1. For over a year, since the start of the current crisis in Thailand in July 1997, the Bretton Woods institutions, and the Group of Seven industrial countries’ governments which dominate international economic policy-making, have followed a strategy of containment. They hoped that tight fiscal and monetary policies, coupled with devaluation as a condition for IMF balance of payments assistance, would rapidly stabilise financial markets and stimulate an export led recovery in Asia. They hoped that incremental changes to the international financial system to promote good practice by national regulators of finance markets, in corporate governance and in fiscal policy would restore private investors’ confidence. They hoped that growth in the USA would continue and be supported by recovery in Europe and Japan. This containment strategy has failed. The crisis is spreading and deepening, and the toll of human casualties mounting. Globalisation is on trial.

The Roots of the Crisis: the Absence of Regulation

2. The cause of the crisis was the blinkered pursuit of financial liberalisation without an adequate framework of regulation to prevent mismanagement, speculation and corruption. Governments abdicated responsibility for managing their economies to global financial markets. This released massive international flows of short term credits and portfolio investment on emerging financial markets without establishing international systems of accountability, transparency and prudential regulation. Rules and institutions needed to prevent the inherent volatility of money markets ruining decades of hard work and productive investment were neglected.

The Consequences: Severe Social Crisis

3. The consequences of the financial turmoil are a massive increase in unemployment and poverty. The most vulnerable in society, who bear no responsibility for the crisis, are carrying the heaviest burden of policy failures. In Thailand and Indonesia, families are sending children and grandparents to scavenge on rubbish tips while the adults search desperately for casual labour. Prostitution is increasing rapidly amongst children forced onto the streets because their parents can no longer afford school fees. Families are breaking up as the men return to the villages to try, and usual fail, to find work on the farms. HIV/AIDS infection and drug abuse are sky-rocketing. In Russia and the Ukraine, the problems of a large scale restructuring of the economy and society have been compounded by a rapid liberalisation of finance markets and an ill prepared programme of privatisation. Together these policies have created the disastrous social crisis in which tens of millions of workers unpaid for months rely on potatoes grown on small plots to survive the winter. Living standards in Africa, the world’s least developed region, and Latin America, the region with the most social inequality, have still not recovered from the debt crises of the 1980’s and now prospects for recovery from its enduring effects look increasingly fragile.

4. As the spreading recession pushes more and more people into destitution, the wealth of the 225 richest people in the world has risen to over $1 trillion, equal to the annual income of poorest 47% of the  world’s   population  (2.5 billion people).(2)  A system   based on such vast inequalities is unsustainable, socially, morally and politically.

The Need for Urgent Action

5. The interlinked social and financial crises in the global economy will dominate discussions at this year’s Annual Meetings of the IMF and the World Bank. Restoring financial and social stability, and laying the foundations for recovery, is only possible through a package of mutually reinforcing policy initiatives. This Statement argues that large scale concerted action is essential to avert the risks of a deep and long world recession, through :-

• a major increase in financial assistance to the developing and transition countries in the front-line of the crisis, targeted on social programmes and the restructuring of private and public debt;

• substantial reforms to the architecture of the global financial system;

• a coordinated cut in interest rates across the OECD countries;

• support for the building of democratic institutions and the principles of good governance, including the respect for fundamental workers rights; and

• a determined drive to eradicate poverty.

The Human Face of the Economic Crisis in Asia

6. Korean workers and their families are battling to stave off a sense of hopelessness as the promise of prosperity to accompany their newly won democratic freedoms evaporates. Bankruptcies and redundancies, especially in small and medium-sized enterprises, are rising rapidly, and unemployment is now over 1.5million, or 7% of the labour force. Yet restructuring of the dominant chaebol remains blocked by the inertia of their owners and allies in parliament. In Thailand, massive redundancies especially in the construction and finance sectors, and a large-scale reverse migration to the poor rural north-east from the major urban areas have set back decades of development. Unemployment and poverty in Indonesia on an even larger scale threatens the entire social fabric of the world’s fourth largest nation. Unemployed workers in these countries have little compensation for loss of income because of deficient social security systems, and many are now unable to meet their basic needs for food, shelter, health care, and education for their children. A particularly disturbing trend is an increase incidence of child labour in many of the crisis-ridden Asian countries.

7. Because of their unequal position in the labour market, women are more adversely affected by the crisis than men, because:-

• they are in more precarious jobs;

• they are less well organised;

• employers, regarding them as "secondary" earners, dismiss them first;

• their wages and benefits are lower; and

• they have lower skill levels and often face difficulty in finding training places.

