Courtesy of Share the Worlds Resources:
This report analyses the negative impacts of the IMF, World Bank and WTO on sustainable development and suggests an alternative mechanism for regulating the international economy which can allow these institutions to be progressively decommissioned.
Dec 05 – Rajesh Makwana ~ STWR
The WTO, IMF and World Bank have been major counterparts in the creation and management of the modern world economy. Their activities are endorsed by economically dominant governments and corporations who favor neoliberal policies and free-market solutions of debt-based finance and international trade as the route to poverty reduction.
Together these institutions encourage economic structural adjustment, privatization and market liberalization in emerging markets. Within the competitive global framework, developing countries are left with little choice other than to comply with the neoliberal agenda. As a result these countries are often left with crippling debt and a fragile economy. Meanwhile, foreign investors and multinational corporations gain control of a significant portion of the world’s resources, finance, services, technology and knowledge. Whilst these multinationals report record profits, around 50,000 people die each day from poverty.
In order to create balanced trade, stable international finance and effective development in poorer countries, the regulation of the global economy must be returned to United Nations. The global public must, through their governments, demand cooperative control over those resources which are essentials to life and should be shared internationally according to human need – not corporate profit. Sharing resources can also reduce the level of corporate controlled trade, debt accumulation and wasteful development projects. As the remit of the international financial institutions is reduced, they can be progressively dismantled.
Table Of Contents:
Part 1: The IMF, World Bank and WTO
How The IMF, World Bank & WTO Work Together
The IMF, World Bank and WTO Are Undemocratic
Structural Adjustment Programs (SAPs)
WTO Trade Agreements
Corporate Lobbying At The WTO
IMF & World Bank Corporate Links
Part 2: Sharing The World’s Resources and Decommissioning the IMF, World Bank & WTO
An Alternative Model of Economic and Financial Stability
The Role of the UN
Sharing The World’s Resources
How Sharing Will Affect the Global Economy
Aid and Development
Part 1: The IMF, World Bank and WTO
Created by the US and British Governments at The Bretton Woods Conference after World War II (1944 Hampshire, USA), The International Monetary Fund (IMF) and The World Bank (WB) were designed to ensure economic and corporate sustainability in countries affected by the war – mainly in Europe. The World Trade Organisation was established more recently, in 1995, to replace the General Agreement on Tariffs and Trade (GATT). The WTO aims to lower tariffs and non-tariff barriers in order to increase international trade.
Since the 1970’s the World Bank has steadily increased its original mandate of providing long term loans for reconstruction, to funding multimillion dollar infrastructure projects in developing countries. It is the single largest source of development finance in the world, lending for broad structural and economic changes, long-term development and poverty reduction, building roads, dams, pipelines, extracting natural resources etc. It is an especially important source of finance for very low income countries that are unable to acquire commercial loans. In this way the World Bank has a direct effect on the lives of millions living in the majority world.
The IMF was created to maintain global monetary cooperation and stability by making loans to countries with balance of payment problems, stabilising exchange rates and stimulating growth and employment. There have been many changes in the global economy since then, such as the divorce of exchange rates from the stable ‘anchor’ of gold, massive growth in the global economy and a dramatic increase in destabilising, speculative movements of capital between nations. As a result the IMF has shifted its focus and now mainly intervenes in economically vulnerable nations, particularly in the south.
The WTO fosters ‘free-trade’ between nations. It does this by liberalising markets, which means ‘opening them up’ to global competition. This creates a free market where the unrestricted flow of goods and services can sharpen competition, motivate innovation, create profit and breed success. Most of the world’s trading nations are members, and as members they have to ratify WTO trade agreements within their governments. The WTO clearly states that these rules, although binding on governments, are primarily for the benefit of the business community that produce, import and export goods and services. In effect, the WTO overrides a government’s sovereign right to regulate its economy, and places corporate interests first.
