New International Institutions for the other economy

Lovain, Belgium - Quito, Ecuator

Franois HoutarT

Existing financial and economic institutions These institutions are of two types. Some are the official type resulting from the Bretton Woods (USA) decisions, where they were created in 1945: the World Bank (WB), the International Monetary Fund (IMF), and the General Agreement on Tariffs and Trade (GATT) which in 1995 became the World Trade Organization (WTO). The World Bank was founded for the reconstruction of Europe and the development of its former colonies. By the same route regional banks were created for Africa, Asia and Latin America. The IMF had to control the international movement of money and to manage crises. The International Trade Organization (ITO) was initiated, but only existed during the 50 years of GATT. The WTO doesnt form part of the U.N. system; it is independent, managed by its members. The role of economic coordination within the U.N. is performed by ECOSOC (Economic and Social Council). The English economist, John Maynard Keynes, proposed the institution of an international currency of reference. The U.S. objected. Then he proposed an International Exchange Union, which had no better luck. The U.S. wanted to take full advantage of its status of being the big winner of World War II. The U.N. headquarters was established in New York, and the global financial organizations in Washington. Still tied to gold, the U.S. dollar became the currency of reference. The World Bank president had to be an American, and the IMF presidency was awarded to a European. With 17% of the capital (and votes) one country had the veto right, which the U.S. was only the case. The Southern countries, instead, would have only marginal representation. During the 30 years after World War II there were no major crises, thanks to the limited but adequate
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Translation by Jos Moreira e Erik Svenkerud

A reflection on the new economic institutions should first recall those institutions that already exist, and how they reflect the fact that the world economy is not spontaneous, but rather responds to very specific interests.

regulation of the system. During the 1970s, the Washington Consensus was begun, in other words, the freeing up currencies exchange, economic deregulation and privatization, supported by financial institutions established in Washington by the U.S. Federal Reserve (the FED) and large North American multinationals. Soon the removal of the gold standard from the dollar was introduced, as well as its transformation into a commodity. International financial organizations were transformed into instruments of this policy, imposing neo-liberal standards especially to the countries of the South: the so-called structural adjustment programs. The world economy grew dramatically, but inequality and irrational waste of raw materials also increased, particularly energy. Crises started to be more frequent, until the 2008-2009 crisis, the largest one since 192930. Financial organizations, supposedly created to regulate the global economy, acted according to the law of the market, accelerating the march towards bigger crises. They were pro-cyclical decisions, according to the United Nations Commission on international financial and monetary crises (Stiglitz Commission). These situations were denounced by many social movements, NGOs, churches and others. There were also private informal institutions, which helped the system to work according to the logic of the capitalist market. For example, the Basel Committee, which brings together the big banks (including central banks) to regulate among themselves, and Rating Agencies, which play an essential role in assessing the financial capital risks. Being financed by the same banks and financial agencies, they cannot avoid conflicts of interest. There are also a large number of think tanks and encounter groups. The World Economic Forum in Davos brings together each year the richest in the world, with representatives from the World Bank, IMF, WTO and senior political leaders, to discuss the orientation of the economy. The Trilateral Commission has also had influence, with representatives of businesses, Governments and

Council. This body could coordinate all the United Nations agencies in the economic field and impose counter-cyclical measures in times of crisis. An International Court for Debt Restructuring of the States and a World System to Monitor Global Targets (climate, etc.) would complement this picture. Those were recommendations made by the Stiglitz Commission. From the standpoint of civil society from below, we must add the importance of the World Social Forum in Towards new international institutions the social and political arenas to broaden a global soBesides some cosmetic changes proposed by the cial consciousness and create networks, as well as the existing institutions or powerful states, most of their proposals are reformist in type. Those proposals can be global coordination of political organizations of the left (as the So Paulo Forum in Latin America). Some quite radical, as the Stiglitz Commission, but none of them goes further than a neo-keynesianism on a global consider this Forum as a democratic Fifth International. scale. They can be useful in a transitional process, but they do not question the logic of the capitalist system. Other institutions for a post-capitalist world An initial proposal is the reform of existing orHowever, the multiple crises (financial, food, enganizations, the World Bank (WB) and the Internaergy, and climate) related to the logic of capitalism, tional Monetary Fund (IMF). The Stiglitz Commission requires more than regulatory institutions: it requests presented this as an urgent demand to deal with the a fundamental change in orientations (paradigm shift) crisis. According to this Commission, the WB must on human development. This means a redefinition on redefine its objectives depending on growth, stability what constitute the Common Good for Humanity, based and poverty reduction. The IMF, in order to contribute on the four axes of collective life on the planet: 1) a to global financial stability, would have to manage a respectful relationship with nature as the source of life new system of global reserves, based on all the curren- (Mother Earth); 2) the production of the fundamentals cies of the world. The existing special emission rights of life (economy) as use value, and not exclusively of would have to be amplified. It is a way of creating an exchange value (as in capitalism); 3) the spread of international currency other than the dollar, which democracy (fairness) in all the institutions and in all could be regionalized within institutions of its own, as social relations (including between men and women), the Southern Cone market (countries of the South of and 4) multiculturalism. the Americas) or the ASEAN (Association of the SouthNew institutions respective to these four axes East Asian Nations) and with the creation of regional should be created within the UN, with decision-making currencies, as the sucre in South America or what power, democratic functioning, and participation from was proposed in the Chien Mai initiative in Thailand for below. In each area a coordinating body for all initiathe ASEAN area or also in the Shanghai Group, which tives, old, renewed and new would be created. (1) includes China and Russia. The Stiglitz Commission also The relationship with nature, including climate, biodiproposes to end Americas and Europes domination on versity, oceans, nature and animal rights, agriculture the Presidency of these bodies and to ensure a more (FAO) and mining, etc.; (2) The world economy (Interinternational and democratic representation. national Bank, Financial Regulation Fund, Trade ReguIn addition, according to the Stiglitz Commission, lation Organization, International Labor Organization, new institutions should be created. The first is a Peretc.); (3) The collective organization such as: human manent International Experts Panel, able issue timely rights, the international courts, disputes settlement, warnings on the dangers of crisis. This was the only gender equality, etc.; and (4) culture, with UNESCO and proposal accepted by the United Nations (UN). But it is its various functions, indigenous cultures, etc.). also about creating a body with capacity to act on the Its about reestablishing the UN in the spirit which mechanisms of the global economy: a Global Council was proposed by Father Miguel DEscoto, who was the q for Economic Education (GCEE) parallel to the Security General Assembly president. trade unions. The Bildenberg Group meets each year; large capitalist groups, neo-liberal politicians and European royal families, to develop international policy proposals. The main informal organizations are state organizations: the G7 (+ 1), the richest countries in the world plus Russia, and more recently the G20, which includes emerging countries.

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