8. Migrant workers are another highly vulnerable group affected by the crisis, and their needs must be addressed. There exists a current of tension in the main host countries of migrant workers, especially Thailand, Malaysia and Singapore, as a result of large numbers of unemployed migrant workers, unwilling to return voluntarily to their country of origin because of lack of job opportunities there.

9. Looming ominously over the efforts of Thailand, Indonesia, Korea, Malaysia and the Philippines to halt and reverse the recession is the threat of an economic slowdown in China. The weakening of export growth in the coastal provinces is exposing the ruthlessness of the government’s approach to transition from state planning to a market economy. Hundreds of millions of workers continue to be made redundant by inefficient state run enterprises and the government administration while the prospects of new jobs fade. With Japan struggling to restructure its financial system at the same time as counteracting a dangerous deflationary spiral, the outlook for Asia is grim.

A Social  Action  Plan  for  Asia(3)

10. Large scale international support for recovery measures must be targeted on the countries worst affected by the crisis and the most vulnerable people in those countries. The priorities are:-

• protecting education and health budgets, ensuring that the poorest are able to keep their children at school and have access to primary healthcare;

• creating and expanding social safety nets to ensure that the under and unemployed have a basic income on which to live, including the extension of ILO-backed child labour eradication programmes;

• boosting employment intensive public works schemes and extending training and job search programmes;

• restraining prices of essential commodities and maintaining the purchasing power of minimum wages;

• promoting tripartite dialogue between governments, employers and unions, based on respect for the ILO’s core labour standards, to broaden support for adjustment policies and lay the foundations of a sound industrial relations system; and

• working with the international banks to reduce, write off and reschedule debts so that productive enterprises are enabled to recover, maintain employment and eliminate wage arrears .

The Financial Restructuring of Asian Enterprise

11. The growth of exports within the region is being held back by the pace and depth of the slowdown. A social action plan would help to restore consumer demand in Asia. However, it is also vital to restore the financial viability of the region’s enterprises. Having relied heavily on bank lending, and with a narrow equity base, many companies are insolvent, unable to raise working capital and struggling to pay still high interest rates. The major families, which over the past decades built up these companies, are reluctant to sell shares to foreign multinationals at the knockdown prices they would currently command, and governments are reluctant to liquidate what amounts to the backbone of the nation’s development. The foreign banks and their local intermediaries are focusing primarily on rebuilding their assets to compensate for a big increase in non-performing loans. The international banks’ rescheduling deals merely stretch out repayments and do little to ease the liquidity crunch. The international institutions backed by the main industrialised countries must act to break this impasse.

12. An international fund, financed by industrial country governments and working as part of the World Bank’s International Finance Corporation, should be set up to inject new share capital into Asian companies and reduce over-borrowing. The fund would oversee the elaboration of five to ten year financial and social restructuring plans for the major companies. In parallel, Asian governments should set up social security funds, financed by employer, worker and government contributions, to provide pensions, sickness, and unemployment benefits. Such funds, which should be independent of government’s main budget and thus insulated from "raiding" at times of crisis, would be supervised by tripartite bodies of union, employer and government nominees and publish their accounts regularly. As the social security funds became operational and the company restructuring plans worked out, the shares owned by the international fund would be sold at their original purchase price to the social security funds to strengthen their capital base and repay the international fund.

Preventing Collapse in Russia, the Ukraine and the CIS

13. Efforts at containing the contagion effects of the crisis have failed in the case of Russia where energy export revenues have fallen, the rouble has depreciated steeply and the government defaulted on its domestic debt. The spectre of increasing poverty for millions of men and women is particularly ominous. The ICFTU and the Russian trade unions have warned on numerous occasions over the last two years of the gravity of the scale of non-payment of wages and pensions in Russia, as well as the Ukraine and other CIS countries. While a new elite has built massive fortunes from privatisation and the growth of a largely unregulated financial sector, and transferred a large proportion of their assets into foreign currency accounts in Switzerland and Cyprus, perhaps 50% of the Russian workforce has not received regular wages. They survive, with the help of other family members, by not paying rent and utilities bills, bartering the "in-kind" payments they get from their employers and growing vegetables on small plots of land. Support from the IMF, the World Bank and industrial country governments in return for largely unfulfilled promises of reform to the tax system and the business sector have failed to build the basic infrastructure of a market economy.

