When the governments of the world met in Doha, Qatar in December 2008 to review progress made in the area of financing for development, the first rumblings of financial chaos could be felt. It was decided that the spreading financial and economic global crisis called for a follow up conference to determine its causes and what could be done to recover. The meeting was to take place “at the highest level” and would be hosted by the only fully multilateral body – the United Nations.

President of the UN General Assembly, Father Miguel D’Escoto Brockmann opened the Conference with these challenging words: 

It is neither humane nor responsible to build a Noah’s Ark only to save the existing economic system, leaving the vast majority of humanity to their fate and to suffer the negative effects of a system imposed by an irresponsible but powerful minority.

We must take decisions that affect us all collectively to the greatest extent possible, including the broad community of life and our common home, Mother Earth.

Joseph Stiglitz, Nobel Prize Economist and Chair of the Commission of Experts established to prepare for the Conference, offers this assessment of reality:

The current global financial architecture hasn’t been working well. But more than that, it is unfair, especially to the developing countries. They will be among the innocent victims of this global crisis that wears the “made in America” label. Even countries which have done everything right — those which have managed their economy with far better regulation and better macro-economic prudence than the US — will suffer as a result of America’s mistakes. Worse, the International Monetary Fund has — at least in the past — demanded pro-cyclical policies (raising interest rates and taxes, lowering expenditures when an economy goes into a recession), while Europe and America do just the opposite. The result is that capital flees developing countries in times of crisis, reinforcing the vicious cycle.

In today’s globalized world, the biggest problems can only be addressed by more global participation: we see this in such issues as global warming and global imbalances. The G-8 is no longer the appropriate forum for these issues. Indeed, to leave the discussion to these few countries, can be counterproductive. It is reasonable to expect that the wealthiest industrial countries will try to advance their interests at the expense of others. Inviting some other countries (such as the G-20) to participate in some of the discussion might be seen as a step in the right direction. But it too may actually be counterproductive. The Club has been expanded, but it can be a two- tier system that still reflects the global inequities of the past, where not all participants are equals,

We NGOs issued a long statement to the governments meeting in the conference on the global financial and economic crisis that concluded with these words: 

The outcome document of this UN High Level Conference should reflect the urgency of the situation and contain short-term measures, to be implemented immediately as a response to the crisis. These measures must include sufficient non-debt generating funding for a global stimulus package for developing countries and economies in transition. Donor countries must fulfil their commitments of development assistance to poor countries. The crisis must not be used as an excuse.

We trust that the outcome document will specify the necessary short-term measures and also contain concrete commitments for an intergovernmental time-bound process towards long-term structural reforms. This UN Conference must be the beginning of a process for systemic change, crisis resolution and social economic and environmental justice among developed and developing countries, and economies in transition.

The Conference met from June 24-26. It gave a clear diagnosis. The patient is in trouble. The world economy has a high fever. The conference outcome document candidly describes the root causes of the crisis, including “unsustainable global macroeconomic outcomes, … major failures in financial regulation, …excessive reliance on market self-regulation, overall lack of transparency, financial integrity and irresponsible behaviour”.  To put it in the vernacular:  “uncontrolled greed”

But the decisions on how to remedy the crisis and what treatment was needed were far too weak. The decisions for action did not match the urgency of the diagnosis. Much more is needed to reform the rules governing global economic and financial activity. The institutions such as the World Bank, the International Monetary Fund and the structures, that allowed the creation of unfair rules, need radical overhaul. And the rich countries, that benefit from the way things are, resisted sharing power with other countries to make the necessary changes.      

Developed (read richest) countries wanted to deal with economic problems in an exclusive forum like the Group of Twenty (G20). In this way they could exclude most developing (read poorer) countries and NGOs. The negotiations in the weeks prior to the conference that produced the final compromise text were bruising. Many of the rich countries resisted working through the forum that this UN conference offered. Rather than work with other countries as their equals, they wanted to hold onto privilege and so they blocked a fuller agreement.

The way forward

In the pre-conference negotiations, an issue that caused much conflict was whether the conference would have an ongoing life. Rich countries wanted UN involvement to end with the conference – no follow-up mechanisms. The West ‘owns’ the World Bank and the IMF!

But the conference decided there will be an “ad hoc working group of the General Assembly to follow up on the issues contained in the outcome document” and an “ad hoc panel of experts on the world economic and financial crisis …(which) could provide independent technical expertise and analysis, which would contribute to informing international action, political decision/making and fostering constructive dialogue.”

Those hoping for a stronger decision to reform the international financial institutions and to give oversight to all member states through the UN were disappointed. But this is enough to begin to change the way things are done.

