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Reform of the global financial architecture and of the role of the internat=
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Reform of the global financial architecture and of the role of the internat=
ional financial institutions : the labour movement's perspective
 / Peter Bakvis ; James Howard. - [Electronic ed.]. - Bonn, 2000. - 9 Bl. =
=3D 48 Kb, Text
. - (Studies on international financial architecture ; 2000,8 : IMF special=
)
<br>Electronic ed.: Bonn : FES Library, 2000.
<br><br><font size=3D"-1"><i>=A9 Friedrich-Ebert-Stiftung</i></font>
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<p>
</p><ul>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E1">The World Ec=
onomic Situation in the year 2000: No Grounds for Complacency</a><br></font=
>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E2">Significant =
Commitments needed to Poverty Reduction </a><br></font>

<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E2a">Requirement=
s for a Successful Poverty Reduction Strategy</a><br></font>


<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E3">Core Labour =
Standards</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E4">Attention to=
 Primary Education and Health Care</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E5">Gender Equal=
ity</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E6">Taking Socia=
l Protection Serious</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E7">Employment</=
a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E8">Industrial R=
elations to be improved</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E9">Debt Relief =
for Developing Countries</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E10">Stabilising=
 the International Financial System</a><br></font>
<font size=3D"+1">
<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E11">Conclusions=
</a><br></font></ul>
<br><br>
<br><br>

<center>
<tdvalign=3Dtop bgcolor=3D"#C0C0C0">
<p><b><i>Summary</i></b>
</p></tdvalign=3Dtop><table width=3D"80%" cellspacing=3D"1">
<tbody><tr>
</tr>
<tr><td valign=3D"top" bgcolor=3D"#C0C0C0">
<p>The recent crises have highlighted the need for a new approach to the go=
vernance of the international economic and financial system. Governments mu=
st create a broad-based international commission, with a mandate to provide=
 recommendations for establishing an effective international regulatory fra=
mework for a new financial order. The international financial institutions =
must assume the necessary leadership and put forward proposals for a newly =
regulated international financial system.
<br>The IMF and World Bank must make major and concrete steps towards rever=
sing the growing polarisation of wealth and access to resources in the worl=
d economy. Social policy guidelines need to be adopted formally as part of =
IMF/World Bank policies at all levels. The institutions must include core l=
abour standards, primary education and health-care, social protection syste=
ms  and gender equality into their strategic approaches:  The HIPC Initiati=
ve has to be overhauled; debt relief has to be made available to the eligib=
le countries more quickly.
</p></td></tr></tbody></table>
</center>

<br><br>

<p>In June 1999, the ICFTU=92s (International Confederation of Free Trade U=
nions) report to its Economic and Social Committee on the International Mon=
etary Fund (IMF) and World Bank noted in its conclusion that =84as the wors=
t of the Asian crisis has passed from the news headlines the political mome=
ntum for far-reaching reform [of the international financial system] shows =
signs of dissipating". This prediction has been borne out with the continua=
tion into the year 2000 of strong economic growth in several industrial cou=
ntries as well as in some of the Asian countries previously beset by financ=
ial crisis. A sense of complacency does appear to have installed itself onc=
e again in many quarters within the two international financial institution=
s (IFIs).=20
</p><p>Such complacency is, though, counteracted by a growing and increasin=
gly vocal sector of world opinion concerned by the persistence of severe ec=
onomic problems in many countries and the potential for renewed financial i=
nstability on a global scale. The April 2000 meetings of the IFIs in Washin=
gton received unprecedented public attention, which may well be repeated at=
 future meetings of the IMF and World Bank for some time to come. The Finan=
ce Ministers and Central Bank governors of the world who attend such meetin=
gs will have to anticipate a level of public scrutiny far greater than they=
 are accustomed to. Such public attention can be explained first and foremo=
st by the fact that never since the international financial institutions we=
re created has the contrast been so striking between the growing wealth and=
 prosperity enjoyed by a few and the increasing poverty experienced by a va=
stly greater number:
</p><ul>
<p></p><li>While strong economic growth continues in some industrial and "e=
merging" economies, many developing countries have encountered new problems=
 of stagnation, recession or even economic collapse;
<p></p></li><li>Although the wealth and number of the super rich is increas=
ing by leaps and bounds, new studies indicate that the number of those livi=
ng in absolute poverty is increasing;
<p></p></li><li>While the profit rates of many large multinational companie=
s are at unprecedented levels, as are the incomes of the managers of these =
firms, real wages for ordinary workers have been stagnant or declining in m=
any countries of the world;
<p></p></li><li>Even within countries experiencing high growth, inequality =
in the distribution of income and access to basic service is increasing;
<p></p></li><li>While the AIDS pandemic has only belatedly received global =
attention, it has become one of the most serious health crises the world ha=
s had to face and one of the primary obstacles to development in some of th=
e world's poorest countries.
</li></ul>
<p>The IMF and World Bank must assume their share of responsibility in this=
 situation of growing misery, inequality, and uncertainty in a world of eve=
r-increasing wealth. Fifty-six years after their creation, the Bretton Wood=
s institutions can make no claim to having achieved a system of economic ju=
stice and stability in which the entire world community can participate. It=
 is this failure that explains the decline in confidence in the institution=
s, and which has led a number of critics, both in the industrial and develo=
ping world, both on the left and right, to call for a substantial curtailme=
nt or even the cessation of their activities.
</p><p>The IMF and World Bank must make major and concrete steps towards re=
versing the growing polarisation of wealth and access to resources in the w=
orld economy if they wish to preserve their credibility in combating povert=
y, inequality and economic instability. Failure to do so cannot but reinfor=
ce the body of world opinion which considers the institutions to be a part =
of the problem rather than a part of the solution to finding a better way f=
orward. These solutions would include new and more effective commitments in=
 the areas of poverty reduction, social protection, debt relief and interna=
tional financial stability.=20
</p><p align=3D"CENTER"><a href=3D"https://library.fes.de/fulltext/iez/0079=
5.htm#I0"><img src=3D"https://library.fes.de/images/digbib/e_oben.gif" widt=
h=3D"101" height=3D"15" border=3D"0" alt=3D"Page Top"></a>