14. The weakness of the basic institutions for a market economy has created fertile ground for speculation, fraud and corruption. One of the fundamental problems is that the banking system does not provide working capital to enterprises, which as is normal, face a need to pay the regular running costs of their operations while awaiting payment for deliveries. This has created a vicious spiral of non-payment which is hampering reform and deepening the recession. In addition, viable companies with no liquidity to maintain their production are difficult to distinguish from enterprises that require more fundamental restructuring or outright liquidation. With the prospect of severe social tensions and a political breakdown, there is now talk that the new administration will simply print money and distribute it arbitrarily to whichever sectors of the economy are able to exert the most pressure. The price for workers and pensioners of being paid at least part of their due wages and benefits is likely to be a massive inflation of prices possibly leaving them no better off than now.

Tackling the Non-payment of Wages

15. As an alternative to inflation or deepening recession, the ICFTU would therefore propose that the Group of 24 organise an international fund to create a new special business overdraft window at the Central Bank of Russia. This would offer an overdraft equal to say 3 months’ wages and charge a nominal interest rate covering costs. The credit line could be rolled over only where a local union representing the workers verified that wages had been paid. Such a facility would not be inflationary given the high volume of spare capacity, would put cash in the hands of those who need it most, not to the wealthy who will transfer it abroad, and help to restart the dangerously stalled process of institutional reform and economic recovery. As soon as the banking system can demonstrate its capacity, the overdraft business would be passed to it. An emergency scheme along the lines suggested would both help stave off the threat of severe social hardship this winter and also contribute to the establishment of a functioning market economy.

No Silver Lining in Slump in Oil and other Commodity Prices

16. Between June 1997 and April 1998 non-oil commodity  prices  declined  by  some  10%(4) and are still falling. Oil prices have fallen even more steeply and are expected by the industry to be stuck at between $12 and 16 per barrel for several years. This is almost down to the level before the 1974 oil shock in real terms. While some commentators have suggested that this is a positive factor, helping to contain nascent inflationary pressures in the industrialised countries, the wider impacts are very disturbing:-

• most developing countries and a number of transition countries of the CIS (e.g. Indonesia and Russia) rely heavily on oil and other commodity exports, adding to pressures on the balance of payments and exchange rates;

• depressed oil prices add considerably to the intractable political problems of the Middle East and Central Asia;

• low prices for hydro-carbon fuels in the near term will make it more difficult to meet the Kyoto Conference goals on the reduction of greenhouse gases; while

• disrupting long term investment plans of some of the largest companies in the world and governments energy policies, sowing the seeds of a future oil shock.

As part of a co-ordinated response to the crisis, governments need to re-examine how to bring more stability to commodity prices in general and the oil market in particular. A relatively small boost to oil prices would substantially ease the financial position of number of countries in the front-line of the crisis.

Stopping the Crisis Spreading to Latin America and Africa

17. The world's leading industrial powers must take immediate action to prevent the collapse of the Latin American economies in the light of the massive currency shifts out of emerging finance markets such as Brazil. Industrialised countries should immediately set up a large scale contingency fund to bolster foreign currency reserves. If one Latin America country collapses, there could be a "domino effect" as others follow, setting back efforts to reduce unemployment and social inequality. In Latin America, a recent improvement in general output indicators has not been matched by improved employment. Although overall growth reached 5% in 1997, accompanied by a decline in inflation from very high levels and improved real wages in several countries, unemployment in the region increased between  1991  and   1996,  reaching  7.4%  in  1997,  according  to   the  ILO(5.)     Latin America faces the danger in 1998 of being caught in a global pull back by investors in emerging markets, which could push unemployment and underemployment up sharply. Unable to work in formal markets, where productivity is high and wages relatively good, many workers have to engage in a number of activities that sometimes just allow them to survive.

18. The main impact on Africa of the crisis is the threat to commodity export revenues which will undermine the fragile recovery in a number of countries. Resumed growth in sub-Saharan Africa after prolonged drought, though encouraging, could easily fall foul of the spreading world recession. With a labour force growth of almost 3% and little job creation in the formal sector, most jobs are necessarily created in the informal sector, and in low-productivity agriculture. In addition, with a predicted annual growth rate of 2.9% in the economically active population between 1997 and 2010 (compared with 1.9% for South East Asia and 1.8% for Latin America), an estimated 8.7 million new job-seekers will enter the labour market every year.

