[Traduction en français]
I think the time has now come to acknowledge, particularly in an age of very well-developed private capital markets, the ability of the leading developing countries and virtually all of the post-communist societies to meet their needs through private commercial mechanisms, leaving the international financial institutions, the inter-governmental system, to focus, above all, on Africa and the poorest of the poor.
This does bear on some very practical questions, most clearly on the question of the European Bank for Reconstruction and Development. I think we may be reaching a stage, for example, where the Czech Republic simply no longer needs the bank. If all goes well, Poland will follow in short order, leaving the bank to focus primarily on Russia as its number one client. Russia's economic and financial needs can and should be met by sources other than government contributions through the EBRD.
It's time to take up the question of a sharpened priority across the international financial institutions and multilateral development banks in lending to other governments and ensuring that these funds are not used in the aggregate economic management to perpetuate large military establishments and large military spending. I think there is a broad consensus on the rationality of this as we move into the post-Cold-War period. The idea was strongly endorsed by the recent commission on global governance, and in summits past it was certainly looked upon with great favour by the major powers in the G-7.
The possibility of moving beyond a focus in lending toward countries that are following the process of demilitarization with an active new military diversion fund to provide a positive reward is also an idea on the table. But even at the more minimal level, I think the bias in the system toward national expenditures in military reduction will provide a broad array of benefits. That is, of course, an element of emphasis that none of the international financial or economic institutions have yet taken up.
We need to focus the international financial institutions and the multilateral development banks ever more strongly on the tasks of developing sustainable development. Much progress has been made over the years, but I think it is possible to envisage generalizing the example of the Asian Development Bank. It has a commitment that by 1997, for example, over 50% of its lending will be to the traditionally considered softer areas of projects that support the empowerment of women, the preservation and enhancement of ecological capital, and social equity.
We can move beyond that as well to broaden the transparency of the international financial institutions themselves. One idea that bears worthwhile consideration is to see whether or not a government like Canada, which has recently introduced at the national level a commissioner for sustainable development, might see if there is a consensus amongst our G-7 colleagues for instituting commissioners for sustainable development within the major international financial institutions and multilateral development banks. That would provide a permanent presence to ensure that the modern values of sustainability are actually reflected to the degree these institutions themselves proclaim they should be.
Further, we need to look at the more micro questions of governance and management in the multilateral development banks and international financial institutions. In 1945 when the Bretton Woods system was created, it was overwhelmingly rational to ensure that in the case of the World Bank, for example, the president of the institution would always be an American citizen, often drawn from the Congress of the United States; that the institution would be headquartered in Washington. In a world in which the United States was overwhelmingly the only major capital provider in the international system, with the recent worries of isolationism from the interwar periods, that was a wise judgment.
But 50 years later we are now in a world where the United States is providing only about 17% of the capital of the World Bank and where the World Bank family has evolved an array of other institutions--the International Finance Corporation, the Multilateral Investment Guarantee Agency, the International Development Association--with a broader array of purposes and a much more diverse base of funding sources.
That process of broadening has begun. A Japanese national now heads the Multilateral Investment Guarantee Agency. I think it is a process that would continue. If one were looking for candidates to take us to the next stage of this diversification, the International Finance Corporation is an institution worthy of closer examination.
There is no reason why the International Financial Corporation, part of the World Bank family but with a very private sector orientation, needs to be headquartered within the beltway in Washington, D.C. and continue to be governed by a structure headed by an American national.
Next, I think we should look at the missing pillar of the Bretton Woods institution, the advantages of creating a global environmental organization. I'll elaborate on that thought in the question period, if there is any further interest in it.
I would like to end with one final thought, and that relates to the role of the G-7 system itself. In the course of your discussions you will encounter a number of well-meaning suggestions for broadening the membership of or participation in the G-7 itself. These should be treated with extreme caution.
