Robert B. Zoellick, president of the World Bank Group argues that now is the moment to ‘seize opportunity from crisis’. He believes this can be achieved through multilateralism, through ‘reforming and empowering’ the institutions already in place.

He celebrates Keynes as a crucial founder of multilateralism – through the creation of the cornerstones of the World Bank Group, the International Monetary Fund and the World Trade Organisation during the era of World War two and argues that like Keynes we should ‘not shrink away from unifying ideas and actions’ despite the current crisis. He argues that ‘unlike crises in the past sixty years, this is a global crisis’. It therefore demands a global solution. He believes that multilaterlism can magnify the advantages, and temper the downside risks of economic interdependence. It can provide an important monitoring system and control and ensure that the global economic system, particularly trade, is mutually beneficial for all parties.

 He paints a bleak picture of the global context that frames his thoughts and the urgency with which he believes we must act:

The World Bank’s latest estimate of global economic growth in 2009, released today, forecasts a contraction of 1.7% compared to economic growth last year of 1.9%. This would be the first decline in the global economy since World War 2. We also face a 6% drop in the volume of world trade in goods and services, the largest decline in 80 years…just as our economy once helped to lift hundreds of millions out of poverty, today there is a risk of development in reverse, as our interconnected world transmits negative shocks with greater power and velocity.’

Zoellick recommends that as a first step, the G20 should ‘endorse a WTO monitoring system to advance trade and resist economic isolationism, while working to complete Doha negotiations to open markets, cut susbidies, and resist backsliding. We are already seeing creeping protectionism – measures taken at the expense of other countries: ‘Buy this’ or ‘buy that’ campaigns’.

Drawing more seats to the table

It is important, however, that multilaterism serves the interests of developing countries and that open markets aren’t enforced blanketedly on developing countries without their consent and participation in decision-making and an assessment of country-specific and developmental factors.

In Zoellick’s opinion developing countries can be a key part of the solution to the global economic crisis. However, their economies need support from the developed world to ensure that social programs aren’t negatively impacted by the recession and that development and poverty gains achieved aren’t undone. He has called on developed countries to invest 0.7% of their stimulus packages in a Vulnerability Fund to help developing countries.

He proposes supporting developing countries to invest in infrastructure, building productive capacity to pay back loans. This will boost global demand.

Zoellick concludes that if develping countries are going to be part of the solution they must have ‘seats at the table’. The G7 was not inclusive enough to suit the ‘economic realities’ of the time. But the G20 has the potential to do so. However, it still excludes over 160 countries. Zoellick argues that multilateral institutions have an important role to play with their ‘broader membership’ in connecting the G20 to the rest of the world.

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‘The World Bank’s Board of Governors made a start this year with a first phase of reform to increase the influence of developing countries, but we must now go further to rebalance voting shares and Board seats. Making those changes will require that both Europe and the United States reconsider old prerogatives and controls. How they do this is a decision for governments. But I would urge them to be bold and far-sighted. The rising stakeholders must also recognise that with rights come responsibilities, including to boost development assistance’.

Reform is indeed long overdue. Lets hope as Zoellick hopes, that governments can be bold and far-sighted resist the temptation to withdraw and look after their own.

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