How The IMF, World Bank & WTO Work Together
The underlying theory that these International Financial Institutions (IFIs) propagate is that of ‘economic growth’ and ‘free-markets’ as the only means of generating wealth for development and poverty reduction. This neoliberal ideology now dominates the global economy and has proven to be extremely profitable for corporations and financiers. Meanwhile, these policies have increased levels of poverty and inequality in developing countries.
Given their financial insecurity, developing nations are left with little option but to participate and compete in the global economy in the hope that they can increase their economic output (GDP). However, the competitive free-market is inherently biased, and countries that enter the playing field with less wealth and undeveloped industries are handicapped.
Developing countries find themselves in a position where they do not have enough foreign currency reserves to invest in growth-promoting policies as they may have spent their reserves on imports and debt repayments. They might then lent money by the World Bank to finance large development projects in the hope that such projects (such as extracting oil) will facilitate economic growth and have a knock-on effect on development. The World Bank has significant connections with corporations (mainly in the US) who they contract for these lucrative projects. Whilst these corporations earn huge benefits from these contracts, the country in question often finds itself with an additional debt burden, a loss of control over key natural resources or services and a loss of revenue from these resources as profits are repatriated abroad.
Faced with possible bankruptcy, which would ostracise them from other potential investorsthis, the country has little choice but to turn to the IMF for a loan. The IMF clearly states that it is not a development bank and is not concerned with poverty reduction. It is, however, closely allied with Wall Street bankers and the US Treasury, and ensures that economic policies are implemented that benefit private investors and financial speculators in the free-market. It lends to governments on the strict condition that they prioritise the repayment of the loan (over and above domestic welfare needs). Countries must also agree to adjust domestic economic policies to ensure that their balance of payment problems do not occur again. Once these conditions have been implemented and the loan approved, the international investment community is informed. This reassures private investors of the country’s potential profitability, and additional funds come flooding in.
With restrictions on the movement of capital relaxed, a period of destabilising financial speculation and capital flight often results, further benefiting wealthy foreign investors and speculators whilst often bankrupting domestic companies. This same IMF/World Bank enforced agenda has devastated many developing economies in East Asia and Latin America over the past 20 years.
The WTO’s trade agreements work alongside the IMF and World Bank measures, ensuring all barriers to trade and domestic restrictions on how to manage foreign investment are lifted This enables foreign corporations to purchase and control everything from water, heath-care and education facilities to agricultural technology and indigenous plants and knowledge. All in all, there is a huge migration of control and financial resources away from local enterprises and industries that would otherwise benefit society and strengthen local economies. Instead, these resources migrate to the large corporations whose major shareholders profit handsomely. Foreign ownership of domestic resources, services and production compromises local initiative and industry, and undermines the sovereign and democratic rights of local people and governments.
The combined effects of trade liberalisation and IMF/World Bank policies are insidious, devastating numerous aspects of social and economic life in developing countries. It is clear that the ultimate beneficiaries of the IFIs’ policies and actions are wealthy private investors, corporations and speculators. These small groups of private individuals ultimately end up holding the reigns to the majority of the world’s natural resources, agriculture facilities, technology, services, intellectual property and finance mechanisms. Their businesses are invariably based in the US and EU, ensuring that the economic output, or GDP of their host countries remains high.
Revelling in their economic ‘profit’, G8 governments increasingly tow the corporate line, using their influence within the IFIs to further the neoliberal ideology that appears to be prospering their nation. As a result, governments have readily given away rights over public assets to corporations. They also continue (through the agency of the IFIs) to denying the rights of developing countries to participate in the formation of international development and finance strategies, multilateral trade agreements, or indeed their own domestic economic policies. In this way, wealthy governments are guaranteeing their continued economic dominance within a competitive, market-based global economy.
Whilst economic growth increases, the level of global inequality and marginalisation also increases. This phenomenon is not restricted to developing countries, but is common place in wealthy nations. For example, in 2004 there were 5.4 million more Americans living in poverty than in 2000. Although the US is also one of the richest nations on earth, with a GDP of 12.41 trillion dollars, about a fifth of global GDP, it has the largest inequality gap of any industrialised nation. It also pursues neoliberal economic policies to a greater extent than other countries. This added much weight to the significant body of evidence that suggests the pursuit of competitive economic growth for reducing extreme poverty is largely ineffective and unable to reduce inequality.
