality had been discussed and had enjoyed some support), and did
so for some years.

Conditionality did not exist in the original IMF Articles of Agreement. The Fund started applying it since 1952 as a matter of a Board policy decision. Minds more critical than
I - practically everyone else - might add: in violation of the IMF's own statutes. It was as late as 1969 that conditionality became explicitly enshrined in the Articles of
Agreement and became thus legal. But it was proved that operating with conditionalities is possible.

May I add a link to a short comment of mine on Argentina? If interested, please click
http://www.primeeconomics.org/?p=3067#more-3067

Best

Kunibert Raffer
Dept. of Economics
University of Vienna, Austria
http://homepage.univie.ac.at/Kunibert.Raffer/

Dear friends,

Here go two small appreciations from Fortaleza complementing Chandra’s (C.P. Chandrasekhar) intervention.

http://alainet.org/active/75589
http://alainet.org/active/75543

Regards

Dr.Oscar Ugarteche
Investigador titular
Instituto de Investigaciones Económicas UNAM Mexico
Sabatico en la Universidad de Newcastle
10 Greystoke Street NE2 1PN
Newcastle, GB
Cell phone 044 07582 860024
Coordinador OBELA
www.obela.org

Dear friends,

Please find below my opinion piece connecting last week's BRICS summit with the Palestinian occupation, the G77, the end of the Washington consensus and a (possible) return to multilateralism. I have tried to capture both the optimism and the cynicism that I have seen in many analyses of last week's events (many of them circulated on this list) and relate it all to the bigger picture.

http://www.actionaid.org/2014/07/building-blocks-better-world-order

In solidarity,

Sameer

Sameer Dossani | Advocacy Coordinator, Reshaping Global Power | ActionAid International

Mob: +918800762059 | Roaming: +12023293406

E: [email protected] | Skype: sameeractionaid | Twitter: @sameerdossani

ActionAid is a global movement of people working together to further human rights for all and defeat poverty.

www.actionaid.org   | www.twitter.com/actionaid   | www.facebook.com/actionaid  

Dear friends,

Adding to the BRICS discussion, I would like to share with you some thoughts not on the BRICS development bank, but on the Reserve Fund the five countries also launched in their meeting in Fortaleza.

Prof. Dr. Barbara Fritz
Freie Universität Berlin
Economics Department/Latin American Institute
Ruedesheimer Str. 54-56, D-14197 Berlin, Germany

THE BRICS CONTINGENT RESERVE ARRANGEMENT IS A STEP
TOWARDS MORE FINANCIAL STABILITY

by Stephany Griffith-Jones[1], Barbara Fritz[2] and Marcos Antonio M. Cintra[3]

The volatility of international capital flows subjects emerging market currencies to boom and bust cycles. During the boom, capital inflows flood their financial markets. Financial assets and real estate appreciate, and exchange rates suffer upward pressure. The bust brings capital outflows and depreciates prices of assets and exchange rates. Interbank and capital markets retract; credit costs increase, debt rollover gets difficult, and credit transactions to foreign trade are disturbed.

When last year the Federal Reserve announced it would start softening its ultra-expansionist monetary policy, the currencies of most emerging markets, especially of India, South Africa and Brazil, went downwards. Central banks of emerging markets had to protect themselves against this tide with contractive monetary policy.  From April 2013 to April 2014, the Central Bank of Brazil for instance raised the policy rate from 7.25% to 11%, one of the highest rates in the world in real terms.

This kind of policy not only lowers economic dynamism. It also creates new uncertainties, as a consequence of its impact on the fiscal balance and the accounts of firms and households. Even if these countries currently are far from being close to another financial crisis, they are forced to maintain capital inflows to finance their current account deficits. In 2013, the current account of Brazil registered a deficit in the current account of 2,4%, and India of 4,7% of GDP. Given this, capital flows have to be maintained, even at the cost of depressing the domestic economies.

What are the alternatives to face financial vulnerability? A significant devaluation of their currencies, followed by a period of stability, would not be a magic solution to every problem; however, it would certainly help regain competitiveness for exporters, thus improving the current account. However, how to accomplish a devaluation of such a magnitude without taking the risk of a cataclysm – capital flight and increasing interest rates, inflation and unemployment? Besides a domestic agreement to refrain transitory price increases, this would require support and coordination from outside. An international institution providing liquidity – guaranteed and supported by domestic reserves – would be required to support this process of controlled depreciation.

