WIDER Growth and Poverty Conference Reform the UN and The

World Institute for Development Economics Research No. 1/2001 WIDER Growth and Poverty Reform the UN and Conference the Bretton Woods an economic growth reduce poverty? Will the 1.2 Institutions Cbillion people living on less than US$1 a day see much benefit from current policies? What do we need to do to by Deepak Nayyar ensure that more poor people share the benefits of growth? These are some of the questions which were discussed by 120 researchers and policy-makers from over 30 countries at the WIDER Development Conference on Growth and Poverty in May (25-26) in Helsinki. Building on some of the themes of the World Bank’s Development Report 2000-2001, and UNDP’s annual Human Development Report, the conference reviewed what is presently known about the relationship between growth and poverty. And it provided a forum for an exchange of views between researchers and policy-makers. The meeting also highlighted issues that require much more attention if Deepak Nayyar presenting his lecture world poverty is to be reduced at a faster rate. he United Nations, the World Bank and the Poverty has fallen significantly in the fast growing Asian TInternational Monetary Fund, created at the economies over the last 3 decades: some countries saw end of the Second World War, today operate on their poverty rates cut in half. The number of people living outdated political and economic foundations. on less that US$1 a day in East Asia fell from 452 million in They need to be overhauled before a crisis induced 1990 to 278 million in 1998. However, in Sub-Saharan Africa by globalization forces the changes required. The the number of poor people rose from 242 million in 1990 to UN and its security council together with the 290 million in 1998, in part because economic growth was Bretton Woods Institutions (BWIs) need urgent either slow or negative. reform to meet globalization’s challenges. The participation of the poor in growth, and therefore It took a world war and a worldwide economic growth’s benefit to them, depends on their access to land, depression to create the UN and the BWIs. Fifty education, and markets. If this access is limited, then their years on the international community should not benefits from growth will be limited. Hence, policies such wait for a crisis of such proportions to take action as land reform, more investment in education, and market on global governance. reform are often required to reduce poverty at a fast rate. Women are often disproportionately poor, so gender Its Time to Reform the Reformers discrimination in education spending and employment must The BWIs are the most ardent advocates of also be tackled. economic reform. It is now time to reform the Moreover, policies to raise economic growth can reformers. Both institutions were created to sometimes have adverse short term effects, including manage the international payments system and higher unemployment, greater economic insecurity, and the to help Europe reconstruct. This was at a time weakening of traditional safety nets. And policies for growth shaped by memories of the Great Depression. that ignore the environment, may cause pollution, soil But the world has changed since then. BWI erosion, and deforestation, thereby damaging the orthodoxy has not resolved the economic livelihoods and the health of the poor. All conference papers problems of borrowing countries: deep poverty are available at: www.wider.unu.edu and inequality persist. And the BWIs are The United Nations University incapable of effectively managing needed to manage global macro- co-operation between nation states today’s international financial economics and prevent crises. which facilitates co-ordinated action system—in particular the instability What are the foundations for a and co-operative behaviour is and volatility of exchange rates and new system of macroeconomic needed. Above all, it is essential to capital flows. The essence of the management? create institutional mechanisms that problem is international capital flows give poor countries and their people The cornerstones must be instit- without any international controls. a voice in the process of global utional mechanisms to foster In fact, globalization has accentuated governance. consultation, consistency, and the crisis of development. surveillance of national macro- The IMF must manage and stabilize economic policies. This must be Ways Forward the international financial system, supported by more emergency not only through crisis management finance, available before (not after) Establish a Global People’s but also through more crisis international reserves are depleted Assembly, modeled on the prevention. It is high time the IMF in times of crisis. Standstill European Parliament, to run practices what it preaches about procedures, or orderly debt workout transparency. Accountability is an procedures, must be initiated to deal parallel to the General imperative without which the Fund with country debt problems, in the Assembly but to serve as the will continue to pursue the interests same way that these procedures voice of global civil society of a subset of the international handle private-sector bankruptcy community—often to the detriment procedures. And countries need Create an Economic Secu- of the general interest of peoples and more support in developing minimum rity Council to govern governments or the collective standards in prudential regulation, globalization, and to ensure interest of the world economy. supervision, and accounting. that the UN provides an The World Bank should cease to be Governing Transnational institutional mechanism for a moneylender and transform itself Corporations consultations on global into an institution more concerned economic policies and also, with development, focused on An international system of development activities in poor governance for transnational wherever necessary, to act countries. Accountability at the corporations is also needed. This as an international regulatory World Bank is limited to finance should focus not only on the authority. ministries and central banks. An rights—but also the obligations— independent evaluation of Bank- of transnational corporations. Establish a high quality supported projects and programmes Restrictive business practices Volunteer Police Force should be a first step to improving should be curtailed, and an to de-politicize UN its accountability to governments international regime of anti-trust inter-vention, and enable and peoples. laws created. This can build on efforts by the UN Conference on it to provide a prompt The number of humanitarian crises Trade and Development, the collective security response with their legacy of death, experience of the EU, and initiatives whenever humanitarian displacement, and destruction, has by the OECD and the IFC. risen dramatically over the past emergencies arise. decade. The response of the Globalization has reduced the power international community and of the of national governments in UN—in peace-keeping, helping economics and politics without a Professor Deepak Nayyar is refugees, mine clearance, corresponding increase in effective Vice-Chancellor of Delhi University, reconstruction etc—has been ad international co-operation or a member of the WIDER Board, and hoc, inadequate or simply not supra-national government which director of the WIDER project on forthcoming. There is still no system could regulate this market driven ‘New Roles and Functions for the in place to take care of—let alone process. Without effective UN and the Bretton Woods prevent—complex humanitarian international oversight, international Institutions’. This article is based emergencies. Action is urgently problems (such as international on Professor Nayyar’s public lecture required (see Box). crime, or trade in drugs, guns, ‘The Governance of Globalization’ people, and human organs) will on 18 June 2001 at WIDER in Missing Institutions increase while international public Helsinki. Research papers from this project are available through International capital markets have goods (world peace and sustainable the Institute’s Web site at undergone explosive growth since development) will be undermined. www.wider.unu.edu 1944. A new financial architecture is An international mechanism for 2 The End of History by Ravi Kanbur FAO Photo by G. Bizzarri hen the Berlin Wall fell in 1989, Wit was famously heralded as "the end of history" the end of all "big" debates on the organization of economies and society. Triumphalism aside, there is no doubt that in the early 1990s there was a sense that a consensus could be reached on key issues of economic policy, distribution and poverty. But the 1990s saw the disastrous consequences of mismanaged transition in the formerly communist economies, the financial crises in Mexico, East Asia and Russia and, finally, the debacle in Seattle. In the year 2000, the governors of the World Bank and the IMF—organizations Measures to empower the rural poor are crucial to development whose self-stated mission is to and B, characterized as the "Finance Before exploring these disagree- promote poverty reduction and Ministry" and "Civil Society" ments, it is as well to record here growth—could only meet under tendencies. Group A types are those growing areas of agreement and police protection, under siege by who tend to believe that the cause consensus across these groups in those who believe that the policies of poverty reduction is best served such areas as international public they espouse benefit the

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