WTO, IMF & World Bank Are Undemocratic
Both the World Bank and IMF criticise recipient governments for their lack of transparency, widespread corruption and undemocratic regimes, insisting on the reform of these aspects as a pre-condition to granting loans and debt relief. However these same issues haunt the World Bank and IMF which are widely regarded as not transparent, undemocratic and unaccountable. Corruption within these organisations is rife, and millions of dollars unaccounted for
Both institutions are based in Washington USA, and are owned by their 184 member countries. The majority (40%) of all votes are held by just 7 countries (the G7). The US holds the largest share at 18%, which grants them the ability to veto policies that do not serve US interests. Votes are allocated according to financial strength (‘one dollar one vote’), resulting in those financially powerful countries (and the commercial interests that influence them) determining the monetary, economic and development architecture of the global economy. Thus the existing global economic system places developing countries squarely at the mercy of G7 foreign interests.
The WTO is, constitutionally, a democratic organisation with an equal share of votes distributed to all member nations regardless of their economic power. Yet the poorer nations still find themselves unable to exercise their democratic rights in WTO global trade negotiations. The dominant economic powers- USA, Canada, the EU and Japan (also known as the ‘Quad’ or ‘Quartet’) very clearly establish the agenda before a round of trade talks. The Quad then invite a selected group of poorer nations to a ‘Green Room’ meeting where the key decisions are made about which issues will be open to negotiation in the formal talks, and a declaration is drafted. During the formal talks, nations can only agree with or block the predetermined proposals.
This structure effectively excludes the majority world from influencing the international trade agenda. Throughout these negotiations, even within the green room talks, poorer nations (given their reliance upon international aid, IMF and World Bank assistance) are at the behest of the Quad and are often unwilling to contest the declaration in fear of economic or financial consequences. Overall, the global south’s ability to make trade work to their benefit is severely compromised.
The bias and disquiet of these negotiations is reflected by the frequent collapse of trade talks in, the eventual submission by developing countries to further open their markets to the dominant nations and the systematic inability of ‘quad’ nations to live up to their pledges to remove their own protectionist measures.
Without democratic representation within these bodies, and cooperation with the south, The WTO, IMF and World Bank will remain unaccountable to the very people they claim to be assisting. In light of the failures of the WTO, World Bank and IMF to address poverty and inequality, global protests continue to gain momentum, citizens and nations are calling for a ‘ground up’ process of globalisation that is not controlled by, and for the benefit of, the ruling elites.
Structural Adjustment Programs (SAPs)
When a developing country requires urgent financial assistance to avoid economic catastrophe, it usually turns to the IMF. Although this assistance constitutes a crippling debt for the borrower, the IMF also insists on economic reform as a condition to the loan. In effect the IMF take this opportunity to render the struggling economy ‘free-market friendly’. Prioritising debt repayment, market liberalisation and privatization allow corporations and private interests to capitalize on these reforms. The economic consequences for the developing country are often dire.
The IMF, working in conjunction with Wall Street bankers and the US Treasury, has effectively forced many emerging economies to liberalise their financial markets. This happened to many countries in East Asia and Latin America in the 1980’s and 90’s. Often this exposed them to massive financial speculation which in-turn devalued their currencies, and created recession and financial crisis. Bolivia’s per capita income is less than it was 25 years ago, with 63% of Bolivians living in poverty. Argentina is another well documented recent example, as is Thailand, South Korea, Indonesia, the Philippians, Russia and Poland.
In essence structural adjustments involve the following measures:
Reducing social spending, government budgets, programs and subsidies for basic goods – This allows a rapid mobilisation of currency to repay the loans (debt). Meanwhile schools and hospitals are forced to introduce/increase fees which in turn increase illiteracy rates, disease and death rates and perpetuate the poverty cycle.