<a href=3D"https://library.fes.de/fulltext/iez/00795.htm#E9E2"><img src=3D"=
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" border=3D"0" alt=3D"Next Item"></a>

<a name=3D"E9E1"></a></p><p><font size=3D"+1">The World Economic Situation =
in the year 2000: No Grounds for Complacency</font><br><br>
</p><p>Several, though certainly not all, industrial economies have been ex=
periencing continued strong growth in their GNP while inflation has been mo=
derate. Some of the East Asian countries that underwent serious economic cr=
isis in the late 1990s are participating in this growth. This has led some =
governments of IMF and World Bank member countries to display signs of comp=
lacency and an attitude that the end-of-the-millennium problems of world ca=
pitalism have now been overcome, that nothing stands in the way of continue=
d prosperity. But in actual fact, this "prosperity" has been both very uneq=
ually distributed and particularly fragile, so that a sudden downturn canno=
t be ruled out.
</p><p>The current boom of consumption and investment depends on what many =
commentators consider a significantly overvalued stock market. Interest rat=
e hikes in the United States could force a slow-down of economic growth bot=
h there and in other countries that are far from a situation of operating a=
t full capacity. In Europe, it is essential that the European Central Bank =
adopts an accommodating monetary policy stance that allows faster growth to=
 continue so as to exploit fully the potential of the =84new economy". And =
the world's second-biggest national economy, that of Japan, has not yet see=
n the end of a decade-long period of stagnation. Any increase in interest r=
ates could cut short recent indications of some economic recovery in Japan.=
 Such developments would also create serious damage for the Asian economies=
 that have managed to put themselves back in a growth mode after the severe=
 turbulence of the 1997-98 period. However some Asian countries, most notab=
ly Indonesia, remain mired in serious difficulty; none have recuperated all=
 the ground lost during the crisis; and all remain vulnerable to large-scal=
e capital movements by nervous international investors and speculators.
</p><p>The majority of countries in Central and Eastern Europe and the Comm=
onwealth of Independent States have yet to see the light at the end of the =
tunnel of the transition to market economies. Except for a small minority o=
f holders of large assets who have benefited from the privatisation of form=
er public enterprises, most citizens in these countries have not seen an im=
provement in their welfare. In most of these countries, total production an=
d employment have not yet returned to pre-transition days, while most socia=
l indicators, including average life expectancy, have deteriorated signific=
antly. The situation is particularly severe in the CIS, which has yet to be=
gin a significant recovery from Russia's economic and monetary collapse of =
August 1998.
</p><p>While much attention is given to the growth rates of a few star-perf=
ormer "emerging" economies, the majority of the countries of Asia, Africa a=
nd the Americas find their economies in situations of stagnation, if not ou=
tright recession, with growing poverty and unemployment. This situation exi=
sts, in spite of many of them having accepted the international financial i=
nstitutions' recommendations to privatise, liberalise, and deregulate. Ther=
e is no indication that developing economies which have undergone the radic=
al structural adjustment prescribed by the IMF and World Bank subsequently =
enjoyed higher growth rates than those that did not. A case in point is Arg=
entina. Over the past decade, the country has privatised every public servi=
ce capable of generating a profit, including the postal system; has substan=
tially decreased social expenditures; has dismantled most tariff and non-ta=
riff trade barriers; and has "dollarised" the national currency, thus renou=
ncing any autonomous monetary policy. Over the past two years the already h=
igh level of unemployment began increasing once again and is over 15% in ur=
ban areas, while real wages have declined in the past decade. And yet on 11=
 July 2000, Argentina was again being referred to approvingly by the IMF in=
 its assessment of Argentina=92s  economic performance.

