That's not to stop Joseph Stiglitz, however, from giving it another go. If LDCs are squealing like Olive Oyl during the current crisis, is Stiglitz our Popeye? (I hope he has large forearms.) From the Financial Times comes word of yet another plan to make these institutions more accountable to LDC concerns. Is it 1964 or 2009? See for yourselves:
The Group of 20 should be replaced by a new Global Economic Council, an advisory panel of senior international economists has said. Under the panel’s proposals, the council, which would be a United Nations body, would become the main forum for setting the agenda for worldwide economic and financial policy.
The proposal, made by an 18-member UN commission headed by Joseph Stiglitz, the Nobel-prizewinning economist, will be raised at next week’s expanded G20 summit in London, at which heads of state will debate a global response to the world financial crisis. It is part of a draft 10-point plan put forward by the panel, appointed last October by the 192-member UN General Assembly, to study reform of international financial institutions...
The new UN body, which would be independent of the Security Council in which the main powers hold a veto, would have a membership of 20 to 25, Mr Stiglitz told the FT. The proposal goes to the general assembly this week.
The panel’s plan also proposes a new global reserve system that would provide support to developing countries on a regular basis and would not be subject to veto by industrialised countries that dominate existing international financial institutions, such as the IMF [also see this recent post].
The plan calls for developed countries to set aside 1 per cent of their fiscal stimulus plans, in addition to existing foreign aid budgets, to spend in developing countries. “While the decision on stimulus is national, it should be judged on its global impacts,” the panel says in a draft document.
It also calls on advanced economies to abide by pledges to avoid protectionism “and . .. insure that stimulus packages and recovery programmes do not further distort the economic playing field and further increase global imbalances”. The draft criticises “misguided policy recommendations” by institutions such as the IMF that have prevented developed countries from adopting the counter-cyclical stimulus policies being pursued by the developed countries.
The draft document says that a global response to the financial crisis “must encompass more than the G7 or G8 or G20, but the representatives of the entire planet, from the G192”.
There is much to discuss here but probably little to look forward to in terms of becoming a reality. The UN-phobic William Easterly will have a field day with this globalization-by-committee approach. From my POV, some of these suggestions appear rather impracticable and will fall on deaf ears like in so many times past:
- The G20 is already weak-kneed as it is; adding another layer of UN bureaucracy to the proceedings is bound to hinder rather than help;
- The UN already has a General Assembly in addition to a Security Council; why would adding another grouping help matters along? And don't forget UNCTAD, either;
- Stiglitz proposes a global reserve system to replace that overseen by the IMF, but won't that require setting up an alternative institution to the IMF?;
- Why would the many industrialized countries already running large fiscal deficits readily be able to fork out 1% of their respective stimulus packages to help LDCs?
- The G-192 sounds like a recipe for gridlock; if the G-77 was unwieldy, what is this thing?
Bottom line: while I await the final document, Stiglitz's suggestions certainly mirror initiatives past that have fallen by the wayside. Plus, many are recycled from his recent book. That this one is being captained by an American at a tony Ivy League institution certainly does it no favors in terms of legitimacy.
I am perplexed why Stiglitz is keen on portraying LDCs as hapless victims when many now have increased political-economic clout. LDC populism without realism has not, in times past, proven to be a recipe for reform of global economic governance. If Stiglitz is concerned about exacerbating global economic imbalances, the best course of action is not to recycle the "woe is me" approach taken so many times before. Rather, making large LDC funders of US deficits force Uncle Sam to shape up or feel the wrath of reserve sales is the way to go. As I've said, US protectionism may be a way of generating this desired result as offended countries chafe at ridiculous protectionist policies. Sorry Dr. Stiglitz but realpolitik beats Olive Oyl each time out.