Upon the adoption by consensus of the Outcome Document, the General Assembly President said:

“The world has had the opportunity to hear the voices of the G-192. All the Members of the General Assembly have had and continue to have the chance to express their points of view. Today our efforts have culminated in the adoption by consensus of an outcome document that represents the first step in a long process of putting the world on a new path towards SOLIDARITY, stability and sustainability.

At the same time, it has been recognized that the financial and economic crisis must not delay the necessary global response to climate change and environmental degradation through initiatives for building a ‘green economy’”.

The United Nations General Assembly, the G-192, has now been established as the central forum for the discussion of world financial and economic issues, and this in itself is a major achievement. In addition, the General Assembly has been asked to follow up on these issues through an ad hoc open-ended working group.

The issues to be followed up range from crisis mitigation – including global stimulus measures, special drawing rights (SDRs) and reserve currencies – to topics such as  restructuring of the financial and economic system and architecture, including reform of the international financial institutions and the role of the UN; external debt; international trade; investment; taxation; development assistance; South-South cooperation; new forms of financing; corruption and illicit financial flows; and regulation and monitoring.

The way forward demands the attention and vigilance of NGOs, civil society and ordinary citizens to ensure life does not revert to the default position of business as usual.

For our part the U.S. administration will argue for four things:

• A robust global stimulus package that will commit all countries to financially shield the world economy from a dragged out global recession.
• Expanded regulations of financial institutions and other rules regarding the flow of capital
• A robust readjustment of the International Monetary Fund  to aid it in its mission of helping the developing world. This would triple the financial resources to the fund and offer emerging powers a stronger participation with the IMF.
• A concrete pledge against protectionism.

Certainly I will not argue the issues of global economic policies here. The onus will be on the people siting at the table in London to do this monumental task of redesigning the future of capitalism. There has already been a call to have a “group of experts” exist which can assess the efforts that may come out of this talk and I for one believe this is very appropriate since in many ways these national economies are walking through terra incognita and whatever comes out of these talks ought to be continuously evaluated and tweaked in order to adjust for unforeseen development.

My contribution with this post  is to do two things. First I would like to raise the moral position from our Catholic social tradition regarding the unsustainable global economy. Catholic social teaching has warned us against the unregulated free market time and time again as an instrument that is incapable of serving the global human community. This is because its narrow focus on quick short term profitability and the limited measurement of GDP produces an unsustainable system that does not assess long term repercussions.

But it is unfortunate that on these new conditions of society a system has been constructed which considers profit as the key motive for economic progress, competition as the supreme law of economics, and private ownership of the means of production as an absolute right that has no limits and carries no corresponding social obligation. This unchecked liberalism leads to dictatorship rightly denounced by Pius XI as producing “the international imperialism of money”. One cannot condemn such abuses too strongly by solemnly recalling once again that the economy is at the service of man. – Populorum Progression #26 (Pope Paul VI, 1967)

When the United States Catholic Conference of Bishops offered the document “Economic Justice for All” they offered an economic vision for collaborative capitalism that at the time (1986) could have help steer the American economy in a more sustainable global direction.

Completing the unfinished business of the American experiment will call for new forms of cooperation and partnership among those whose daily work is the source of the prosperity and justice of the nation. The United States prides itself on both its competitive sense of initiative and its spirit of teamwork. Today a greater spirit of partnership and teamwork is needed; competition alone will not do the job. It has too many negative consequences for family life, the economically vulnerable, and the environment. Only a renewed commitment by all to the common good can deal creatively with the realities of international interdependence and economic dislocations in the domestic economy. The virtues of good citizenship require a lively sense of participation in the commonwealth and of having obligations as well as rights within it. The nation’s economic health depends on strengthening these virtues among all its people, and on the development of institutional arrangements supportive of these virtues. #296

This vision unfortunately went undeveloped and today we are now living with the crisis that this moral vision tried to avoid.

The second purpose for this post is to offer the general public resources and a forum that could help move the community ahead in assessing and, at some level, to participate in a constructive exchange regarding this economic crisis. This is not to time to offer punitive legislation to punish those we feel are culpable for this situation. There is certainly enough blame to spread around. This is also not the time to produce unnecessary fear and promote isolationism. The solution, whatever it may be, exist with the global economy. To argue against some unqualified fear of either socialism or fascism and to prop up a retrenchment into isolated nationalism will destabilize of global society in such a way that we would be led down the same path that economic isolationist policies led to prior to World War II.

I offer the following resources for your consideration:

• The Carnegie Endowment for Peace is a good think tank monitoring the G-20 here is a link to that site.
• The Brookings Institute offers a recommendation for global policy coordination. Here is a link to that site.
• The Financial Times offers an interesting dialogue on the future of capitalism. I offer this link below for further study and engagement of this critical issue of our times. In depth coverage of The Future of Capitalism from the Financial Times.

www.youtube.com/watch?v=nVIewK9n6qw