</p><p align=3D"CENTER">
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<a name=3D"E9E2"></a></p><p><font size=3D"+1">Significant Commitments neede=
d to Poverty Reduction </font><br><br>
</p><p>Both the IMF and World Bank have given much attention to poverty red=
uction in the wake of the social turmoil resulting from the Asian financial=
 crisis. The objective of poverty reduction was given top billing during th=
e 1999 IMF/World Bank Annual Meetings and subsequently led to the adoption =
of a joint Bank-Fund approach claiming to ensure the primacy of poverty red=
uction in all future lending. As a condition for receiving new lending or d=
ebt relief, countries are required to formulate a <i>Poverty Reduction Stra=
tegy Paper</i> (PRSP), which defines certain specific goals for poverty red=
uction which are to be assessed as a determinant for funding. The commitmen=
t to reducing world poverty was reiterated in the report prepared in June 2=
000 by the IMF and World Bank jointly with the UN and OECD, <i>A Better Wor=
ld for All</i>, in which the four institutions enunciate seven specific goa=
ls for reducing absolute poverty by 2015.
</p><p>The new commitments to poverty reduction by the IMF and World Bank a=
re welcome, insofar as they are intended to lead to concrete policy changes=
 which would reduce poverty both internationally and on a country level. Un=
fortunately, many of the new policy statements in favour of poverty reducti=
on tend to be long on generalities and short on real evidence of policy cha=
nge. For example, <i>A Better World for All</i> appropriately pinpoints som=
e of the key root problems which explain the persistence of poverty, but th=
en recommends a classic 1980s-type model of structural adjustment measures =
(trade liberalisation, freer capital flows, anti-inflation measures), which=
 have clearly not succeeded in reducing poverty over the past decade and a =
half. "More of the same" is not an acceptable answer to the enormous challe=
nge of growing world inequality. And it is essential that the IMF, under pr=
essure to redefine its role to concentrate its lending on short-term balanc=
e of payments assistance, must not reduce its commitment to promoting pover=
ty reduction strategies in the PRSPs and other programmes. =20
</p><p>The same type of reflex to revert to structural adjustment-type poli=
cies under the guise of poverty reduction continues to occur on a country l=
evel. Funding required to develop or modernise badly required services or i=
nfrastructures is often only available if the government agrees to privatis=
e the infrastructure or service in question. Assistance for publicly owned =
and operated services seems to out of the question. This pro-privatisation =
drive takes place even in emergency situations. For example, in a Country A=
ssistance Strategy for Honduras recently produced by the World Bank, the re=
port notes the urgent needs that still exist to rebuild infrastructures suc=
h as roads, water systems, and electricity distribution networks that were =
destroyed by Hurricane Mitch in October 1998. The report continues that the=
 World Bank's International Financial Corporation "could include Honduras" =
in its electricity generation and distribution projects, but that such assi=
stance could only be provided insofar as "the privatisation process continu=
es".
</p><p>Under the PRSP process, countries receiving lending assistance must =
identify targets for poverty reduction outcome indicators and monitor these=
 indicators as a condition of the country's access for debt relief and loan=
 support. There is no indication, however, that failure to achieve the pove=
rty-reduction goals would be as binding as have been the international fina=
ncial institutions' traditional structural adjustment conditionality, where=
 failure to meet the conditions could lead to suspension of financial assis=
tance. Also, despite the fact that the PRSP process requires countries to p=
ut part of the resources received from the Fund and the Bank into poverty-r=
eduction programmes, countries often find themselves obliged to reduce spen=
ding on these same types of programmes (which could include basic education=
, primary health care, rural roads and housing assistance) in order to redu=
ce government spending deficits so they can be eligible for assistance in t=
he first place.=20
</p><p>The involvement of civil society in the PRSP process, not only in th=
e formulation of the PRSP but also in the implementation, is one of the key=
 characteristics of the poverty reduction approach. Unfortunately, the inte=
rnational financial institutions give no specific instructions as to which =
civil society organisations should be included in the process or how they a=
re to be included. ICFTU affiliates in countries as diverse as Ecuador and =
Uganda where PRSP processes have been put in place have reported that trade=
 unions have not been included in the process. Government claims to involve=
 civil society in the poverty reduction strategy would be very hollow if tr=
ade unions, often the most organised component of civil society, are not ev=
en consulted.=20
</p><p>Although the IMF and World Bank have stated that the active involvem=
ent of civil society is a necessary element of a successful poverty reducti=
on strategy, the institutions themselves are not consistent in their own pr=
actices in this regard. It would almost appear that such involvement is con=
sidered useful only inasmuch as the civil society groups concerned are prep=
ared to endorse the institutions' predetermined plan of action. A recent Co=
untry Assistance Strategy for Colombia prepared by the World Bank makes muc=
h of the Bank's relations with civil society groups which have marked "a tu=
rning point " and "should help harness domestic support to implement the ne=
cessary reforms". Unfortunately, the only reference to trade unions in the =
sixty-page document appears under the title "Evaluation of Risks" where it =
is stated that IMF-sponsored structural adjustment reforms "may prove diffi=
cult to implement due to labour resistance to reform measures". It is unfor=
tunate indeed that the Colombian trade union movement, which has already su=
ffered 80 assassinations (and hundreds more death threats) from paramilitar=
y and security forces in the past year alone, is considered by the institut=
ions as nothing more than an impediment to reform.