Eliminating foreign ownership restrictions and increasing interest rates – These measures increase profitability for foreign investors and enable corporations to take control of domestic resources. Meanwhile local producers and businesses are destroyed, not being able to afford essential credit; unemployment goes up, and control of their resources shifts to wealthy countries. Income is transferred out of the developing country further damaging its people and economy.
Eliminating import tariffs and switching from subsistence farming to export economies – These measures benefit foreign export markets and eliminate local competition. Low cost foreign goods including luxury items out-compete domestic producers, putting them out of business. Food insecurity and malnutrition increases as production shifts to cash crops for export and countries are forced into dependent relationships with northern suppliers. Increased resource exploitation creates environmental degradation and pollution.
SAPs have recently been replaced by Poverty Reduction Strategy Papers (PRSPs) as part of an effort to address the issue of ‘government ownership’ of structural adjustment policy, and to focus on strategies to relieve the debt of Highly Indebted Poor Countries (HIPCs). Unfortunately little progress has been made; strategies are still broadly imposed on governments and are still subject to conditions that increase income disparities
Not surprisingly, the neoliberal, open-market model preached by the IMF and Wold Bank was not the model adopted by all existing economic powers during their industrialisation and development. Instead they protected their own markets from foreign goods and investment and continue to do so, donating huge subsidies to domestic business. Indeed, the US and EU remain, to this day, highly protected economies. The hypocrisy of liberalising emerging markets is evidently in the self interest of economically dominant countries. Enforcing these policies on developing countries is akin to economic imperialism.
More information on neoliberal policies such as free trade, privatisation and market liberalisation can be found here
WTO Trade Agreements
Since its creation, the WTO has promoted market access for corporations with trade agreements. These agreements circumvent the democratic national rights of a country to determine domestic polices regarding trade, natural resources and service provision.
The General Agreement on Trade in Services (GATS) was agreed at the World Trade Organization (WTO) in 1994. Its aim is to remove any restrictions and internal government regulations in the area of service delivery that can be+ considered “barriers to trade”. Such services include everything from marine fishing to provisions for health and education. The agreement affectively abolishes a government’s sovereign right to regulate, subsidise and provide essential national services on behalf of its citizens.
The WTO’s Trade Related agreement on International Property Rights (TRIPS), forces developing countries to extend property rights to seeds and plant varieties. The agreement will even allow corporate property rights over individual plant genes, thereby impacting on agricultural practices that two thirds of the worlds rely upon for their livelihoods. It undermines thousands of years of indigenous control over local knowledge and production of food and livestock. Six corporations now own 70% of patents on staple food crops, allowing them to set the market price for them and block competition for 20 years.
Another serious infringement on democratic rights are the Trade Related Investment Measures (TRIMS) which open domestic finance to corporate control, eliminating a country’s ability to shape their policies relating to foreign investment and capital controls.
The evidence suggests that market liberalisation and intellectual property rights hinder development in poor countries and serve the economic interests of dominant countries. In 2000, an UNCTAD confirmed this in a report which concluded that neoliberal trade measures primarily benefit corporate interests. Even the European Commission doesn’t shy away from stating that trade agreements are primarily instruments for the benefit of business.
Effectively, control over resources, services, policies and finance are granted to corporate interests through the GATS, TRIPS and TRIMS framework. Meanwhile, developing countries continue to resist the imposition of WTO agreements, and recently this resulted in the collapse of the Doha Round of trade talks (2006).
Corporate Lobbying At The WTO
Multilateral trade rules are agreed behind closed doors between the US, EU and major trade partners. 80% of corporations reside in the US and EU, and through their lobbyists they enjoy privileged access to government policy makers who partake in trade talks. Over 30,000 corporate lobbyists are based in Washington and Brussels, vastly outnumbering the US Congress and European Commission staff that they lobby. The vast majority of lobby groups represent business interests, who spend billions of dollars annually advocating their cause, typically market access in emerging economies.
