22 Feb, 2012

UNCTAD’s Lone-Voice Early Warnings Ignored At First, But Proven Right Today

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Geneva, 21 February 2012 – Experts marking the 30th anniversary of one of the world’s more influential economic annuals said Monday that themes long sounded in UNCTAD’s Trade and Development Report retain current prominence – particularly those citing the questionable wisdom of unbridled free markets. Other prominent themes concerned the persistence of trade imbalances, the risks of overdependence on commodities exports, the risks of premature liberalization of capital flows, the need for new mechanisms to deal with sovereign debt, and the problems posed by income inequality.

The report, first published by UNCTAD in 1981 – when it explored the themes of “world development in historical perspective” and “the world economy in transition” – was celebrated with a day of panel debates reviewing its origins and evolving ideas, its approach to development strategies, its macroeconomic reasoning, and its evolving theories on international economic governance.

The seminar was titled “Thinking Development” and served as a prelude to the 23 April release of a publication of the same title during the UNCTAD XIII quadrennial conference in Doha, Qatar.  That volume will review in depth three decades of the report’s theories and analysis.

The Trade and Development Report “is UNCTAD’s original flagship report,” said Anthony Mothae Maruping, President of the organization’s Trade and Development Board, as he opened the meeting.

Rubens Ricupero, former Secretary-General of the organization, termed the Trade and Development Report “an encyclopedia of development thought” and said that over the years, as neoliberal economic reforms swept the world, the publication often was a lonely voice calling for an “active role of the State” in spurring the kind of stable economic growth that leads to rising living standards in poor countries.

The 2008 financial crisis and resulting recession have proven the worth of that unorthodox and sometimes controversial thinking, several speakers said.

“The reasoning is that you need a State, a government, to have an idea, a plan for the economy, a design, and an economic policy strategy that makes sense, given the domestic and international constraints,” explained Heiner Flassbeck, Director of UNCTAD’s Division on Globalization and Development Strategies and principal author of the last eight editions of the report.  “That is the basic argument of the Trade and Development Report in recent years.”

He added that in addition to being influential, the report also “is often ignored. The Trade and Development Report is always provocative and challenging.  Sometimes, if you’re ignored, it’s the result of a challenge that hits at orthodox opinion – that hits at the core of the matter.  You show people the empirical evidence to back up what you’re claiming and they simply don’t know what to say.”

A current example is the case of widening economic inequality under global economic forces, noted Mr. Flassbeck and Carlos Fortin, a former UNCTAD Deputy Secretary-General.  “The 1997 Trade and Development Report was about issues of income distribution and the effects of globalization on income distribution and employment,” Mr. Fortin told the meeting.  “That continues to be pertinent today.  Growing wage inequality between skilled and unskilled labour is becoming an increasing problem.  And that report warned about a hollowing out of the middle class. This goes a long way towards describing the current situation – and it was written in 1997.”

The focus of the Trade and Development Report 2012, to be published in September, is income inequality, Mr. Flassbeck added.

Anthony Thirwall, Professor of Applied Economics at the University of Kent (United Kingdom), noted that “the free trade orthodoxy still ignores the balance-of-payments consequences of trade.  This idea that the balance of payments adjusts automatically – the fact is, it often doesn’t.  I think we all agree that global imbalances are bad for the health of the world economy. The Trade and Development Report has always been at the forefront of warning about these dangers.”

Mr. Thirwall said another consistent Trade and Development Report theme has been the importance for developing nations of enabling their economies to produce significant goods for export other than commodities, whose prices are historically unstable. “To put it crudely,” he said, “it makes a difference to a country whether it exports cabbages or computers.”

Remarking on current concerns about a “jobless recovery” from the global recession, Jayati Ghosh, Chairperson of the Centre for Economic Studies and Planning of the School of Social Sciences at Jawaharlal Nehru University in New Delhi, said the Trade and Development Report has noted in recent years that “Growth isn’t necessarily linked with job creation. . . (Perhaps) the time has come for Trade and Development Report to stop being against the mainstream.  Its ideas need to become mainstream”.”

And the Report’s recent calls for reform of the international financial and monetary systems so that 2008 crisis does not recur drew support from Arturo O’Connell, Advisor to the Presidency of the Central Bank of Argentina, speaking in his personal capacity. Among other things, Mr. O’Connell expressed concerns about the limitations of the G-20 countries in setting rules for the global economy: “It is only a self-appointed forum supported by a jungle of working groups, without any power to take binding decisions, instead working through peer pressure.”  He called for “a rule-based decision-making system supported by a dedicated, independent Secretariat.”

Echoing those comments, Jomo Kwame Sundaram, Assistant Secretary-General of the United Nations Department for Economic Development, told the meeting, “We are living in a world where G-20 leaders are constantly looking over their shoulders to see what markets will say, which constrains effective leadership for a strong and sustained recovery when the world economy needs bold Rooseveltian leadership more than ever.”

Other panellists at the Thinking Development event included Yilmaz Akyuz, Special Economic Advisor to the South Centre; Rolph van der Hoeven, Professor of Employment and Development Economics of the Institute of Social Studies at Erasmus University of Rotterdam (the Netherlands); Faizel Ismail, Ambassador and Permanent Representative of South Africa to the World Trade Organization; and Andrew Cornford of the Observatoire de la Finance, Geneva.

Among UNCTAD officials speaking at the session were Richard Kozul-Wright, Head of UNCTAD’s Unit on Economic Cooperation and Integration Among Developing Countries; Taffere Tesfachew, Director of UNCTAD’s Division for Africa, Least Developed Countries and Special Programmes; Charles Gore, UNCTAD’s Head of Research and Policy Analysis on Africa and Least Developed Countries; Detlef Kotte, former Head of UNCTAD’s Macroeconomics and Development Policies Branch; and Alfredo Calcagno, current Head of the Macroeconomics and Development Policies Branch.