The IMF in its origins, back in the 1940s, has been set up to correct exactly this kind of imbalances; however, the Fund of today is far from playing this role. While a global solution is not on the horizon, better alternatives could be devised. Here, the BRICS have realized a double movement: the articulation of a common arrangement to protect against the instability of international capital flows, and the demonstration of solidarity among the major developing economies. At the BRICS summit in Fortaleza, they created a Contingent Reserve Arrangement (CRA) which pools $100 billion. China allocated $ 41 billion; Brazil, Russia and India, $ 18 billion each; South Africa, $ 5 billion (see the Full statement of the BRICS summit).

Each of these countries bears specific fragilities: Brazil, India and South Africa are listed among the 'fragile five', given their high current account deficits, low investment and GDP dynamism, together with increasing domestic prices and interest rates; China has been facing a certain economic slowdown and deleveraging of local governments and of its shadow financial system; Russia has been fighting capital flight. Nevertheless, they dispose of over $3,5 trillion of currency reserves. It is quite improbable that all these countries face external shocks at the same time.

It seems to be important that this mutual support comes without conditionalities (probably with the creation of a secretariat to provide the exchange of information and pursue mutual surveillance). The experience of the Latin American Reserve Fund FLAR comprising a group of Andean countries shows that a regional mechanism can provide liquidity with high speed – which is highly relevant in financial crisis – and without conditionalities. No member country ever defaulted on its debts with FLAR since the mechanism was founded in 1978.

Considering the role that each of these countries plays in its region, they could create and support similar tools of regional financial and monetary cooperation. These might range from bilateral swap arrangements or regional currency pools to payment systems which foster regional trade, among others (see also an UNCTAD study on “Regional momentary cooperation and growth-enhancing policies: The new Challenges for Latin America and the Caribbean”)  This variety of defense mechanisms against abrupt shifts of global capital flows between the BRICS and their neighbors could contribute to reduce uncertainties and improve the governance of the international financial order.

For today, the creation of the BRICS currency reserve arrangement is a highly welcome step which should come to operate quickly. It has the ability to support the BRICS’ insertion into global markets, and helps to avoid austerity and deflationary policies in the more fragile of these economies.

[1] Initiative for Policy Dialogue at Columbia University. E-mail: <[email protected]>.

[1] Institute for Latin American Studies at the Free University of Berlin. E-mail: <[email protected]>.

[1] Institute for Applied Economic Research (IPEA), Brazil. E-mail: <[email protected]>.

Dear friends

It is very reassuring reading D Rodrik's column on Project Syndicate about how even the rich need governments and public institutions. The problem is that very often the super rich determine the policies and actions undertaken by national governments. This was the main argument of Oxfam's report "Working for the Few"  which I co-authored. (Here's the link http://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdf)

In this report, we wrote "When wealth captures government policy making, the rules bend to favor the rich, often to the detriment of everyone else. The consequences include the erosion of democratic  governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all. Unless bold political solutions are instituted to curb the influence of wealth on politics, governments will
work for the interests of the rich, while economic and political inequalities continue to rise. As US Supreme Court Justice Louis Brandeis famously said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’"

What worries me is not that the rich opt out of participating in society, but that they use their voice and financial clout to shape the rules of the games - as the US example after the financial crisis mentioned by Rodrik shows. Using Hirschman terminology, it's not their exit from the political process and society but their undue voice that's of most concern.

Ricardo

Ricardo Fuentes-Nieva
Head of Research
Oxfam GB
Tel: +44 (0) 1865 472 326
Mobile: +44 (0) 7881 733 116
https://twitter.com/rivefuentes

Dear friends

The very rich, F. Scott Fitzgerald famously wrote, “are different from you and me.” Their wealth makes them “cynical where we are trustful,” and makes them think “they are better than we are.” If these words ring true today, perhaps it is because when they were written, in 1926, inequality in the United States had reached heights comparable to today.

During much of the intervening period, between the end of World War II and the 1980s, inequality in the advanced countries was moderate. The gap between the super-

rich and the rest of society seemed less colossal – not just in terms of income and wealth, but also in terms of attachments and social purpose. The rich had more money, of course, but they somehow still seemed part of the same society as the poor, recognizing that geography and citizenship made them share a common fate.