Many developing countries on the other hand do not have the resources to send enough, if any, representatives to argue for fairer trade practices that would benefit their own economic development. In addition, these negotiations are undemocratic, with the public denied access to or information about these discussions. The same is not true of corporate lobby groups such as the European Services Forum (ESF) and many US corporations who can directly affect and have access to Trade Committees. Unsurprisingly then, corporate interests form the basis of WTO agreements. The corporate imperative is to have commercial access to all markets in all countries – whether goods, services or intellectual property.
Unsurprisingly, the vast majority of the world, whose basic human needs are not met, are unlikely to ever have them met within the biased framework of the existing global economy.
IMF & World Bank Corporate Links
To qualify for World Bank loans and expertise a country must agree to implement Structural Adjustment Programs (SAPs). These programs attract massive private investment into the country. Foreign direct investment now exceeds $1 trillion per year for projects such as the privatisation of public utilities and the creation of banking systems. The overall result is the marginalisation of government control over its own affairs and an increased flow of capital out of the developing country to private investors and corporations, usually based in the north.
World Bank projects in Chad, Somalia, Rwanda, Mozambique Ghana, Brazil and the Philippines are well documented as having a strong commercial bias. Generally they have provided corporate welfare at the expense of critical, non-profitable development projects such as health and education.
In recent years the IMF has been vociferously backed by multinational corporate interests when applying for extra funding for expansion. This support was in response to the IMF bailing out big banks and foreign investors which had made bad loans to developing countries. For example, in 1995, the IMF gave almost $18 billion to Wall Street interests who stood to lose billions with the peso devaluation. It also bailed out foreign investors in Russia with an $11 billion package and orchestrated a massive bailout of the big banks that made bad loans to Asian countries in the 90’s.
The World Banks and IMF’s interrelationship, financial opportunism, corporate mandate and US backing is best exemplified by their economic occupation of Iraq. Since the occupation began, Iraq’s entire economy has been fashioned by the IMF and World Bank to suit (mainly US) foreign investors and corporate interests. The Paris Club of creditors, through the IMF, quickly approved the cancellation of 80% of Iraq’s debts, approximately $39 billion. Using this as leverage, neoliberal structural changes were swiftly enacted including the privatisation of assets and state owned enterprises. These undemocratic economic adjustments resulted in capital fight, huge levels of unemployment and unaffordable increases in utility costs, sparking widespread protest.
Part 2: Sharing the World’s Resources and Decommissioning the IMF, World Bank & WTO
An Alternative Model of Economic and Financial Stability
The IMF, the World Bank and the General Agreement on Tariffs and Trade (GATT – predecessor to the WTO) were created at the end of the Second World War. Given the circumstances at the time, the US was in a strong position to secure its economic dominance, and these three institutions were the means through which it could achieve this. Alternative proposals to create a more balanced trade and finance system were rejected by the US at the Bretton Woods conference, and Britain and Europe’s dependence on the US economy during and after the war meant the US had its way.
One such alternative was John Maynard Keynes’ proposal for an ‘International Clearing Union’ (ICU). The ICU was able to create monetary equilibrium between nations and prevent the accumulation of economic and political power to creditor nations. Similarly, an International Trade Organisation was proposed as a mechanism to protect against corporate dominance and ensure workers rights and employment. The GATT was adopted instead, and after considerable corporate pressure, this was later replaced by the WTO which had the power to enforce undemocratically decided trade rules upon member governments.
Since their inception, these organizations have indeed been very effective at securing economic strength for the US. Their influence over the world economy and their ties with commercial interests has also grown.
However, as described in the above analysis, the past 20 years have provided ample evidence that the IMF, World Bank and WTO impede poverty reduction and economic development in poor countries. It is clear that the global economy needs to be urgently overhauled if poverty and inequality are ever to be resolved.
In a reformed world economy, commercial activity should be regulated by a democratic body to ensure that it benefits the public good. Natural resources of common heritage and services that are essential to meet basic human needs must not be allocated by corporations through existing trade structures. Guaranteed access to these resources is a fundamental right according to the internationally adopted Universal Declaration of Human Rights. This right must be exercised by the global public.
