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Caricom and the IFIs

Jun 02, 2009 Editorial

The leaders of Caricom recently called on the International Financial Institutions (IFIs) – the World Bank and the International Monetary Fund (IMF) – to become more sympathetic to the problems of developing economies in general and of the small and vulnerable countries that constitute the membership of Caricom, in general.

Some see such pleas as naïve, but we believe that in the midst of the present global financial meltdown, “the times are changin” and we may very-well witness a massive restructuring of the IFIs, that can redound to the benefit of the developing world.

While the World Bank has long declared that its goal was “a world free from poverty” and the IMF “a world free from financial crisis”, events have propelled several economies from the developing world (“emerging economies” – led by Brazil, Russia, India, China – BRIC – and the Far Eastern “Tigers”) into formidable powers that can be ignored no longer if the IFIs are to stay relevant, much less fulfilling their missions.

When the IFIs were formed in the mid 1940s, the founding members – the USA, Britain and Europe primarily, arrogated most of the control and could do so because of the strength of their economies and their financial systems, in relation to the rest of the world. The emerging economies, ironically have piled up over US$4 trillion in foreign reserves, which places them in an enviable position, when one considers that these reserves were accumulated through the profits generated by factories, that are more modern and efficient that those in the older “developed” economies. Nothing demonstrates this clearer than the largest US industrial corporation, GM declaring bankruptcy yesterday.

It is now universally acknowledged, that if IFIs will not be the institutions that will address the need for greater co-operation in future global economic activities, especially in the monetary area, then some such institution will have to be built from scratch.
The smart money is on the IFIs to receive the mandate, to ensure monitoring of the new three-tiered world that has recently emerged rich, poor and emerging countries.

Already, there have been moves to accommodate the voices of the emerging countries, both from within the IFIs and from without the developed countries that constitute “G8”. Last year, there were some increase in voting quotas in some of the former countries, but it is acknowledged that the reallocation will have to be much more radical. The greatest change will have to come from the European nations that have votes and institutional power, far in excess of the new global economic ground reality.
A second round of adjustment is in the offing, and this is where Caricom can apply its energies, small as they are in absolute terms.
Its leaders, as members of the “third” grouping, can articulate a comprehensive programme of reform that takes a balanced approach that is fair to both sides, but is also not short-sided and unfair to the rest of the world that are “poor”.

When the major global challenges are considered – climate change, communicable diseases, biodiversity etc, these countries are crucial for eventual success and therefore cannot be ignored.
They account for 52 per cent of the planet’s protected natural areas, 44 per cent of people living with HIV/AIDS, and 47 per cent of global carbon dioxide emissions. The international community, simply cannot leave them to their own devices on such crucial issues without jeopardizing its own future.

Caricom can argue, that while the present financial position of the emerging countries may appear impregnable, history has shown that private capital flows have proven to be volatile and prone to sudden interruptions, as exemplified by the Asian and Russian financial crises of the late 1990’s,

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