19. The much heralded Highly Indebted Poorest Countries (HIPC) initiative aimed at reducing and writing off debt has proved to be slow and disappointing in bringing relief. The $7 billion promised mainly to African debtors over the next four years contrasts starkly with the $100 billion loans mobilised for Asia over the last year. HIPC should be reworked to speed up and increase the assistance to the least developed countries, with the benefits of reduced debt service payments used to augment employment oriented programmes and for critical areas such as health, primary education, and poverty alleviation. The criteria for debt relief eligibility and the conditionally attached to the waiting period are too stringent. The approval process should be accelerated and provide debt relief for all potential qualifying countries by the year 2000, in line with the proposals of the NGO coalition on debt relief Jubilee 2000.

20. The priorities for Latin America and Africa are:-

• the relaunch of a larger and quicker dispersing debt write off and relief programme to replace the HIPC;

• a large scale international contingency fund to bolster the currency reserves of countries threatened by the flight of capital from emerging markets;

• increased IMF financial support to compensate developing countries for reduced commodity export earnings; and

• major reforms to the structural adjustment policies of the World Bank, the regional development banks and IMF so as to promote social development, including respect for human rights and basic health and education needs.

Failure to Regulate International Capital Causes Speculation

21. The current crisis has revealed serious weaknesses in the international financial system. Governments can and should take immediate steps to arrest and reverse the incipient world depression that is taking hold in country after country. However, a sound and durable recovery will require a fundamental reconstruction of the way governments, through the network of international financial institutions and specialised agencies of the UN, regulate and manage the global market, and especially financial markets.

22. Over the past three decades but with an accelerating pace in the last ten years, a 24 hour global market for stocks, bonds and other forms of financial instrument has evolved linking money centres around the world. Ingenious new methods of multiplying credit have developed, entailing ever more risks of contagion spreading throughout the world in the event of serious problems arising in one or more markets. Speculative short term flows of capital have grown to volumes that outweigh the ability of most central banks, even when supported by IMF and other forms of international assistance, to stabilise currencies once a flight of capital takes hold. The consequences of financial turmoil, such as that which started in Asia in the second half of 1997, are a rapid, steep and deep economic downturn leading to large scale job losses and increasing poverty in the countries most affected, which spreads through a collapse of imports to trading partners and undermines confidence in other far distant markets also perceived by investors as risky.

23. During the boom years in Asia, the governments concerned failed to develop the national systems of regulation needed to control and prevent speculation. The pegging of currencies to the dollar and the liberalisation of controls on inward investment made it attractive for borrowers to take on low interest short term foreign loans to finance not only long term productive investments but also questionable prestige projects and a huge increase in conspicuous consumption by the wealthy. Furthermore, for several years, major international banks and other investors were prepared to provide large scale credits with minimal assessment of the risks involved and inadequate information on the real value of the underlying investments. The close relationship between business and governments presumably gave foreign investors a sense that private debts to companies owned by relatives or friends of Presidents and ministers were somehow guaranteed by the state. Neither the IMF, the Bank for International Settlements (BIS) nor private credit rating agencies identified these major policy errors and the build up of a huge overhang of short term foreign private debt until too late. Property markets rose to ridiculous heights and were the first to burst, starting a cascade of non-performing loans and threatening many banks, and causing large scale redundancies in the finance sector. Since many other companies were also largely capitalised by long term bank loans or were part of conglomerates that included banks, the financial crisis rapidly made viable enterprises insolvent .

25. One year on, the Asian crisis is now global. For much of the nineteen nineties, the East Asian region was the motor for growth world-wide, generating a quarter of world trade in 1996. With a number of these economies now in reverse gear and imports down by a third, commodity prices, especially for petroleum products, are falling with adverse consequences for the primary product exports of most developing countries, as well as Russia, Australia and Canada. Many international companies are revising downwards profit projections and delaying investments, with the consequent effect of producing a sharp decline in stock prices. Growth in industrial countries is falling, putting off the long hoped for decline in unemployment in Europe. Furthermore, international investors, burnt by their exposure in Asia, are trying to rebuild their finances by cutting back in countries such as Venezuela, Brazil, South Africa and Russia and placing their money in "safe" industrial country government bonds or a few very large "blue chip" corporations. Having contributed significantly to the speculative bubble which caused the crisis, short term capital flows are now spreading its effects around the world and creating a danger that the receding threat of inflation will turn into a price deflation and a global slump.