</p><p align=3D"CENTER">
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<a name=3D"E9E2a"></a></p><p><font size=3D"+1">Requirements for a Successfu=
l Poverty Reduction Strategy</font><br><br>

</p><p>The new PRSP approach adopted by the IMF and World Bank, which puts =
the responsibility on governments to produce a coherent national programme =
for reducing poverty, constitutes a new degree of commitment on the part of=
 the institutions that the international trade union movement has welcomed.=
 We note that, despite the emphasis given to =84country-ownership of povert=
y reduction", the institutions will provide advice to the country drawing u=
p the PRSP and must approve the document before assistance is given. Obviou=
sly, governments are much more likely to take the poverty-reduction commitm=
ents seriously if the IMF and World Bank practice what they preach and are =
serious in their insistence on poverty reduction. The corollary must be a r=
eview and easing of fiscal and monetary targets under structural adjustment=
 programmes. =20
</p><p>In line with the decisions of the of the UN General Assembly Special=
 Session (UNGASS) on =84the World Summit for Social Development and beyond:=
 achieving social development for all in a globalising world" (Geneva, 26-3=
0 June 2000), the IMF and World Bank must participate fully in the elaborat=
ion of =84systems for ensuring the <i>ex ante </i>assessment and continuous=
 monitoring of the social impact of economic policies at both the internati=
onal and national levels" and by =84taking measures to protect basic social=
 services, in particular education and health, in the policies and programm=
es adopted by countries when dealing with international financial crises". =
 Since poverty is a growing world phenomenon and is increasing even within =
richer countries, the institutions must maintain their preoccupation with p=
overty reduction in all of their country-level policy advice. That is why t=
he institutions must include the following social components in their dialo=
gue with governments, notably in discussions under IMF <i>Article IV Consul=
ta</i><i>tions</i> and on the <i>Country Assistance Strategies</i> of the W=
orld Bank as well as in PRSPs themselves.=20

