Fifty years ago, the United Nations Conference on Trade and Development (UNCTAD) was created to guide developing countries in finding their place in international trade. Since then, it has lacked focus and faced internal stagnation. Other organizations, such as the WTO, have taken over many of its issue areas. Furthermore, UNCTAD’s problems stem in part from its voting procedures, which allow any single member state to cause a vote on a new policy to fail. On their golden anniversary, UNCTAD itself may need a guide so it can carve out a new niche for itself.
UNCTAD has had some successes in its current format, such as the the New International Economic Order (NIEO). Nonetheless, consensus voting has caused UNCTAD to be less effective than it could be. Overall, the problem with consensus is that it allows for the preservation of the status quo, causing stagnation within an organization that is supposed to promote development. It is quite simple for a developed country to put the brakes on an initiative that could be of great help to developing countries, but may not be of benefit to the developed world. A move to majority voting would give the organization the flexibility it requires.
UNCTAD has had its issues with ineffectiveness over the years beyond being bogged down by the problems inherent with operation by consensus. Criticisms have ranged from it being staffed by largely unqualified people who had better connections than ideas, to it simply churning out voluminous amounts of data to try to justify its budget, instead of targeting its efforts on areas where it could do the most good. Thankfully the organization became cognizant of most of these issues and has taken steps to address them. The staffing issues have largely been cleared up and the areas of focus being discussed for UNCTAD in the future seem to be in line with positioning it to do the most good in the developing world.
UNCTAD’s past ineffectiveness has come at a price to developing countries, who face their own unique challenges in the world market. These range from having to carry large stockpiles of reserve currencies to stabilize the value of their own currencies to running into protectionist policies in the agricultural sector that many of them would like to be able to compete in globally. They are at a significant disadvantage to more powerful nations in many ways. Rushing into trade liberalization without taking a hard look at the potential dangers can be disastrous for developing countries.
Hot money is something that should be of great concern to emerging economies and UNCTAD should be working with them to develop strategies to help mitigates its effects, which can be crippling. The continuous movement of hot money causes a constantly moving economic crisis because of the sudden removal of investments in one economy in favor of another. In effect, hot money causes the economic collapse of economies it was initially a boon to. Countries may find themselves in a worse position economically than where they started if they do not take steps to diminish their reliance on hot money.
What is currently going on with the Fragile Five economies is indicative of the problems inherent to hot money and premature liberalization of markets by developing countries. The sudden devaluation of the currencies in these nations due to exposure to the global market’s fickle tendencies has put them in a precarious position. Their economies grew because of investment driven by quantitative easing in the United States, which made capital readily available to investors there. When the policy was pulled back, levels of outside investment in those countries plummeted immediately, thus destabilizing their economies. This highlights the need for UNCTAD to work towards building strategies for developing countries to operate effectively in the globalized economy.
By sharpening its focus, UNCTAD could provide accurate analysis of global markets and pragmatic policy recommendations. UNCTAD’s ability to research and analyze the global economy is remarkable. It has been ahead of the curve in anticipating developments, analyzing concerns, and providing recommendations. UNCTAD was the first to correctly note the problems and implication arising from unregulated markets, while the IMF and World Bank argued for unregulated markets. UNCTAD recognized the problems being created in emerging economies by globalization. UNCTAD provides an additional needed voice on the global economy not just for its predictive ability, but also for its criticisms of other economic organizations. In a policy report about the crises within emerging economies from March 2014, UNCTAD criticized the IMF for its lack of surveillance of the global market and knowledge of varying perspectives.
In the same March 2014 report, UNCTAD gave various policy recommendations to deal with the crises in emerging economies. One of UNCTAD’s recommendations is that developing countries should play a larger role in mollifying damages from financial crises. To do this, new management practices need to be created to prevent repeating past mistakes.
It will be difficult for UNCTAD to be as productive as possible while maintaining its practice of consensus voting. Wealthier states have used consensus voting to attempt to steer UNCTAD in a way that benefited them over developing states. If UNCTAD where to adopt majority voting, it would be able to avoid such problems while also becoming a much more nimble organization that could quickly bring its considerable talents to bear on emerging issues in the developing world. UNCTAD is uniquely qualified to help developing states gain the maximum benefit from globalization. It is imperative that it realizes its potential and helps developing countries become stable growing economies.