As the University of Michigan’s Mark Mizruchi points out in a recent book, the American corporate elite in the postwar era had “an ethic of civic responsibility and enlightened self-interest.” They cooperated with trade unions and favored a strong government role in regulating and stabilizing markets. They understood the need for taxes to pay for important public goods such as the interstate highway and safety nets for the poor and elderly.

Business elites were not any less politically powerful back then. But they used their influence to advance an agenda that was broadly in the national interest.

By contrast, today’s super-rich are “moaning moguls,” to use James Surowiecki’s evocative term. Exhibit A for Surowiecki is Stephen Schwarzman, the chairman and CEO of the private equity firm the Blackstone Group, whose wealth now exceeds $10 billion.

Schwarzman acts as if “he’s beset by a meddlesome, tax-happy government and a whiny, envious populace.” He has suggested that “it might be good to raise income taxes on the poor so they had ‘skin in the game,’ and that proposals to repeal the carried-interest tax loophole – from which he personally benefits – were akin to the German invasion of Poland.” Other examples from Surowiecki: “the venture capitalist Tom Perkins and Kenneth Langone, the co-founder of Home Depot, both compared populist attacks on the wealthy to the Nazis’ attacks on the Jews.”

Surowiecki thinks that the change in attitudes has much to do with globalization. Large American corporations and banks now roam the globe freely, and are no longer so dependent on the US consumer. The health of the American middle class is of little interest to them these days. Moreover, Surowiecki argues, socialism has gone by the wayside, and there is no need to coopt the working class anymore.

Yet if corporate moguls think that they no longer need to rely on their national governments, they are making a huge mistake. The reality is that the stability and openness of the markets that produce their wealth have never depended more on government action.

In periods of relative calm, governments’ role in writing and upholding the rules by which markets function can become obscured. It may seem as if markets are on autopilot, with governments an inconvenience that is best avoided.

But when economic storm clouds gather on the horizon, everyone seeks shelter under their home government’s cover. It is then that the ties that bind large corporations to their native soil are fully revealed. As former Bank of England Governor Mervyn King aptly put it in the context of finance, “global banks are global in life, but national in death.”

Consider how the US government stepped in to ensure financial and economic stability during the global financial crisis of 2008-2009. If the government had not bailed out large banks, the insurance giant AIG, and the auto industry, and if the Federal Reserve had not flooded the economy with liquidity, the wealth of the super-rich would have taken a severe blow. Many argued that the government should have focused on rescuing homeowners; instead, the government chose to support the banks – a policy from which the financial elite benefited the most.

Even in normal times, the super-rich depend on government support and action. It is largely the government that has financed the fundamental research that produced the information-technology revolution and the firms (such as Apple and Microsoft) that it has spawned.

It is the government that enacts and enforces the copyright, patent, and trademark laws that protect intellectual property rights, guaranteeing successful innovators a steady stream of monopoly profits. It is the government that subsidizes the higher-education institutions that train the skilled work force. It is the government that negotiates trade agreements with other countries to ensure that domestic firms gain access to foreign markets.

If the super-rich believe that they are no longer part of society and have little need of government, it is not because this belief corresponds to objective reality. It is because the prevailing story line of our time portrays markets as self-standing entities that run on their own fuel. This is a narrative that afflicts all segments of society, the middle class no less than the rich.There is no reason to expect that the super-rich will act less selfishly than any other group. But it is not so much their self-interest that stands in the way of greater equality and social inclusion. The more significant roadblock is the missing recognition that markets cannot produce prosperity for long – for anyone – unless they are backed by healthy societies and good governance.

Published at Project Syndicate - best regards,

Dani Rodrik
Professor of Social Science
Institute for Advanced Study
Einstein Drive
Princeton, NJ 08540 USA

Dear all,

After 16 months of deliberations, the Open Working Group (OWG) on Sustainable Development Goals adopted by acclamation this Saturday (19 July 2014) at the United Nations a set of 17 proposed goals that will be submitted to the General Assembly in September, and will jump start the final phase of negotiations before the adoption a new UN development agenda in 2015.

The report is available in the following link:
http://sustainabledevelopment.un.org/focussdgs.html

For some there is still a long road ahead towards a more concise and limited set of global priorities. Others might have different views on missing issues, alternative wording, level of ambition and framing of the goals and targets. Development is never an easy process, especially when needs to be sustainable and agreed among 192 countries. Overall the Group delivered a great outcome articulating the most pressing global issues in a consistent way and reaching compromise solutions on very sensitive issues. Following a 36 hours marathon negotiating session the sentiment in room on Saturday morning was that this was the best possible result.  