The Role of the UN
Given the corporate agenda of the WTO, World Bank and IMF, and their inherent bias since their creation, their mandates must be transferred back to the United Nations. The UN system was originally intended to be the key regulatory mechanism for the world economy, and the IMF, World Bank and GATT were originally intended to function as part of this system. Sadly, funding for the UN agencies has been massively restricted in recent years, mainly be the US. One of the reasons for this is the UN’s inherent emphasis on development friendly economics – an approach which is at odds with the US’ more hegemonic intentions. Funding has instead been lavished on the international financial institutions (IFIs) which share the neoliberal ideology.
UN agencies such as the Economic and Social Council (ECOSOC), The UN Conference and Trade and Development (UNCTAD) and the United Nations Development Program (UNDP) have the necessary knowledge, information and experience to re-establish their regulatory hold on the global economy and render it more equitable. Importantly, these UN agencies are naturally democratic and representative, unlike the IFIs.
Alongside restoring democratic control of the global economy to the UN, there must be a strengthening of the UN in general. In order to render the UN democratic, the Security Council must be dissolved, and any rights to veto decisions abolished. The General Assembly must take its place as a truly representative world body. The UN must also be given greater financial power. This can be achieved through a number of possible mechanisms such as a Tobin taxes, taxes on arms, taxes on pollution, or a combination of these.
Most importantly, the UN must adopt the principle of sharing in order to fulfil its humanitarian mandate and secure basic human needs across the world. A new economic system based on sharing essential resources, such as land, food, water and medicine needs to be urgently implemented to achieve this objective. We propose the creation of a new UN agency, whose specific task would be to facilitate this process, the UN Council for Resource Sharing (UNCRS). A system of sharing would exist alongside an overhauled market based economy that can continue to produce and supply all ‘non essential’ resources.
Sharing the World’s Resources
Sharing resources requires that the global public claim their communal ownership over essential goods and services. In general, these will be all resources that are naturally occurring, such as land, water, oil and minerals, all produce that is essential for life such as basic agricultural produce and energy, and essential services such as access to clean water, healthcare and education.
One of the main reasons for sharing the world’s resources is to prevent unnecessary death from poverty, by guaranteeing universal access to food, water, healthcare and other essential goods and services. The saving of some 50,000 lives each day in this way will hasten international development efforts and thereby have a positive impact on the global economy. This will not only be the result of the investment in human capital that sharing creates, but also by strengthening local industry. When countries are able to develop their own economies, they are better placed to be active within the global economy.
Within this system of sharing, essential resources would be shared firstly as part of a United Nations Emergency Redistribution Program (UNERP), designed to rapidly mobilize essential food, water and healthcare to people and nations who are experiencing extreme poverty, malnutrition and unnecessary death. There after, a more comprehensive system of sharing can be implemented that can ensure basic human needs are always prioritized and met by the global community. To achieve this, the UNCRS would create a Global Sharing Network (GSN) which could monitor the ever changing levels of production and consumption of essential resources across the globe. The GSN would then be able to coordinate an efficient global redistribution of these resources according to need. Resources would be produced and consumed locally where ever possible, then shared regionally, and finally shared internationally.
How Sharing Would Affect the Global Economy
Global public ownership and cooperative management of these resources will mean that they are no longer directly involved in financial markets as commercial products. Excess production of essential resources would not be traded or exchanged. They would instead be held in trust by the UNCRS, on behalf of the global public, and distributed to where they are most urgently required. This will have a significant impact on existing systems of trade, finance and development, and thereby directly affect the activity of the WTO, IMF and World Bank.
Aid and Development
Sharing essential resources in this way would replace all existing aid and development efforts. Redistributing resources to alleviate poverty will replace the existing export oriented model of competitive economic growth for poverty reduction. The majority of these resources must be transferred from where they are in excess in global north to where they are most urgently required in the global south. Amongst other things, this will entail a significant transfer of finance, food, technology and labour over a number of years in order to create a global economic and social safety net.
