Only New Agency Can Stop Global Economic Crisis, UN Group Says

by Thalif Deen

Indonesian Foreign Minister Ali Alatas -- speaking on behalf of the 132 developing countries of the Group of 77 -- said the time was ripe for the creation of a new world body to monitor and regulate international money markets effectively.

Alatas told IPS that the creation of a body "to mitigate the unpredictability and dire effects of globalization" is needed.

"We already have a mechanism of this nature in the field of international trade: the World Trade Organization (WTO)," said Alatas. "And there is no reason why we cannot have a similar mechanism in the field of financial and monetary flows if it means the difference between order and chaos in the global economy."

The crisis, which has devastated the economies of Indonesia, Thailand, South Korea and to a lesser extent Malaysia, has been blamed in part on international currency speculators.

The financial turmoil has forced countries such as Malaysia to reinstitute controls on currencies and capital flows, casting doubts on the much- talked- about benefits of globalization.

"Globalization's promise of greater prosperity and widespread benefits for humankind is increasingly beclouded by uncertainties and exposure of vulnerable economies to risks of devastation," Alatas said on September 18, speaking at a three-day meeting held by the 185-member UN General Assembly to assess the economic and social impact of globalization.

While agreeing that globalization has tremendous opportunities for creating wealth, Alatas pointed out that its rewards seemed reserved for the strongest of economies and those best equipped to avail themselves of the opportunities.

"On the other hand, it could lash out with awesome ferocity at vulnerable developing economies," he noted, adding that "globalization is by no means an evil force, but it is a blind one."

A few days later, Sri Lanka's President Kumaratunga concurred with Alatas when she told the U.N. General Assembly that "the international monetary mechanism has proved desperately inadequate in handling the recent crises."

"We now have to think in terms of a new financial architecture to obtain radical reforms of the international monetary system," she added. "Effective surveillance devices must be designed to anticipate problems before the demolition squads of speculators move in."

Globalization is seen, not as a term describing objective reality, but as an ideology of predatory capitalism, he said.

"Whatever reality there is, in this view, the perception of a siege is unmistakable. Millions of people are suffering; savings have been decimated; and decades of hard-won progress in the fight against poverty are imperiled," Annan said.

"And unless the basic principles of equity and liberty are defined in the political arena and advanced as critical conditions for economic growth, they may suffer rejection," he added. "Economic despair will be followed by political turmoil and many of the advances for freedom of the last half-century could be lost."

Annan also described the current Asian economic crisis as "the first major crisis of globalization."

"If globalization is to succeed, it must succeed for poor and rich alike," he said.

Malaysia's Ambassador said the crisis in Asia had been largely triggered by the boom- and- bust behaviour of short- term lenders and investors. It had caused violent depreciation of currencies, highly volatile exchange rates and rapid increases in interest rates. Asset markets had plunged and banks had ceased lending.

Ambassador Ahmad Kamal of Pakistan said the accumulation of the side effects of globalization would lead to new class divisions. There would be divisions, he said, between those who prospered in the global economy and those who did not; between those who shared its values and those who would rather not; and between those who could diversify its risks and those who could not.