In particular, the combination of inclusive growth and decent work for all into a sustainable development goal is most welcome! Targets on social protection/social protection floors, decent work for all, youth employment, labor rights, child and forced labour, fomalization and SMES, skills development are also outstanding commitments for a truly transformative post 2015 development agenda.

So far so good... but looking forward to the coming chapters.


Please have a look at our short summary:
http://www.ilo.org/newyork/news/WCMS_250039/lang--en/index.htm

Best, Vinicius

Vinicius Carvalho Pinheiro
Deputy Director
ILO Office for the United Nations
1 Dag Hammarskjold Plaza
885 Second Avenue, 30th Floor
New York, NY 10017
Tel: +1 212 697-1196
www.ilo.org

Dear friends,

70 years ago, the 22nd of July 1944, the United Nations Monetary and Financial Conference, better known as the Bretton Woods |1| Conference, that had lasted for three weeks, reached a conclusion. It was attended by representatives from 44 countries |2|.
In order to prevent a recurrence of economic crises like the crash of 1929, but also to ensure world leadership in the post-war era, the United States government began to plan for the creation of international financial institutions as early as 1941. The World Bank and the International Monetary Fund saw the light of day at the Bretton Woods Conference of 1944 held in Bretton Woods, New Hampshire. Initially, the Roosevelt administration was in favour of creating strong institutions capable of imposing rules on the private financial sector, including Wall Street. But noticing the hostility of the banking world Roosevelt backed down. Indeed, the distribution of votes within the World Bank and the International Monetary Fund clearly illustrates the will of certain major powers to exert domination over the rest of the world.
http://cadtm.org/Concerning-the-founding-of-the 
 

Eric Toussaint
Senior Lecturer at the University of Liège
President of CADTM www.cadtm.org
345 Avenue de l'Observatoire, 4000 Liège Belgique

Dear Friends

For a brief summary of some critical views expressed at a meeting of think-tanks, civil society activists and academics on the BRICs Bank, you may want to read: 

http://www.ipsnews.net/2014/07/international-reform-activists-dissatisfied-by-brics-bank/

Best

CPC

C.P. Chandrasekhar
Professor at Jawaharlal Nehru University
New Delhi, India
http://www.networkideas.org/
http://triplecrisis.com/

Dear friends,

Attached some initial comments on the BRICS Contingent Reserve Arrangement (CRA) - the enclosed piece might be of interest to you.

All the best, M F Montes

Butch Montes

Senior Advisor on Finance and Development, The South Centre

Ch. du Champ d'Anier 17, C.P. 228, 1211 Geneva 19

Switzerland

Tel. +41 (0) 22 791-8165;  

email: [email protected] ;  

web: www.southcentre.org

Dear colleagues,

When I read the news that the BRICS bank and the CRA had been created I was very thrilled and celebrated. I think we should all do so.

Like many of us, I had been advocating for many years that the South should have a  far greater say in global governance; in the last 10 years, i was arguing the emerging and developing economies should have their own  financial institutions, as they had the savings and the forex resources to do this; for an early paper prepared  for G24  on this, see http://www.stephanygj.net/papers/Enhancing-Role-RDBs.pdf

I think it is a marvelous achievement that the BRICS have created these institutions and we should do all we can to both support it and make constructive suggestions on how they may wish to do it so as to maximize impact on sustainable and inclusive development.

I think the BRICS(new Development ) bank is clearly a very valuable institution. There are huge unmet needs in infrastructure, including for giving clean water and electricity to the many who do not have it, but also to build key infrastructure for supporting structural change and sustainable development. Bhattacharya, Romani and Stern estimate this need at around $1 trillion a year! The existing institutions cannot do it on their own, so the New Development Bank can help supplement existing investment . In my recent paper for UNCTAD
http://www.stephanygj.net/papers/BRICSBankUNWorkingPaper2014.pdf
and in the shorter piece for the Financial Times, attached
I estimate  that, given certain assumptions,  in 20 years the New Development Bank could be lending around $35 billion annually; this would be more than the World Bank currently lends for infrastructure a year. Not a panacea, but a very  important contribution, especially if-as is seems likely- the Bank is well run and fairly agile.

