The FfD Process, Systemic Economic Issues and Staying Engaged - - PDF document

1 The FfD Process, Systemic Economic Issues and Staying Engaged Presentation by Oscar R. de Rojas Panel Discussion on the Third International Conference on Financing for Development United Nations, New York, 12 December 2014 Good afternoon everyone. Thank you very much to Ambassadors Pedersen and Talbot, as well as to the FfD Office, especially my colleague and friend Mr. Trepelkov, for inviting me to this event today. I feel especially happy to be back at the UN discussing Financing for Development. I understand the main subject for discussion in this panel is the effective implementation of the “Staying Engaged” part of the Monterrey Consensus – i.e., the intergovernmental follow-up mechanisms to keep the FfD process alive and well. We all know that this has not happened. The weakest part of what was agreed to in 2002 was precisely that; and no matter how hard we have tried over the last 12 years, and the different innovations that have been introduced into the existing modalities, both in ECOSOC and the General Assembly, we do not yet have a robust mechanism to keep track of things and make needed recommendations for necessary actions. As the background note prepared by the FfD office rightly indicates, many ideas and options have been suggested over the years to close this “loophole”, but they have either not been sufficiently effective, or have not met with political agreement. I continue to think, like many

• thers, that the best, easiest solution would have been to do what was done after all the other

major UN conferences of the last decades: to set up a special functional commission of ECOSOC to take upon itself the follow-up and monitoring responsibilities. I have never understood why this option was resisted, because it has been shown that it would have had little –if any—cost implications, when you take into account all that is spent, in effort, time and money, the way we are doing things now. My suspicion is that the objection is mostly a political one: That there continues to be a fear of giving FfD “too much power” to deal with issues which, in the mind of some, should not be addressed at all in UN, particularly the systemic economic ones. But the inescapable truth is that systemic issues are an integral part of FfD. FfD is not, and should not be, just a way to try to find money to finance the MDGs or the SDGs. It is that, but also much more. The “package” that was reached in Monterrey included ensuring the coherence and consistency of the international financial and monetary systems in support of development. It formed an integral part of the FfD agreement and we have an obligation to honor that pact. We cannot try to hide it under the rug now, even if some may want to emphasize other priorities. We also cannot say that the world has changed and that systemic issues are now best discussed in entities such as the G20, which by definition is limited to participation of so-called systemically significant countries. To my knowledge, most developing countries (and many developed ones) have never agreed with that assertion. The G20 can be helpful –just like the Non-Aligned Group can be helpful— to help build consensus on some pressing international issues, but the truth of the matter is that the only universal, legitimate, participatory forum, where all voices can be heard, and final policies should be set, continues to be the United Nations and the UN system.

2 In order to arrive at the Monterrey Consensus, many important tools were used, but one I would like to recall here and that is especially relevant to Staying Engaged is that we opened the doors. Rather than fighting with the Bretton Woods institutions (and WTO), for the first time we invited them in and worked together with them, including at the Secretariat level. Also for the first time, we welcomed as partners not only civil society organizations but also private sector groups. That is something that should always be kept in mind in designing a more effective FfD follow up mechanism: that legitimacy entails having all relevant stakeholders included in as true partners. Another historical fact to remember is that, just as we were finalizing preparations for the follow up conference in Doha, came an unexpected big blow: the financial crisis of 2008. In retrospect, the financial crisis did not have to have a negative effect on the FfD process. Quite the contrary, logically speaking, it should have given all the more impetus for the Doha follow up conference to succeed and to go beyond Monterrey in many areas. The upheavals and grave implications of the crisis could have led to using that unique opportunity to set in motion a profound reform of the international economic and financial systems, and of international economic governance, with the participation of all the relevant stakeholders. I even remember discussions that it was perhaps time for another Bretton Woods-type conference, under the UN umbrella. If there had been political will, Doha could have agreed on all that! But politics stepped in, from all sides, to prevent this from happening. First, on the part of the “North” we saw that ill-timed convening of the Group of 20, just a few weeks before Doha. Instead of dealing with the catastrophe utilizing the universal forum and occasion that we had at

• ur disposal, the major economies decided to address the situation through that new, select club
• f “systemically significant” players. This in turn helped fuel radical fires that had already been

burning in the Group of 77 for some time, and to a demand that the UN convene a conference on the World Financial Crisis, without the involvement of the BWIs! Everything went exactly the

• pposite of what had been done, and gained, in Monterrey! We literally took back several steps.