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<a name=3D"E9E3"></a></p><p><font size=3D"+1">Core Labour Standards</font><=
br><br>
</p><p><i>Core labour standards</i> as defined in the ILO Declaration on Fu=
ndamental Principles and Rights at Work (1998) must become =84system-wide" =
and given effect in the programmes of all the international institutions in=
cluding the IMF, the World Bank and the World Trade Organisation (WTO). Ful=
l respect of human rights, including trade union rights, needs to be incorp=
orated in the overall policy of the IMF, World Bank and regional developmen=
t banks, entailing respect for core labour standards in the Procurement Gui=
delines of the World Bank and mandatory labour clauses offering real protec=
tion to workers in the Standard Bidding Documents and other contractual doc=
umentation of the World Bank and other development banks.
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<a name=3D"E9E4"></a></p><p><font size=3D"+1">Attention to Primary Educatio=
n and Health Care</font><br><br>
</p><p><i>Primary Education and Health-Care </i>constitute important pillar=
s on which any successful widely-shared development strategy must be based.=
 The Geneva 2000 UNGASS meeting restated the Copenhagen commitments to time=
-bound targets for achieving =84universal and equitable access to quality e=
ducation, the highest attainable standard of physical and mental health, an=
d the access of all to primary health care". Priority must be given to prog=
rammes aimed at maintaining and enhancing school participation, especially =
for girls, up to the minimum school leaving age and up to at least 14, and =
spreading the availability of health care for all. In addition, all countri=
es should be requested to develop or improve comprehensive strategies for t=
he elimination of child labour, giving priority to its worst forms, in ligh=
t of the adoption of ILO Convention 182 on the Worst Forms of Child Labour =
in 1999. Yet once again, this objective seems to be at variance with the re=
ality of IMF/ World Bank programmes on the ground.  For example, the World =
Bank recently approved a Country Assistance Strategy for Ecuador in which p=
ublic spending for health and education in 2000 will have declined precipit=
ously from levels of 1995 (in the case of health, spending will have fallen=
 from 5.50% to 2.83% of budgetary spending). Given that many Ecuadorians al=
ready do not have access to basic education and health care, it is difficul=
t to see how, under those budget constraints, availability of these service=
s can be enhanced.
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<a name=3D"E9E5"></a></p><p><font size=3D"+1">Gender Equality</font><br><br=
>
</p><p><i>Gender Equality </i>is essential to maximising economic growth, a=
chieving social development and ensuring food security. Yet many adjustment=
 programmes have typically involved public expenditure cuts and public sect=
or reform, including retrenchment in education, health and the civil servic=
e, which have caused a deterioration in vital social services that are pred=
ominantly needed by women. The Bretton Woods institutions should systematic=
ally review both the labour market implications of their policies, and the =
prevailing labour market situation at country level and should incorporate =
gender perspectives into these reviews as an essential component of the soc=
ial dimension.  They should further affirm their commitment to closing the =
gender gap on the basis of the consensus reached at the United Nations Spec=
ial Session on Gender Equality, Development and Peace (New York, 5-9 June 2=
000).
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<a name=3D"E9E6"></a></p><p><font size=3D"+1">Taking Social Protection Seri=
ous</font><br><br>
</p><p><i>Social Protection </i>measures also constitute an important compo=
nent of an effective poverty reduction strategy. The IMF and World Bank sho=
uld, as agreed at the Geneva 2000 UNGASS meeting, work in an ILO-led proces=
s to =84develop social protection systems for vulnerable, unprotected and u=
ninsured people". Governments must be encouraged to develop a comprehensive=
 system of social safety nets, including retirement pensions, unemployment =
benefits, child support, maternity, and sickness and injury benefits. IMF A=
rticle IV Consultation staff reports usually in fact do the opposite, berat=
ing governments for not moving fast enough to eliminate one or other part o=
f the social safety net. Unemployment insurance programmes often come under=
 the IMF's guns, as was the case in recent Article IV staff reports for Mac=
edonia and Canada, where governments were told they should reduce the numbe=
r of those receiving benefits by decreasing the duration of unemployment as=
sistance. In the case of Canada where significant cutbacks in unemployment =
insurance have already taken place, barely one-third of the country's unemp=
loyed are currently receiving benefits versus close to four-fifths in 1990.=
 One has to wonder at what point the IMF would consider such a scheme cease=
s to be overly generous. Also in the case of Canada, IMF staff "expressed c=
oncern about the government's recent proposal to increase maternity and par=
ental leave benefits".=20
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<a name=3D"E9E7"></a></p><p><font size=3D"+1">Employment</font><br><br>
</p><p><i>Full Employment and Building Social Institutions </i>are other im=
portant pillars of a successful poverty reduction strategy and were re-emph=
asised at the Geneva 2000 UNGASS meeting. Programmes to increase vocational=
 training, establish and improve job search systems, implement labour-inten=
sive public works programmes and counteract discrimination need to be enhan=
ced. With the active engagement of the ILO, the IMF and World Bank should e=
ncourage the participation of trade unions, employers' organisations and no=
n-governmental organisations in the development and implementation of econo=
mic and social policies, in line with the Geneva 2000 UNGASS decision =84to=
 strengthen national institutions and consultative mechanisms for economic =
policy formulation, involving improved transparency and consultation with c=
ivil society".
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<a name=3D"E9E8"></a></p><p><font size=3D"+1">Industrial Relations to be im=
proved</font><br><br>
</p><p><i>Developing Sound Industrial Relations: </i>Labour market reform m=
ust be founded on respect of the ILO's competence in the development of the=
 institutional framework for collective bargaining and labour law. Yet inst=
ead, the promotion of good labour practices has generally been absent from =