Clearly the New Development Bank will improve global governance, by reflecting more accurately new global  trends; it will be a  large  bank owned and run mainly by emerging and developing  economies. We should hope and expect it will be well run; it can after all build on the expertise of the CAF, the BNDES, the Chinese, Indian  and South African Development Banks, as well as that of the World Bank , Asian , African and Inter-American Development Bank. It has the advantages of latecomers, and it can learn positive and negative lessons; it can both compete in a healthy way  with,  and  clearly complement existing institutions, like the World Bank.

The CRA , the liquidity facility is also potentially very  important, as an alternative or complement to IMF ; however, it would be better if it had its own condtions and not be attached to IMF conditionality, as has been reported would be the case, beyond 30% of quota.

I look forward to further discussions in this excellent forum
Best
Stephany

Professor Stephany Griffith-Jones
Financial Markets Director
Initiative for Policy Dialogue
Columbia University USA 

Dear friends,

Adding to the BRICS Bank discussion, many of us have been following and supporting the Bank of the South. The Banco del Sur plans to utilize regional reserves to finance the development of its member countries, strengthening regional integration,  reducing poverty and social exclusion, promoting employment and activating a virtuous cycle of sustainable development, fundamental for the economic, social and political transformation of the region.

After a powerful start in 2007, when the Founding Charter of Bank of the South was signed by the Presidents of Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela, progress was halted due to internal divergences, mostly from Brazil who already had a (national) development bank —the BNDES— with a much larger investment portfolio than the World Bank in the region. A key disagreement was the issue raised by Rathin Roy and John Weeks - “One country, one vote” or “one dollar, one vote”?, among other issues described in the article "The Bank of the South: Progress and Challenges"

Good news - this July 2014 there was the first meeting of the Governing Body of the Bank of the South in Caracas. The announcement of the BRICS bank eclipsed the news, but hopefully we will have these southern banks operating soon. 
http://www.nodal.am/2014/07/realizan-i-consejo-de-administracion-del-banco-del-sur-y-afinan-los-detalles-de-su-puesta-en-funcionamiento/ 

FYI there is also the small but pioneering Bank of ALBA. Given the delays and realpolitik re: Banco del Sur, the Bank of ALBA was launched in January 2008 by smaller group of countries.  Currently, it includes contributions from Venezuela, Cuba, Bolivia, Nicaragua, Dominica and St. Vicent and the Granadines. This is a less know development bank, with a small portfolio to support ALBA regional integration processes. ALBA was created in 2006 to address the ''social debt'' of Latin America, that is, address the needs of those who have lost out in the process of globalization –and as an alternative to the Free Trade Area of the Americas (FTAA). ALBA countries argue that a new set of public policies is needed to redress social asymmetries and raise living standards, based on social spending, public investment, and macroeconomic policies geared towards employment and the expansion of national markets. ALBA is using policies of regional solidarity to pursue social transformations at both national and regional level; from literacy programs and regional universities to the promotion of industrial technology policies; from radio/TV media with indigenous content to investments in energy generation/distribution and nationally-produced pharmaceuticals.
http://www.bancodelalba.org/

I though this may be of interest - another multilateral development bank is possible…

Thanking your very interesting contributions to this e-discussion,

Best regards,
Isabel

Isabel Ortiz
Director Social Protection
International Labour Organization (ILO)

Dear John and colleagues,

I'll respond in detail soon to John's very  interesting intervention  (full disclosure: I have been intimately involved in the design of this institution since 2011). 

But one URGENT clarification:

The Bank does NOT have a governance structure in which "money votes with shares". The principle of "one member one vote" has been established.  India fought hard for this with South Africa, and I was somewhat surprised at how lukewarm the Brasilians were in supporting this principle. Anyway, to my deep satisfaction, it is now so. 

One other piece of information may be of interest. I was tasked to write the design note on the governance structure for the Bank, for India to present for consideration during the negotiations. That note argued forcefully for delinking economic weight/ contribution to capital from governance clout/ voting power. That has now been achieved. The note also proposed  that the Principals should contemplate adding between one and four " stakeholder members" to the Board from amongst our Southern development partners, to be chosen by nomination or rotation. But they would have EXACTLY the same voting rights as the capital contributing partners I e one member one vote. And no vetoes. 