Most of these claims are not made on the basis of a need for broader representation or participation to improve the efficiency or effectiveness of the G-7. They are made rather on the grounds of the desirability of expanded representativeness.
The primary reason for caution is that in a world with so many international institutions that have as their central mission offering that representativeness to members of the international community, to usurp that function from them by having the G-7 address it would be a major strategic mistake.
There is, however, some room for further deepening the G-7 system itself institutionally, in part to deal with the new issues of finance and economics the world is facing. I can return to those in the question period, if there is interest.
The Chairman: Thank you very much, Professor Kirton, for a very broad-ranging and thoughtful presentation.
Professor Gerald Helleiner (Department of Economics, University of Toronto): Thank you, Mr. Chairman.
I'm very happy to be before this committee again. My remarks will relate principally to the substance of the G-7 summit as it relates to the international financial institutions and the process through which reform activities take place.
It is something of a cliché now that the world economy has become massively globalized to a degree that no one could have imagined 50 years ago at the time of the initial Bretton Woods conference.
In particular, capital and financial markets have become truly global to the degree that what would have been considered a relatively minor eruption in a middle-sized country--Mexico in the middle of December--struck terror in the financial markets around the world.
Yet despite the globalization of the economy through markets, the global economy is remarkably undergoverned. The public goods national government supply to make domestic economies at the national level function more effectively are only weakly supplied at the global level, if they are supplied at all.
I speak of public goods in the form of rules, laws, stability, crisis management and greater equity, not the least greater equity.
As far as the IMF and World Bank are concerned, three principal public goods are at issue: macroeconomic management at the global level; the provision of adequate liquidity for the globe; and the provision of development finance. These three public goods cannot be adequately supplied by markets.
Market failure in macromanagement, the provision of adequate liquidity and the provision of development finance for those who cannot acquire finance on markets is the reason that at the national level we have established effective central banks and effective financial institutions in which the state plays a role. This is a prudential, supervisory role that sometimes involves direct financial contributions.
That there should be a review process under way 50 years after the Bretton Woods conference is entirely appropriate. It is also 50 years after the formation of the United Nations.
During the past couple of years there have been innumerable conferences and papers written on these subjects. They typically detail the enormous changes, both in the sphere of economics and international politics, that have taken place over the past 50 years.
They call attention to the weaknesses, not least in the sphere of trade in which we have at last just established what I would not describe as a Bretton Woods institution. The World Trade Organization is perhaps a Marrakesh institution, but more appropriately a Havana institution, a final completion of a process that began at a conference in Havana in 1947.
One of the issues is how this new institution with its own governance practices quite different from those of the IMF and World Bank will interact with the IMF and World Bank. This new institution also has considerable overlap in its functions, particularly as it relates to the handling, regulation and supervision of financial services.
Also relevant to a consideration at the 50-year point is the role of the other United Nations organizations as they have evolved. The UN Economic and Social Council, the UN Conference on Trade and Development, and a host of other UN bodies and agencies have appeared upon the scene, and generally speaking the UN agencies, exclusive of the IMF and World Bank, which are strictly UN agencies themselves, have not developed the strength that was originally contemplated for them.
The question arises how, if at all, UNICEF, the World Health Organization, the UNDP and other effective UN bodies are to be best employed at the international level in their interaction with the most powerful and most central bodies, which are today the product of history: the IMF and the World Bank.
That raises questions that are relevant at the national level. Which national government agencies are best equipped to interact with the central institutions on these international and global issues?
At present national governments typically interact with the most powerful central agencies through departments of finance. That may be entirely appropriate; however, departments of finance typically devote only second-order importance to longer-term development questions, to many of the issues that are primary in UN agencies such as UNICEF, FAO and the World Food Program.
Finance departments have to deal with annual budgets, they have to battle with financial markets in the short term--not the long term--and they have not typically been seen by those who erected the original United Nations machinery as likely sources of long-term vision or long-term development interests at the global level.
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