Doha happened and, like in all UN conferences, ways were found to control damage and prevent it from looking like a failure. Indeed, we adopted the Doha declaration, which, in some modest ways, here and there, does go beyond Monterrey. But, for the reasons already indicated, we did not succeed in the major goal of strengthening the inter-governmental follow-up mechanism for the FfD process which could have guaranteed its relevance and permanence, including its role as a forum to discuss global economic architecture and governance issues. Therefore, in my view, the challenge lies now with FfD-III, the conference to take place in Addis Ababa next year. Ladies and gentlemen, colleagues and friends: Before concluding, I would like to make reference to a specific element of systemic issues that has grown in importance in the years since Monterrey and that should definitely be part of any enhanced follow-up arrangements for Staying Engaged on FfD. It is the subject of international cooperation on tax matters. We hear everyday complaints about tax evasion, money laundering, and other illicit money flows which could and should be better controlled by global cooperation. As you know, the UN presently has a group of experts, acting in their personal capacity, devoted to study, and make recommendations on these issues, which reports regularly to ECOSOC. It is

3 not, however, an intergovernmental body and therefore cannot go beyond recommendations and decide on policy matters. Over the years there have been many calls, including from the Secretary-General and from important countries and groups, to “upgrade” the group to a fully representative intergovernmental body. Again, like the proposed FfD functional commission, this is something that would not entail any additional costs for the UN, so that the decision is purely

• political. I earnestly hope that the Addis Ababa conference will give this serious consideration.

One of the reasons that leads me to bring this up is recently having read the best-selling book by Thomas Piketty, Capital in the Twenty-First Century. As you may know, Piketty’s central concern in his book is the growing inequality in the distribution of income and wealth, both within countries and among countries, which, in his view, can in the long run have disastrous consequences for the maintenance of sound welfare states and stable societies, for the idea of just social contracts that has been around for the last two hundred years, and for democracy itself. To address the problem, one of the policy options he proposes is the introduction of a progressive global tax on wealth. As Piketty recognizes, this concept is politically explosive and can only be achieved if there is, first, the will to do it, and second, the necessary mechanisms of coordination. I am not saying that we push for implementing such an international wealth tax tomorrow, but it is certainly food for thought, especially for those who are concerned with the implications of ever growing inequality and worsening distribution of income in the world. This is a systemic issue par excellence and we should not have any qualms about talking about it here. Underlying Piketty’s arguments, is the basic theme that humanity can do something about its destiny. That it does have not leave things to “invisible forces” that nobody controls and often have a perverse internal logic. By enhancing the status of the body on international cooperation on tax matters we might be taking a first step in the right direction, which future generations may thank us for. This is a good example of what we mean when we talk about dealing with the systemic. We should address the individual elements that make up the whole, but not losing sight of the larger context in which they find themselves. It is commendable to set new development goals in terms

• f poverty eradication, health and education issues, and environmental matters, but we must also

set goals with regard to regulating financial capital and its playing rules, on fixing how the whole system works, which at the end of the day is what can most affect the lives of nations and people. I finish by congratulating again the facilitators, the Secretariat and all of you who are personally involved in the preparations of the Addis Ababa conference, as well as in many other related processes taking place in the UN at this complex time. Indeed, one of your main challenges will be to strive to achieve the necessary convergence, coherence and consistency among all of those mechanisms and processes, and, in so doing, keeping the FfD exercise alive and well! Thank you.