The exact number of such Board members would clearly be a political decision. One would be gestural. Five would be excessive as then the founder members could be outvoted by a coalition of non founders which would never fly politically in our domestic constituencies .. thus between two and four stakeholder  members depending on the leaders appetite for  South solidarity and mutuality. 

This proposal has not been implemented at this time, indeed my own country bureaucrats were very uncomfortable with it, when I presented it in the design note. 

Even so, our  (new) political leadership thought the idea worth airing in Fortaleza. 

As far as I can see it's not been trashed, either. So I live in hope. 

Best
Rathin

Rathin Roy
Director and Chief Executive 
National Institute of Public Finance and Policy
Ministry of Finance
New Delhi, India 

Friends,

I have a skeptical view on the BRICS bank, which I provide below. The original, with some graphics, can be found on Open Democracy,
http://www.opendemocracy.net/od-russia/john-weeks/brics-bank

John Weeks
Professor Emeritus School of Oriental and African Studies,
University of London, UK 

The BRICS Bank

For many years various officials of governments in African, Asian and Latin American have urged the creation of a "development" bank that they would control.  On Tuesday 15 hopes become reality in Forteleza, Brazil with the formal creation of the New Development Bank by the leaders of the so-called BRICS group of countries (Brazil, Russia, India, China and South Africa).

            This event raises several political questions for progressives:  1) what is a type of "bank" do the BRICS leaders propose, 2) why is it needed, 3) are these the appropriate leaders to organize and control the new institution, and 4) is it something progressives should view favourably?  

            The BRICS proposal has two parts, a "development" bank and a US$ 100 billion reserve of international currencies.  The former has similarities to the operations of the World Bank, while the latter would have some functional kinship with the International Monetary Fund.  At this point the plans for the second -- short term support for balance of payments problems -- remain a work process.  Those for the first are quite clearly specified.

            A little tedious background is necessary.  An international "development" bank is a non-profit, cross-country, public sector institution that makes loans to governments for long term projects, either directly productive ones (e.g., a hydro-electric dam) or supportive of productive activities (e.g., roads and highways).  A development bank's sine qua non lies in offering loans at more favourable terms than private banks.

             The Bretton Woods conference of 1946 created the World Bank to provide loans of this type.  In addition, African, Asia and Latin America each has a regional development bank (the African Development Bank, the Asian Development Bank, and the Inter-American Development Bank).  Why is another one needed?

The answer is simply stated -- global power and its changing distribution over the last fifty years.  The proposals for the IMF and the World Bank at the end of WWII assigned voting power to the contribution of each member government to the capital base of the institution.  In contrast, each country would have had one vote in the International Trade Organization (ITO), proposed at the Havana conference of 1947-1948 to regulate world trade.  The Open Democracy reader will not be startled to learn that opposition from US government resulted in the early death of the ITO.

In practice the IMF and World Bank voting shares conformed to the demand of the US government to have control of both institutions.  The governments of the countries that emerged as the victors in WWII held the overwhelming majority of votes in both the IMF and the World Bank with the US government grabbing the largest share.

The institutional power held by the United States, Great Britain, France and Canada became increasingly disproportional to their economic power as the Federal Republic of Germany ("West Germany") and Japan emerged to be major economic actors (this anomaly would be even greater in the UN Security Council with no permanent seat for either).  Bitter complaints about this imbalance resulted in marginal adjustments to voting shares among the developed countries, but peanuts for the economically blossoming BRICS.

The first complain by the BRICS governments that prompts the new bank is lack of power.  They want a financial institution in which they hold the controlling shares.    Closely related to this aspect of institutional power is the long-standing opposition -- even outrage -- among governments in the developing world at the policy conditions attached to IMF and World Bank loans (and grants for the latter). 

In the World Bank the use of these well-known and notoriously anti-development conditions substantially increased with the institution's shift from "project lending" -- most of it for infrastructure -- to "budget support".  In the 1970s almost all World Bank lending went to projects.  In the 1980s came the Latin American debt crisis and with it a massive shift in the World Bank to loans directly to governments with their use not specified. 

For example, in place of a requirement that US$ 200 million to Zambia be used to build a hydro-electric damn, conditions would require the government to privatize public enterprises, savagely cut government employment, and drastically slash public sending.  The implicit and frequently explicit purpose of these conditions was to convert the recipient governments to extreme neoliberal economic policies.  Brazil (in the 1980s) and Russia (in the 1990s) especially suffered from this ideological driven "structural adjustment".  All the regional development banks joined into the neoliberal conditionality game with varying degrees of enthusiasm.

