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Capitalism, IMF and World Bank under fire at U.N.

26 June, 2009

UNITED NATIONS: Ecuador`s left-wing President Rafael Correa blamed capitalism on Thursday for the global financial crisis, suggesting at a U.N. conference that the International Monetary Fund and World Bank be abolished.

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Criticism of the IMF and other so-called Bretton Woods institutions established during World War Two has become a running theme at a three-day meeting of the U.N. General Assembly on the crisis.

"Patching up the Bretton Woods system, which we do not control, makes no sense for (developing) countries," Correa said in a speech on the second day of the conference.

Reforming the IMF and World Bank "would be an insufficient stopgap solution," he said, adding that "we are faced with a crisis unlike those (previously) provoked by capitalism."

If the Bretton Woods institutions cannot be abolished, he said, then they should be changed and given less authority over the world`s poor countries. More financial decision-making power, Correa said, should go to the United Nations instead.

Cuban Trade Minister Rodrigo Malmierca Diaz had said on Wednesday that the IMF and World Bank had "impoverished" nations around the world and should be scrapped.

The U.N. meeting was originally set for June 1-3 but General Assembly President Miguel D`Escoto, a leftist former foreign minister of Nicaragua, delayed it to this week because of arguments over a set of draft proposals on reforming the world financial system.

Roughly three quarters of the General Assembly`s 192 nations are participating in the conference, which is due to adopt a draft document outlining financial reform proposals which diplomats said now had close to unanimous backing.

The final proposals, watered down from an initial draft that was prepared by D`Escoto and rejected by Western powers as too radical, include a call for reforming the IMF.

But the only specific reform they call for is that the decision-making power of emerging market and developing states be increased in the next IMF quota review by early 2011.

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Nobel Prize winning economist Joseph Stiglitz, an adviser to D`Escoto, told reporters the developed world realizes there are severe problems and has started to make reforms.

"My own view is that there is likely going to be a lot of volatility going forward and that it is going to be very difficult to restore robust growth until we make at least some of the reforms," Stiglitz said.

One area of contention is the creation of an alternative global reserve currency to the U.S. dollar. Stiglitz said reforming the reserve system is part of the process.

The draft, which delegates plan to adopt on Friday, also calls for increased aid and debt relief for poor nations and more supervision of hedge funds and financial products like derivatives and warns against national trade protectionism.

Most delegates have spoken of the need to reform the IMF and World Bank, but representatives of Western developed economies rejected the idea of abolishing the institutions.

"The Bretton Woods institutions have rarely been popular but they have never been so necessary," Britain`s Africa Minister Mark Malloch Brown said on Wednesday.

Although the meeting has been billed as a summit, no Western leaders are attending. Less than a dozen presidents and prime ministers, mostly Latin American and Caribbean, showed up. Others taking part have sent lower-level delegates.

Western diplomats said the turnout reflected widespread dissatisfaction with the way D`Escoto organized the event.

End.


 
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