specific country reports, which more often emphasise the need for greater l=
abour-market flexibility. Some recent examples of this are IMF recommendati=
ons regarding Argentina and Poland. In Argentina, IMF representatives inter=
vened publicly in favour of controversial measures reducing the scope of se=
ctoral collective bargaining. In a recent IMF Article IV staff report on Po=
land, government authorities were admonished to resist pressures for reduci=
ng the working week, even though unemployment reached 13% in 1999, and enco=
uraged instead to promote "increased flexibility of labour market structure=
s including the work week".
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<a name=3D"E9E9"></a></p><p><font size=3D"+1">Debt Relief for Developing Co=
untries</font><br><br>
</p><p>The ICFTU (working together with the International Trade Secretariat=
s (ITS) that represent workers in different sectors, and with the Trade Uni=
on Advisory Committee (TUAC) to the OECD) has for many years pressed the in=
ternational community to accord substantial debt relief to the developing c=
ountries. Not only is a reduction of the debt burden essential for the welf=
are of our members in developing countries (where two-thirds of ICFTU membe=
rship is to be found) but it is also a prerequisite for permitting developm=
ent of the global economy on a more stable, sustainable and equitable footi=
ng. The additional commitments made at the G-8 summit in Cologne in June 19=
99, which led to the creation of the enhanced <i>Highly Indebted Poor Count=
ries</i> (HIPC) Initiative, were welcome improvements. However they are sti=
ll a far cry even from the relatively modest Jubilee 2000 proposals, which =
the ICFTU has endorsed, and which would expand from 40 to 52 the number of =
countries eligible for partial debt reduction under the HIPC plan. It is in=
conceivable that countries like Haiti, the poorest country in the Americas,=
 or Nigeria, the country with the largest debt in Africa, are excluded from=
 the HIPC Initiative because they don't quite meet the strict eligibility r=
equirements.
</p><p>We are concerned that the industrial countries still have a long way=
 to go to make the commitments originally made in Cologne and reiterated at=
 the 1999 Annual Meetings. The IMF and World Bank Spring Meetings underline=
d the fact that substantial progress needed to be made in order to finance =
the HIPC Initiative, both in terms of cancellation of bilateral debt and co=
ntributions to the World Bank trust fund created to finance reduction of mu=
ltilateral debt. ICFTU and TUAC affiliates in industrial countries have bee=
n strongly encouraging their governments to quickly move forward and fulfil=
 their commitments to the Initiative. The same affiliates have been encoura=
ging their governments to increase Official Development Assistance, noting =
that, in many cases, OECD-member governments are in surplus or close to bal=
anced budget situations and can no longer use the pretext of budget difficu=
lties to resist increases.=20
</p><p>In addition to some industrial countries being slow in delivering on=
 their promises, the implementation of the HIPC process has been sluggish f=
or other reasons as well. In some cases, failure of potentially eligible co=
untries to apply structural adjustment reforms fast enough to accommodate t=
he conditions of the international financial institutions have led to delay=
s. In other cases, individual large creditor countries have actually pressu=
red countries not to apply for debt cancellation under the HIPC Initiative =
under threat of seeing bilateral assistance curtailed. At the time of the S=
pring 2000 Meetings of the IMF and World Bank, only five countries had actu=
ally reached the HIPC "decision point", less than half the number that were=
 to have reached the point by this time according to announcements made by =
the Fund and the Bank in 1999. These obstacles to implementation augur badl=
y for the credibility of the entire Initiative, as do the financing difficu=
lties.
</p><p>The ICFTU has called for an overhaul of the HIPC Initiative with the=
 aim of quickly making debt relief available to the eligible countries and =
to increase the number of eligible countries provided trade union and other=
 human rights are respected and social spending is prioritised. The overhau=
l would include:
</p><ul>
<p></p><li>A reduction of the required waiting period to the "completion po=
int" for receiving HIPC debt relief;
<p></p></li><li>An end to the practice of applying strict structural adjust=
ment conditionality for determining a country's eligibility to receiving de=
bt relief;
<p></p></li><li>Quick-disbursement interim sources of financing for urgent =
and targeted social expenditure, provided human rights, including fundament=
al workers' rights, are respected.
</li></ul>
<p>The ICFTU has further urged the IMF and World Bank to join with the Unit=
ed Nations and World Trade Organisation in the recently-launched proposal t=
o hold a global conference or similar high-level event on Financing for Dev=
elopment (FfD) before the end of 2001. This initiative, originating in the =
UN General Assembly, has the potential for developing a co-ordinated approa=
ch for mobilising the resources necessary to make a substantially increased=
 assistance to developing countries in their efforts to overcome the barrie=
rs to their development. The international trade union movement intends to =
co-operate fully in the successful realisation of the FfD conference.
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<a name=3D"E9E10"></a></p><p><font size=3D"+1">Stabilising the Internationa=
l Financial System</font><br><br>
</p><p>The fact that some of the countries that underwent financial upheava=
l in the late 1990s are now experiencing positive growth should not obscure=
 the serious flaws in the international financial system which allowed such=
 a crisis to happen and which could lead to its recurrence. It has been obs=
erved that, while IMF and World Bank policies have forced governments to be=
 more disciplined, it was an imprudent private sector, and not imprudent go=
vernment, that provoked the crises of 1997-98. And it has been working peop=
le, who suffered massive lay-offs, slashed social benefits, and reduced rea=
l wages, who took most of the brunt of the crises. Far-reaching measures ar=
e needed to regulate and manage international financial markets if crises a=
re not to repeat themselves at regular intervals, and the markets are to be=
 of assistance to achieving stable, widely-shared economic development, rat=
her than a hindrance.
</p><p>The recent crises have highlighted the need for a new approach to th=
