In a new report, entitled “Development-led globalisation: Towards sustainable and inclusive development paths”, the United Nations Conference on Trade and Development (UNCTAD) calls for a fundamental reform of the current global financial system, in order to create a more stable and inclusive economic development process. If potential gains from trade are to be maximised for everyone, developing countries should have the freedom to choose their own policies to build up diversified and resilient economies, the report reads.

The report sets out the main issues to be addressed by the UNCTAD XIII conference in Doha in April, which is the first ministerial conference on trade and development to be held after the outbreak of the economic crisis. According to UNCTAD secretary-general Supachai Panitchpakdi, many governments have returned to a ‘business as usual’ approach regarding the functioning of the financial market, a development that has to be halted and reversed if the negative trends in trade are to be restored, he warned.

“Financial markets and institutions have become the masters rather than the servants of the real economy, distorting trade and investment, heightening levels of inequality, and posing a systemic threat to economic stability,” warns the report, labelling the international economic system of the last three years as “finance-driven globalization”. Under the current trading system, priority is placed on liberalisation and deregulation policies, neglecting other issues, such as technology transfer, non-tariff barriers and restrictive business practices. Such policies have strongly affected trade performances of developing countries.

The policies of unregulated financial markets, as advocated by the International Monetary Fund (IMF) and the World Bank (WB) have been criticised by the UNCTAD that has warned already in the 1990s against the consequences likely to derive from the systemic risks from derivative markets and rapid financial liberalisation processes. The report states that the IMF should not be involved in the negotiations between sovereign debtors and private creditors, as the countries addressed are among the shareholders of the fund, which also constitutes a creditor.

“Stable monetary and financial arrangements are a pre-condition for making trade and investment work for inclusive growth and development,” said Panitchpakdi. Such policies however requires the channelling towards the right kind of productive activities, as means to foster industrial development — a priority for many developing countries “because of the big opportunities it provides to raise productivity and incomes, and to get the most from international trade”.

With regards to the current aid system, the report points out that programmes in recent years have mainly focused on social areas, including education and health that has led to a lack of focus on how recipient could be enabled to mobilise their own resources for development.

Read the full report here: UNCTAD (pdf).

Sources:

• UN News Centre
• guardian.co.uk - Global development