10/28/2000
Prepared by Madina Fassassi
For Professor Ahmad Kamal
Class: International Organizations and Their Management: The United Nations System
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The institutions
One important element of the actual international financial system is of course the Bretton Woods institutions: The World Bank, the International Monetary Fund (IMF) and the World Trade Organization created later, in 1995. The World Bank with its five institutions1, provides loans and technical assistance to developing countries in order to reduce poverty and advance sustainable economic growth. The IMF facilitates international monetary cooperation and financial stability and provides a permanent forum for consultation, advice and assistance on financial issues. The World Trade Organization set up regulations on issues such as good trade, investments, and patents.
Major issues
A new range of issues has arisen, such as the transformation of command economies into market-oriented economies; the emergence of massive, and largely unregulated, international-capital and foreign exchange markets; and, in many countries, increasing cooperation between the government and the private sector. At the same time, old problems such as endemic poverty and the inadequacy of capital transfers to those who are in greatest need persist.
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Three propositions in order of priority:
1.To cancel poor countries debt
The overall debt of developing countries reached 2,2 billions $ in 1997, compared to 1,8 billions in 1992. Most of the indebted countries are caught in a vicious cycle that undermine any perspective of sustainable development. A debt cancellation along with a more serious check of the accountability of public officials is an efficient step to fight against one of the major problem of the present financial system: the growing gap between North and South. Moreover, this important step is a way to strengthen developing countries economy and reduce their vulnerability to speculation, which means reducing the threat of a global financial turmoil in the long-term.
2.To establish global taxes on foreign exchange trading
The establishment of a global tax such as the tax on currency exchange transaction proposed by Jame Tobin in 1972 would respond to three problems of the actual financial system. First, it will facilitate redistributional measures to close the gap between North and South since most of the financial transactions are made by interests based in developing countries. Second, it could enable the financing of the organizational infrastructure necessary for the extension of global order. And third, it will reduce the volume of transactions and therefore favor a more stable market (higher rates could be set for short-term transactions).
3. To democratize the institutions
The Bretton woods Institutions are not part of the UN system, and many people (civil society, southern countries) question its legitimacy since in these institutions, the number of vote depends on the wealth of a country. Moreover, financial issues are clearly linked to issues such as economic and social development, and environment: the international society has to take coherent decision in these three fields. Therefore, the decisions should be more and more shifted to the UN system by installing a control by the ECOSOC on the decisions taken in the Bretton Woods Institutions. The present heads of the Bretton woods Institution are now aware that they need to democratize their institution, and contacts with the United Nations have started.
Conclusion
Many propositions have been proposed for reformatting the financial architecture of the world. Among theses propositions, the cancellation of poor countries debt, the democratization of the financial institution, and the establishment of global taxes are a priority. They give a response to the three main problems of the world finance system : inequality between developed and developing countries, instability of the market, and loss of legitimacy of the present institutions. These propositions favor the concept of global governance, by democratizing the institutions and giving them useful resources ( trough global taxes); they also show the way for new institutions more able to seek long-term and cross-field solutions.
Some Sources :
International Taxation , The Trajectory of an Idea from Lorimer to Brandt By Myron J. Frankman World Development 24 May 1996, 2000
The coffers are not empty : financing for sustainable development and the role of the United Nations By Jens Martens and James A. Paul