e governance of the international economic and financial system which balan=
ces macro-economic policies with a framework for action to promote just and=
 equitable societies. Social policy guidelines need to be adopted formally =
as part of IMF/World Bank policies at all levels, not merely as a =84soft" =
annex to a list of incremental financial market reforms but as an integral =
part of their structures. Furthermore, a new approach must serve to widen p=
articipation in policy formulation at both national and international level=
 to ensure that in future those who have had to bear the burdens of recent =
policy failures have, in future, a voice in the process of reform and rebui=
lding. As part of such a new approach, the IMF and the World Bank should re=
sume their internal debate on incorporating the conclusions of the 1995 UN =
Copenhagen Summit for Social Development and, now, the Geneva 2000 UNGASS i=
nto a set of social principles and practices to guide their work in the com=
ing years.  =20
</p><p>The IMF has given much attention to strengthening surveillance stand=
ards through such measures as the <i>Data </i><i>Dissemination Standards</i=
>, the<i> Basel Core Principles </i>and the<i> Financial Sector Assess</i><=
i>ment Programme. </i>The IMF and World Bank have also assisted member coun=
tries in overseeing external debt by establishing guidelines for sovereign =
debt management. However IMF attempts to involve the private financial sect=
or in crisis prevention and resolution have been limited to trying to obtai=
n voluntary private sector co-operation on an ad hoc basis, rather than in =
forcing the private sector to share in the cost of resolving such crises.=
=20
</p><p>While the experience in Asia demonstrates that controls placed on cr=
oss-border capital controls can play a beneficial role in rendering countri=
es less vulnerable to external crises (the examples of India and China) or =
in mitigating the impact of the crisis (the example of Malaysia), the IMF h=
as continued past policies of combating any and all capital controls. A rec=
ent IMF Article IV Consultation staff report for Poland informed the county=
's authorities that any delays in abolishing remaining controls on capital =
flows were "unwarranted", government fears of speculative pressures on the =
national currency notwithstanding. We urge the IMF to cease trying to force=
 governments to dismantle capital controls and, instead, recognise that suc=
h controls can play a positive role in limiting the destabilising impact of=
 rapid capital inflows and outflows.
</p><p>The ICFTU has, in the past, frequently asserted that the debate over=
 international financial market reform is much too important to be left to =
bankers and their regulators. Such is, however, the case of the Financial S=
tability Forum, whose discussions have taken place behind closed doors unde=
r the auspices of the Bank for International Settlements. We have urged tha=
t governments must create a broad-based international commission, which wou=
ld have a mandate to provide recommendations for establishing an effective =
international regulatory framework for a new financial order. At the very l=
east, the Financial Stability Forum should hold public hearings to which tr=
ade unions and other representative organisations would be invited. The IMF=
, for its part, should make public the nature of the recommendations it has=
 received from the Forum regarding international capital flows, hedge funds=
 and offshore centres and explain why it has refused the proposal that it u=
ndertake surveillance of offshore centres.
</p><p>The international financial institutions must assume the necessary l=
eadership and put forward proposals for a newly regulated international fin=
ancial system which would achieve stable, sustainable development by all co=
untries. The necessary measures would include:
</p><ul>
<p></p><li>Improved fiscal and monetary policy co-ordination between the cu=
rrency blocks of the dollar, euro and yen in order to generate more stable =
parities;
<p></p></li><li>Recognition of the rights of governments to control foreign=
 capital inflows and outflows in the interest of domestic macro-economic an=
d social stability;
<p></p></li><li>Binding international standards for the prudential regulati=
on of financial markets covering capital reserve standards, limits to short=
-term foreign currency exposure, and controls and certification on derivati=
ves trading and other forms of leveraged investment built on credit;
<p></p></li><li>A mandatory role for the private sector in comprehensive de=
bt rescheduling programmes that share the burden of responsibility between =
companies or countries that over-borrow and the international banks which o=
ver-lend;
<p></p></li><li>Ensuring that banking systems are transparent and bound by =
effective disclosure criteria;
<p></p></li><li>Agreement on the right of developing countries to operate a=
 temporary debt standstill when circumstances require, as agreed at the Gen=
eva 2000 UNGASS meeting;
<p></p></li><li>Developing an effective early warning system based on impro=
ved information on currency flows, private debts and reserves;
<p></p></li><li>The establishment of a currency transactions tax to reduce =
speculative currency flows and to raise resources for the support of povert=
y alleviation.
</li></ul>
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<a name=3D"E9E11"></a></p><p><font size=3D"+1">Conclusions</font><br><br>
</p><p>The IMF or World Bank are not solely responsible for the failure to =
fulfil their stated mandates to reduce world poverty, promote human develop=
ment, or assure international financial stability. However they have not ta=
ken the necessary leadership to put forward concrete solutions to resolve t=
hese crises and, in some cases, have actually exacerbated the problems. Nor=
 have they been ready to take into account the =84objectives and policy app=
roaches of the United Nations conferences and summits" as was stressed once=
 more at the Geneva 2000 UNGASS meeting on Social Development. =20
</p><p>The ICFTU therefore urges the IMF and World Bank to consider very se=
riously the proposals such as those outlined in this article and to make su=
bstantial new contributions in the areas of poverty reduction, social prote=
ction, debt relief, effective international financial regulation and improv=
ed dialogue between the IMF and the World Bank and trade unions both at nat=
ional and international levels. By doing so, the institutions can demonstra=
te their capacity to address the rising popular concerns about their releva=
nce in solving these key global problems.