Unlike existing development loans provided by the World Bank, sharing must not constitute a loan or incur a debt. It would be necessary for the UNCRS to work closely in conjunction with existing UN development agencies and international NGOs, to ensure that development occurs in an effective, sustainable and efficient manner. Over time, the World Bank will be rendered largely redundant and any remaining development projects can be administered through the United Nations Economic and Social Council (ECOSOC) and UN Development Program (UNDP). The World Bank can then be progressively dismantled.
A system of sharing would mean that the majority of commodities and goods that are currently traded would instead be cooperatively owned and distributed by the global public through the UNCRS. Such resources would include energy supplies and the provision of utilities such as water, essential agricultural produce required for food, cotton for clothing, essential healthcare services, equipment and medication, essential knowledge and technology and resources for providing education. As a result, international trade in commodities and their derivatives will be significantly reduced, and confined to non essential goods.
Sharing will ensure that essential domestic needs are largely met at the local level, reducing dependency on foreign imports of essential goods. As a consequence, there would be less need for developing countries to agree to prohibitive trade agreements, whether multilateral or bilateral. This will free the population to develop their own industry and economy enabling them to compete on an equal footing with wealthier nations in the global economy. Potentially, when enough countries can effectively compete with the economic superpowers, a powerful incentive will be created for these superpowers to adopt a more cooperative approach.
Agreements relating to remaining international trade should, where necessary, be democratically agreed through the UN Conference on Trade and Development (UNCTAD). The remaining international trade, under the auspices of UNCTAD, should utilise an inherently balanced mechanism similar to the International Clearing Union (ICU) mentioned above. The combination of these factors will allow the WTO to be progressively dismantled over a period of time.
Sharing essential resources instead of trading them will mean that these resources are divorced from financial markets. This will clearly have a significant impact upon these markets, dramatically reducing the amount of stock and financial derivatives related to the stocks, which are traded. This in itself will help to reduce the global financial instability that many economists and analysts believe will, sooner or later, result in an international financial crisis.
Sharing essentials will also mean that developing nations will require less foreign exchange in reserve as they will be purchasing fewer goods from abroad. Balanced trading between nations (using an ICU type mechanism) and the removal of debt burdens will also mean less chance of countries experiencing major balance of payment deficits. The lack of foreign exchange is a key reason developing countries turn to the IMF for loans, which in turn leads to crippling debt. Not only can sharing result in greater financial security for a developing country, it will also mean that they are less likely to have to implement structural adjustments to their economy to render it acceptable to the countries that follow neoliberal principles.
When there is a need for short term emergency foreign exchange loans, a new UN based Finance Organisation could lend money and provide the necessary expertise in a pro-development manner without crippling interest rates and without corporate or political influence. It would then be feasible for the IMF to be gradually dismantled; its sizeable assets and gold reserves can be applied to the UNCRS and UN development projects.
New agencies may be required to undertake the decommissioning of the IFIs. Other measures which are essential if the global economy is to be reformed and subjugated to the needs of the people include cancelling all debt owed by developing countries and regulating the corporate environment.
It is clear that the existing framework for development, trade and finance is highly skewed in favour of already affluent nations and that it is unable to deal with the underlying causes of poverty and inequality. Concerted international economic reform is an enormous task with many ramifications for the global economy. It will only be possible to address all the intricacies of such a system within the framework of international cooperation through the agency of a reformed and revitalised United Nations.
Sharing the world’s resources has the potential to create a sustainable economic model that puts human rights and the environment at the centre of socio-economic life. Such a system would necessitate the relegation of corporate activities to a sphere that can be managed by the global public. It will ensure that the administration of the global economy is rendered a democratic, participatory process.
Together, such measures can ensue that the global economy is inherently more equitable and that it serves the interests of the people. Sharing in this way is the only way to meet the basic human needs which are currently sidelined by the need to make profit. It is also an important statement of international solidarity and an acceptance of global unity. In this way, sharing the world’s resources can foster cooperation and peace between nations.