By Rick Rowden, CESR Research Consultant
Currently there are many efforts underway by the international donor agencies and the aid community to draft proposals and plans for establishing a new post-2015 global development paradigm to replace the Millennium Development Goals (MDGs) when they expire in a few years. One important set of issues that any new global development agenda must include is that of finance. The new agenda must ensure new mechanisms are in place to address the ways in which national and international finance systems affect the ability of governments to pursue just and inclusive economic development while protecting and supporting human rights. This essay describes several exciting ways civil society groups and social movements are today linking up nationally and globally to advocate for more just and stable financial systems.
Central to their efforts, however, is a reinvigorated role for national governments in both domestic financial regulation and in the international financial architecture. Two important problems with the previous MDGs agenda were (1) they neglected the importance of finance to development and (2) the role of the nation-state in regulating markets was greatly downplayed. These mistakes must not be repeated in any post-2015 agenda.
Contributing to these blind spots in the MDGs were two different focuses of development with often competing areas of emphasis: one of these respresents a priortization of globalization and a country???s integration into the global economy, while the other is more fixed on community level projects and programs. While both of these are important and worthwhile in their own right, there was little discussion on the proper role of the state in promoting economic development ??? or the need for appropriate financial regulation. Many donor agencies promoting free markets and global integration believed that the state should have either no role or a minimal one in promoting economic development and should simply open up and integrate into the global economy.
However, as we can see from many examples of civic activism today in the wake of the 2008 global financial crises, growing numbers of advocates are calling for measures which will require a reinvigorated state that is more inclusive, participatory, democratic, accountable and responsive to national economic development needs and more capable when it comes to better regulating finance.
After three decades of a free market model that set out to weaken and undermine the state???s role in economic development, a stronger and more pro-active state must be at the center of a post-2015 framework, particularly when it comes to effectively regulating a host of financial issues that are inextricably tied to more successful development. Any such framework must address the shortcomings in several aspects of the international monetary and financial systems. Fortunately, there are many advocates around the world who have made very useful proposals that must inform and guide the post-2015 agenda.
These proposals promote solutions in such areas as: breaking apart the ???too big to fail??? banks and better regulating the remaining systemically important financial institutions and markets, including markets for commodity derivatives; establishing an international mechanism for orderly sovereign debt workouts; better regulating international capital movements, including with the use of capital controls; establishing better norms for regulating foreign aid and foreign direct investment (FDI) in developing countries; listening to the voices of developing countries which are calling for greater degrees of trade protection for their nascent domestic industries; rethinking the dominant export-led model of development and instead offering greater support for industrial policies to better promote new manufacturing and services industries; and ensuring that countries have the policy space and freedom to choose their own macroeconomic policies - aid should not be conditioned on economic policy reforms demanded by external actors.
The views expressed in this article are those of the author and do not necessarily reflect the institutional position of CESR