            In summary, the BRICS bank would provide a less ideological source of lending for infrastructure, and in doing so shift some power in global governance away from the governments of the G7 countries.  It would appear that any government in the developing world could qualify to join and apply to borrow.  However, it is a bit geographically challenged to describe it as the development bank of the "South" given that Russia is one of the founding members, the largest founding member is entirely north of the Tropic of Cancer except for a tiny sliver (China), and a third was entirely north of the equator the last time I checked a world map (India).

            Setting aside pedantries about location, is this Gang of Five likely to shift international lending in a humane and flexible direction as Oxfam hopes?  We should note that the voting proposal for the BRICS bank follows the IMF/World Bank model -- money votes with shares reflecting each government's financial contribution.  The largest voting share goes to China, whose record on investments in Africa is nothing short of appalling (see my discussion of Chinese capital in Zambia). 

Given the BRICS objection to US domination of the IMF and World Bank, I would have expected them to take the obvious lesson that they should not locate the institution in the territory of the largest member (see "BRICS bank to be headquartered in Shanghai").  The warm endorsement of the New Development Bank by the president of the World Bank suggests complementarily rather than tension between it and the Bretton Woods "Twins".

            How should progressives react to the BRICS bank?  Many predict or at least hope that the new lending institution will improve the access of middle and low income countries to financing for infrastructure.  This is likely to be realized, because World Bank project loans not only carry neoliberal conditions, the procedures to obtain them are extremely bureaucratic.  If the BRICS bank can operate less bureaucratically than the World Bank, that would be a substantial gain in itself.

            However, it is worth asking what to me is the obvious question -- why is it necessary for countries to borrow to built a new airport (for example)?  The problem is never "money".  Any government of a country that has its own currency can borrow from the central bank (this would not apply to the 14 members of the West and Central African currency zones).  Only one reason comes to borrow abroad mind, that the project may require substantial imports of materials.  Thus, the purpose of the borrowing is to obtain US dollars, yen, renminbi, etc. 

            Since the purpose of the loan is to obtain foreign currency, the process by which the BRICS bank reviews and assesses specific projects involves of the same unnecessary bureaucracy that we find in the World Bank.  The suspicion most to my mind that the purpose of the BRICS bank, as a project funding bank, is to link the finance to construction firms and materials suppliers in the BRICS themselves.  Certainly, the Chinese government is notorious for doing this (see "China insists on 'tied aid' in Africa").

            Much better than a project bank for the "South" would be an institution providing long term loans in foreign currencies.  This would have several major advantages over the BRICS bank.  First, the loans could be made on the basis of a judgement about the ability of the government to repay, not a narrow assessment of specific project.  This rather difficult judgement is the de facto basis of all loan repayment -- can the country's export sectors generate the foreign exchange to service the debt?

            Second, the borrowing country's external debt would increase by the foreign currency component of the project.  The rest would be financed domestically.  This arrangement would be in line with the famous advice of John Maynard Keynes in 1933, "let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national" (emphasis added). 

Dear friends,

This week leaders of the BRICS countries meet in Brazil to forge historic new financial arrangements in a Development Bank and Foreign Exchange fund.

Conveniently scheduled at the end of the World Cup, leaders of the BRICS countries travel to Brazil in mid-July for a meeting that presents them with a truly historic opportunity. While in Brazil, the BRICS hope to establish a new development bank and reserve currency pool arrangement.

This action could strike a true trifecta - recharge global economic governance and the prospects for development as well as pressure the World Bank and the International Monetary Fund (IMF) - to get back on the right track.

The two Bretton Woods institutions, both headquartered in Washington, with good reason originally put financial stability, employment and development as their core missions.

That focus, however, became derailed in the last quarter of the 20th century. During the 1980s and 1990s, the World Bank and the IMF pushed the "Washington Consensus," which offered countries financing but conditioned it on a doctrine of deregulation.

The legacy of the "Washington Consensus"
With the benefit of hindsight, the era of the Washington Consensus is seen as a painful one. It inflicted significant economic and political cost across the developing the world.

What is more, the operations of the World Bank and the IMF are perceived as rigged against emerging market and developing countries. The unwritten rule that the head of the IMF is always a European and the World Bank chief is to be an American is only a superficial but no less grating public expression of that.

