Rethinking Bretton Woods | Fri, Dec 12, 2008
MONTERREY CONSENSUS BARELY HOLDS ITS OWN IN DOHA.. BUT THAT 'S NOT NEARLY ENOUGH
As anticipated, from November 29 through December 2, the Review Conference on Financing for Development was held in Doha, Qatar. The conference was a follow up to the summit held in Monterrey in 2002, and the first meeting at that level to review the implementation of the commitments made back then. After decades in which the UN was marginalized from economic policy-making issues, the Monterrey Conference had been the first time that economic issues were brought back to a political negotiation within the framework of the UN. Two are the main trademark features of the conference that made it important for an agenda concerned with people-centered development. One, it brought together all stakeholders, including not only the main global economic institutions, but also civil society and the private sector. Second, it dealt comprehensively and in a holistic way with all sources of financing for development, placing on the agenda structural aspects of the global economy that typically remained off-boundaries in ordinary discussions on aid. At the same time, in the word of one of the officials attending the Monterrey Conference, it was “not the end of the road, but just the beginning.” As a continuation of it, therefore, great expectations were placed on the Doha Conference.
No doubt the major achievement in Doha was the agreement –and one that was in question up to the last minute—that the UN will convene a summit-level meeting on the world financial and economic crisis and its impact on development. The proposed summit had been heavily resisted, in particular by the U.S., but also by other developed countries, under the argument that the process within the Group of 20, started by a summit called by President Bush in November, was better positioned to discuss matters of reform of the global financial system.
Besides this agreement, the Doha Outcome Document managed to maintain—but rarely to advance—the full agenda of the Monterrey Consensus, inclusive of all sources of finance. With regards to domestic resources, the Doha Outcome Document recognizes the need to promote international cooperation on tax matters and calls for an examination of how to strengthen relevant institutions, such as the UN Committee of Experts for Intergovernmental Cooperation on Tax Matters.
The chapter on investment contains little worth supporting. The dismal performance of investment as a source of development finance is not the subject of any analysis. Instead, the “more is better” approach to foreign investment, unwarranted by existing research, prevails throughout the chapter. The assertion in this context that every state shall freely exercise full permanent sovereignty over all its wealth, natural resources and economic activity is one of the few high points.
The trade chapter calls, predictably, for a conclusion of the Doha Round under the World Trade Organization (WTO). It does, however, mention that success should not only be defined by export expansion in developing countries –this could well come without any increase, or even with a decrease, of income for the exporting country. Rather, a “successful” conclusion would “reinforce the potential for trade to play its due role as the engine of growth and development, and provide increased opportunities for developing countries to use trade to support development.” The need to improve the operation of the multilateral trading system to better respond to the needs and interests of all developing countries, at a time that “the systemic impact of the financial crisis is affecting us all,” is also mentioned.
The section on aid observes that the increases in aid since 2002 were comprised partly of debt relief (which should not have been counted as aid), and notes that aid is again in a decreasing trend. The outcome steers away from equating aid effectiveness with the Paris Declaration on Aid Effectivenessand its follow up, , a process that was launched by the OECD and a number of recipient countries invited to it and that has been criticized for undermining, rather than supporting, the principles of ownership and mutual accountability that it ostensibly set out to promote. This constitutes an important recognition that such an OECD-driven agenda is not representative of a universal consensus by donors and recipients. Instead, it mentions the Development Cooperation Forum as the focal point within the United Nations for holistic consideration of issues of international development cooperation. It entrusts to this forum, also, the consideration of a report to be submitted by the Secretary General on a more systematic and universal way to follow “quantity, quality and effectiveness” of aid.
Unfortunately, some retrogression from Monterrey can be detected in the debt chapter. The important link between debt sustainability indicators and the financing needs of countries in order to achieve the Millennium Development Goals has been watered down. Instead, there is recognition that in order to achieve such goals while maintaining debt sustainability, an increasing amount of grants and concessional loans should be provided. In terms of progress towards some fairer institutions to arbitrate or mediate debt issues, there are paragraphs for all tastes. But in the clearest mention of “enhanced approaches of sovereign debt restructuring mechanisms”, the document says that debt restructuring should be based on “existing frameworks and principles” and include “an important role for the Bretton Woods Institutions.” This statement could be read as a limitation against pursuing efforts outside of the Paris Club or to placing the Bretton Woods Institutions, creditors themselves, on an equal footing with other creditors in new debt restructuring mechanisms. Yet, there is recognition that the financial crisis may undo years of work on debt relief and a call for future “bold and encompassing” initiatives to address the problem, including debt cancellation.
The systemic issues section, which deals with the more structural reform of the international monetary, financial and trading systems, was the area of least progress since Monterrey, but the assessment in this section fell short of acknowledging the shortcoming (the mention that developing countries’ increased mobilization of domestic resources was the area of greatest progress, was also inexplicably dropped from the concluding document). The lack of progress is in evidence, nonetheless, in several paragraphs that are simply repeats of the calls contained in the original Monterrey Consensus.
Some progress was achieved, compared with Monterrey, in terms of the role of human rights and gender equality in financing for development. Yet, as women’s’ groups mentioned in their statement , such commitments will only be meaningful if “the systemic issues that underpin poverty, asymmetries and mal-distribution of power and resources in the global political economy are decisively addressed.”
Summing up, it may be fair to say the Monterrey Consensus barely held its own. The question is, is this acceptable? Seven years after Monterrey, in the face of the worst financial crisis since the Great Depression and when meager progress in poverty reduction and human development of the last decade are under threat of being rolled back, the answer is clearly no.