A New Architecture for the International Financial System

26. The Mexican peso crisis and the Asian financial crisis are stark reminders of the havoc that unregulated international financial markets can bring. Systemic risk and contagion effects magnify and transmit shocks around the world. Neither the much heralded IMF "early warning system" nor the Basle Committee's Core Principles for Effective Banking Supervision have had any impact on this most serious crisis of globalisation. This failure proves the urgent need for a new architecture to control the international financial system. The aim must be to re-harness financial markets to facilitate long-term productive investment so as to secure growth and widely shared prosperity. There is a democratic deficit in the debate over financial market reform. Governments must therefore establish as a priority a broad-based Independent International Commission mandated to report rapidly on the institutional and policy changes needed to establish an effective international regulatory framework. The ICFTU is heartened that a number of world leaders have stated their readiness to accelerate the process of dialogue and agreement on fundamental reforms.

27. The key issues for early decision are:- 

• improved policy coordination between the emerging reserve currency blocks of the Dollar, Yen and Euro to cut interest rates, boost growth and, thus, ease the financial pressure on the countries where the recession started; and to generate stable parities, along with the progressive removal of large long term current account deficits and surpluses

• re-defining the role and responsibilities of the Bank of International Settlements (BIS), the IMF, World Bank, OECD and the Basle Committee on Banking Supervision to implement a global system of governance for international financial markets; 

• reviewing the role of the IMF and World Bank, as called for by the UN's Copenhagen Summit for Social Development, so that structural adjustment programmes promote good governance and respect for human rights and core labour standards, increased employment and poverty reduction, and not austerity and blind deregulation. The review should include the need for external support to maintain or initiate spending on social safety nets in countries facing difficulties;

• laying the foundations for the implementation of an international tax on foreign exchange transactions; 

• recognition of the role of minimum deposit requirements to discourage short-term speculative monetary inflows; 

• agreement on binding international standards for the prudential regulation of financial markets covering capital reserve standards, limits to short term foreign currency exposure, controls on "derivatives" trading and other forms of leveraged investment built on credit; 

• ensuring that banking systems are transparent and bound by effective disclosure criteria; 

• improved standards of corporate governance and information disclosure;

• improved information on currency flows, private debts and reserves;

• stronger global rules on bribery and corruption; and

• a strengthened international code of practice on the procedures for deciding, implementing and auditing government budgets.

Social Dimension to Global Trade and Investment System  

28. Turmoil in currency markets, recession and social dislocation threaten the open multilateral trading system. Resort to protectionism would compound the crisis but pressures to increase trade barriers are rising. The Asian crisis has demonstrated the danger of allowing the social dimension of globalisation to be ignored. In preparing for the next WTO Ministerial Meeting and the possible launch of a new trade round, governments must make an early start on working out new mechanisms to ensure respect for basic labour and human rights world-wide. The Asian crisis has also demonstrated graphically the results of not keeping social progress in line with economic development. The miracle years masked the failure in many of the crisis countries to allow let alone encourage, democratic trade unions to develop along with other participative institutions reflecting a functioning civil society. 

29. The next WTO Ministerial meeting must decide on:- 

• the inclusion of core labour standards as one of the subjects for negotiation in any new round of WTO negotiations; 

• practical measures to strengthen cooperation between the ILO and WTO; and

• covering core labour standards in trade policy reviews. 

30. Governments must learn the lessons from the latest failure to meet the deadline for the conclusion of negotiations on the Multilateral Agreement on Investment (MAI). The fears of citizens of the effects of unbalanced trade and investment liberalisation are real. Any agreement must not challenge the ability of government to regulate, nor lay governments open to perverse claims of expropriation, nor should the effects of social or industrial disputes be subject to such claims. Governments must be able to maintain effective public services delivered through not-for-profit activities in such fields as health, social and educational services. Future negotiations must agree, among other things, a binding clause in the MAI that commits governments not to lower or not enforce domestic and internationally agreed labour standards and environmental standards in order to attract investment. Governments and the MAI will be judged by whether the granting of legally binding rights and protection for investors is matched by reciprocal rights for workers and for the protection of the environment. Efforts to define a new architecture for global governance must take these essential factors into consideration.

Towards a Framework for Competition and Cooperation

31. Time is not on the side of the Bretton Woods Institutions, but they have a narrow window of opportunity provided by this year’s Annual Meetings to rethink their policies and to work with member states and key parts of the international community including the unions and civil society, to define a new architecture for the global governance of the world economy. Trade unions affiliated to the ICFTU have made a concerted effort world-wide and particularly in the front-line crisis countries, to engage governments, employers and the international institutions in a dialogue aimed at finding a consensus on policies to first, alleviate the effects of the crisis and second, build the foundations for early and swift recovery.