</p><p align=3D"center"><br><br></p><hr width=3D"50%"><br><br>

<p><b>Peter Bakvis,</b> Director of the Washington Office of the ICFTU and =
the International Trade Secretariats (ITS)
</p><p><b>James Howard,</b> Director of the Priority Group on Employment an=
d International Labour Standards at the ICFTU

</p><p align=3D"center"><br><br></p><hr width=3D"50%"><br><br>

<p>The Studies on International Financial Architecture published by the Fri=
edrich-Ebert-Stiftung are a contribution to the national and international =
discussion on the building up of a sustainable international financial orde=
r. They represent the debate in selected threshold and developing countries=
.
</p><p><b>N=B0 1/1999:</b>
<br><b>Proposals for the Reform of the International Financial Architecture=
: Korea=92s Perspectives </b>
<br><b><i>Hyoungsoo Zang, Korea Institute for International Economic Policy=
 (KIEP), </i></b>
<br><b><i>Seoul, Korea</i></b>
</p><p><b>N=B0 2/1999:</b>
<br><b>The Reorganisation of the International Financial System: The Mexica=
n Perspective</b>
<br><b><i>Luis Miguel Galindo, Faculty of Economics at the University UNAM,=
 Mexico</i></b>
</p><p><b>N=B0 3/1999:</b>
<br><b>South African Debates on a New Global Financial Architecture</b>
<br><b><i>Hein Marais, journalist and researcher, Johannesburg, South Afric=
a</i></b>
</p><p><b>N=B0 4/1999:</b>
<br><b>Brazil's Participation in the Reorganization of International Financ=
es</b>
<br><b><i>Jose Carlos de Souza, Institute of Economics at the University of=
 Campinas, Brazil; Marcos </i></b><b><i>Antonio Macedo Cintra, Ibirapuera U=
niversity, Brazil</i></b>
</p><p><b>N=B0 5/1999:</b>
<br><b>India and Global Financial Markets: Emerging Issues, Lessons and Res=
ponses</b>
<br><b><i>Kavaljit Singh, Author and Coordinator of the Public Interest Res=
earch Group, Delhi, India</i></b>
</p><p><b>N=B0 6/1999:</b>
<br><b>The International Financial Architecture issues in Argentina</b>
<br><b><i>Roberto Frenkel, Professor at the Buenos Aires and Palermo univer=
sities</i></b>
</p><p><b>N=B0 1/2000:</b>
<br><b>Reforming the global financial architecture: Singapore's perspective=
s </b>
<br><b><i>Linda Low, National University of Singapore</i></b>
</p><p><b>N=B0 2/2000:</b>
<br><b>Chile's economic liberalization and control of foreign capital inflo=
w</b>
<br><b><i>Rafael Urriola, advisor of the Minister for Public Works in Santi=
ago/Chile</i></b>
</p><p><b>N=B0 3/2000:</b>
<br><b>Credit Ratings and Emerging Economies (Conference Report)</b>
<br><b><i>Brendan Murphy, freelance journalist specialised on financial and=
 economic questions, New </i></b><b><i>York, USA</i></b>=20
</p><p><b>N=B0 4/2000:</b>
<br><b>A New Global Financial Architecture: A Thai Perspective</b>
<br><b><i>Thanong Khanthong, Business Editor of The Nation, Bangkok, Thaila=
nd</i></b>
</p><p><b>N=B0 5/2000:</b>
<br><b>International Monetary System under Changing Conditions and China's =
Policy Options </b>
<br><b><i>Wei Jianing / Wang Tong, Department of Macro Economic Studies, De=
velopment Research </i></b><b><i>Center, State Council, China</i></b>=20
</p><p><b>N=B0 6/2000:</b>
<br><b>Credit Ratings and Emerging Economies (IMF-Special)</b>
<br><b><i>Brian Kahn, South African Reserve Bank</i></b>
</p><p><b>N=B0 7/2000:</b>
<br><b>The Role of the IMF from the Mexican Perspective (IMF-Special)</b>
<br><b><i>Luis Miguel Galindo, Faculty of Economics at the University UNAM,=
 Mexico </i></b>
</p><p><b>N=B0 8/2000:</b>
<br><b>Reform of the Global Financial Architecture and of the Role of the I=
nter</b><b>national Financial </b><b>Institutions - The Labour Movement=92s=
 Perspective (IMF-Special)</b>
<br><b><i>Peter Bakvis, Director of the Washington Office of the ICFTU and =
the International Trade </i></b><b><i>Secretariats (ITS); James Howard, Dir=
ector of the Priority Group on Employment and </i></b><b><i>International L=
abour Standards at the ICFTU</i></b>
</p><p><b>The Studies are also available on the FES-Homepage.</b>

</p><p align=3D"center"><br><br></p><hr width=3D"50%"><br><br>

<p><b>Impressum</b>

<table border=3D"1" cellspacing=3D"1">
<tbody><tr>
<td width=3D"307" valign=3D"top">
<p>Editor: Friedrich-Ebert-Stiftung
<br> Godesberger Allee 149
<br> 53175 Bonn
<br> Division for International Cooperation
</p></td><td width=3D"307" valign=3D"top">
<p> Phone: +49 228 883 604
<br> Fax:  +49 228 883 600
<br> http://www.fes.de
<br> E-Mail: Ernst.Hillebrand@fes.de
<br>=A9 2000 Friedrich-Ebert-Stiftung</p></td></tr></tbody></table><!-- STA=
RT END -->
</p><hr>
<font size=3D"-2">
=A9 <a href=3D"mailto:wwwadm@www.fes.de">Friedrich Ebert Stiftung</a>
| <a href=3D"https://library.fes.de/fulltext/iez/support.html">technical su=
pport</a> | net edition=20
<a href=3D"mailto:walter.wimmer@fes.de">fes-library</a> | August 2000
</font></td></tr></tbody></table>
<!-- END END -->

</p></body></html>
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------MultipartBoundary--6JZKG6HKUfuywspM6khE49fAohi918MGZksx7HspEn------
