São Paulo – The Trade and Development Report 2015, released this Tuesday (6th) by the United Nations Conference on Trade and Development (Unctad), says that the international financial system needs ample reform, with a long-term agenda leading to the creation of a world central bank and even an international currency to replace the dollar.
The document says that after the 2008 crisis, central banks adopted measures to recuperate the financial markets, expanded liquidity, profit returned to even higher levels than before the crisis and the real estate market recovered. In some cases a new boom begun. However, employment growth has been “weak”, real wages remained stagnant or dropped, investment has facing difficulties to pick up pace and productivity increase is “stuck in second gear”.
“Seven years on, and against a backdrop of sluggish global aggregate demand, increasing income inequality and persistent financial fragility, the world economy remains vulnerable to the vagaries of money and finance”, says the report.
Unctad’s report acknowledges that the emerging countries, as well as the advanced ones, adopted measures to contain the effects of the crisis in their economies. However, they are suffering the consequences of a world economy that’s still growing and recovering with difficulties. Unctad’s forecasts indicate that developing countries, as a whole, will continue to expand at a rate of more than 4% in 2015, thanks, in particular, to the resilience of most countries in the Asian region when facing international shocks.
On the other hand, Latin American countries, especially Mexico and South American nations, and some Asia states, such as the Arab ones and former soviet republics, are going through a “significant slowdown” because of the decline in commodity prices and reduced capital inflow, which has already generated fiscal tightening measures. In Africa, the effects are mixed.
The document states that the Bretton Woods “collapse”, the 2008 crisis and its consequences prompt a reform in the international financial system. The Bretton Woods agreement was signed in 1944 during the Second World War to guarantee the countries’ financial stability. It resulted in the dollar as the standard for international business, the creation of the International Monetary Fund (IMF) and the World Bank.
Upon calling for a reform of the International Financial System, Unctad acknowledges that it’s a long-term and difficult project, and suggests alternatives such as the creation of regional and inter-regional measures to reduce the need to accumulate foreign currency and to gain economic strength. The document also recognizes that it’s a great challenge to reform a financial system that has as its standard a national currency – the dollar. “Solutions are available, but dedicated action by the international community will be needed if finance is to become the servant of a more dignified, stable and inclusive world”, says the Unctad.
*Translated by Sérgio Kakitani