32. One of the most important steps forward in that dialogue is a growing understanding that financial and social stability are closely interlinked. Stabilisation policies that exacerbate social tensions are self defeating, as is a resort to the printing presses of central banks as a means of postponing tough choices about the budget. No markets work well without an appropriate degree of regulation by democratically accountable governments, but financial and labour markets are particularly prone to abusive and destructive behaviour. And since it is now more than evident that in a global market a failure to regulate adequately in one country can have profound effects on trading and investment partners, there is an urgent need to agree on strong universal standards to measure national policies.

33. Financial stability is an important prerequisite for development but too often has been pursued by the blunt tools of austerity. Social dialogue between governments, trade unions, employers and other representative bodies is also necessary to build consensus over national social and economic development goals and means of action. Strong social institutions, including free trade unions, are vital to the development of human resources and the mediation of disputes about the allocation of resources.

34. Looking beyond the crisis, the ICFTU strongly believes that comparative advantage will lie with those countries that have a stronger social cohesion built on investment in education and training, health-care and a sound industrial relations system, founded on core labour standards. The most successful countries, both developed and developing, will be those with institutions that are able to balance and rebalance constantly the market pressures of flexibility and dynamism with the social pressures for security and dignity. The suppleness of a country’s institutions will be the key.

35. The first link in the chain of contracts which make the global market function is the employment contract. The workplace is where the pressures of the market impact on people’s aspirations for respect and fair treatment. If governments are to mould globalisation into a force that enables people to achieve their aspirations and allay their fears, they must secure their rights to a say on their terms and conditions of employment.  Adopted at the 86th International Labour Conference in June 1998, the ILO Declaration on Fundamental  Principles and  Rights at  Work (6)  is an important building block in the construction of a more humane and less volatile global market. The ICFTU urges all governments to give the new Declaration their full and active support not only at the ILO but in other international bodies which can make an effective contribution to its implementation. It must be part of the new architecture for governance of the global economy providing a basis for mechanisms for the involvement of trade unions at national and international levels.

36. Within the new architecture of global governance of international trade and investment, a much higher priority is needed for social development. At the UN’s Social Development Summit in Copenhagen, only just over three years ago, more than one hundred heads of state and governments signed up to a very comprehensive anti-poverty, anti-unemployment, anti social exclusion strategy and programme of action. Similarly the UN’s Beijing Women’s Conference marked a major step forward in establishing a platform for action on equality. These unprecedented agreements should be fully integrated into the new architecture. As a first step the IMF and the World Bank should incorporate the national action plan’s for the follow-up of the Social Summit into their policy and lending instruments, including the Country Assistance Strategies and Policy Framework Papers.

37. One of the major unquantifiable barriers to recovery is the intangible element of confidence. This affects not just the expectations of investors about risks and returns but also workers security of employment and income. In addition, the seeming incapacity of elected governments to act is a challenge to the durability of the wave of democratic change which swept the world after the fall of the Berlin Wall. Preventing a global slump and building the foundations for recovery and sustainable development is not just a matter for economists and bankers, it is a challenge to the leadership of the world’s major democracies in the industrialised and developed world.

38. Globalisation is powerful force and its impact is being felt all over the world from Wall Street to the paddy fields of Indonesia. It is however man-made and not a force of nature, even if at the present time it often gives the appearance of being out of control. It was released over the last decade by a combination of the revolution in the information technologies and the cumulative effect of the liberalisation of international financial and trade flows. In addition, the opening to democracy achieved in a large number of countries has led to the dismantling of political barriers between countries and a transition to market mechanisms from systems of state control of economic development.

39. We cannot "deinvent" the innovations achieved by computer and telecommunication scientists even if we wanted to. The will of the people expressed through democratic institutions and constitutions can be repressed but only temporarily, at great cost and by flying in the face of all the basic human values that underpin the work of the United Nations. The world could revert to protectionism and isolationism, and there are dangerous pressures that unscrupulous political forces are exploiting which make that a possibility. However, such a trend would prevent any global effort to eliminate poverty, and destabilise international relations and the quest for peace, security and disarmament.

40. Stopping globalisation is both unrealistic and undesirable. The real question before the international community is can we create the international policies and institutions to manage the process of globalisation in the service of the needs and aspirations of people.

---0---

Els/skp/ga - 24/9/98