Worse still is the fact that the voting structure of both institutions is skewed toward industrialized countries - and grants the United States veto power to boot.

It wasn't always that way. As Eric Helleiner shows in one of his two new books Forgotten Foundations of Bretton Woods: International Development and the Making of the Postwar Order, China, Brazil, India and other countries wanted development goals to remain a core part of the Bretton Woods institutions.

Some of their proposals eventually made it into the policy mix of the World Bank and the IMF, including short-term financing, capital controls and policy space for industrial policy.

Enough is enough
When these institutions failed to predict the global financial crisis of 2008, however, the BRICS and other emerging market and developing countries said enough is enough. First, they tried to work inside the system by proposing reforms that would grant them more say in voting procedures.

However, the U.S. Congress has failed to approve the small stepwise reforms of that process - even though the United States would have maintained its veto power.

BRICS and other emerging market nations also joined the G-20 in hopes that it would be a more pluralistic venue for global cooperation.

The G-20 did hold a landmark 2009 meeting where a new vision was articulated for global economic governance, but none of the promises - especially the coordination of macroeconomic stimuli to recover from the crisis and comprehensive reform to prevent the next one - were realized.

A "Rio Consensus"
Now the BRICS are taking matters into their own hands. Their governments have been diligently putting together two new institutions that hold great promise - a new development bank and a new reserve pooling arrangement.

The development bank would provide financing to BRICS and other emerging market and developing countries for infrastructure, industrialization and productive development. The reserve pool would allow BRICS and other nations to draw on pooled reserves in the event of balance of payments crises or threats to their currencies.

When these institutions are launched in Rio this July, BRICS could and should forge a "Rio Consensus" - provided they do not make the same mistakes of other, mostly Western-inspired "models" in the past. The key is to make it a model for global economic governance in the 21st century.

The new bank on the bloc
The key elements of a Rio Consensus are a definite step in that direction. At its core is a commitment to financial stability and productive development in a manner that is inclusive, honors human rights and is environmentally sustainable.

Organizations carrying out such a mission should also have a more equitable organizational structure with open and transparent rules. This crucially includes the mechanism for picking leaders and a more equal voting system for existing and new members.

Not only will such a framework and structure enable more appropriate finance for development and stability, it can also serve as a moral model of reform that can someday be achieved in the two Washington-based institutions themselves. This will give BRICS more leverage - and an opt-out if the industrialized countries stay set in their ways.

Published at The Globalist.
Best regards

Kevin P. Gallagher
Associate Professor of International Relations
Co-director  Global Economic Governance Initiative
Boston University
154 Bay State Road
Boston, Massachusetts 02215

Dear all,

Many countries aim at universal health coverage. This requires a sufficient number of health workers for the delivery of health services to the sick. However, currently there is a shortfall of around 10.3 million health workers worldwide to ensure that all those in need receive health care. Deficits in the health workforce are particularly observed in low-income countries  where, as a result, close to 90 per cent of the population has no access to health care. As a result avoidable deaths, for example in the case of difficult deliveries and unnecessary suffering due to long waiting lists for surgery are frequent in these countries.

According to estimates of the ILO’s World Social Protection Report, a country should have on average 41.1 health workers per 10,000 people to be able to provide essential health care to its entire population. But in many low-income countries this is far from a reality. For example, in countries like Haiti, Niger, Senegal and Sierra Leone, there are only five or fewer health workers available for as many as 10,000 people, compared to 269 in a high-income country such as Finland. Asia is the continent where most additional health workers are needed (7.1 million), followed by Africa (2.8 million). 

A major reason for the significant shortage of health workers relates to the low level of salaries. In Sudan, Egypt and Myanmar, for instance, health sector wages are only 1 per cent above the poverty line of US$2 a day.

The global economic crisis led many countries to introduce fiscal consolidation policies as a way of reigning in public spending. As a result, the wages of civil servants – among them health workers – were cut or capped in as many as 98 countries, including 75 developing countries. According to the World Social Protection Report, public expenditure was cut in 122 countries, among them 82 developing countries. 

More details are available at
http://www.ilo.org/global/about-the-ilo/newsroom/comment-analysis/WCMS_249229/lang--en/index.htm

Best regards,

Xenia Scheil-Adlung
Health Policy Coordinator
Social Protection Department
International Labour Organization
Route des Morillons 4
CH - 1211 Geneva 22
[email protected]