Introduction
Hello everyone, my name is Esma Djokovic and I will be your head chair for the 2nd ECOFIN committee during the 2012 MVHSMUN conference. I am currently a senior at Mission Viejo High School and this is my fourth year in the Model United Nations Program. I was head chair last year for a novice committee and this will be my first year chairing an advanced committee. I look forward to being your head chair and I hope that we will have a very productive committee session and I hope all of you enjoy it. If you have any questions, feel free to email me.
- Background of Topic
The Global economy has been in its most serious crisis since the Great Depression. The Financial Crisis began in the middle of 2007 and led into 2008 and is still going on today. The stock market crash on October 29, 1933 marked the beginning of the Great Depression. The true causes of the Great Depression include income inequality (there were no middle class incomes), easy money (abundant amount of high interest rates), the Dawes Act (foreign loan programs were cancelled), the Hawley-Smoot Tariff (international trade was killed), and the FED policy (interest rates were raised during the 20’s). Stock markets have fallen all around the world, and financial organizations have collapsed. US investors had lost confidence with the value of “sub-prime mortgages” which led to severe crisis. Because of this, the US Federal Bank infused an immense amount of capital into financial markets. By September of 2008, the crisis had gotten even worse. Stock markets around the world had started to crash and had become unstable. As a result, consumers lost confidence. Home owners within the United States were unable to make payments and the value of homes plunged. Providing and attaining loans became extremely strenuous. The next big crisis occurred on September 14 of 2008 when the US government permitted the investment bank “Lehman Brothers” to go bankrupt. In order to avoid the collapsing of their banks and due to a threat of a domino effect throughout the global financial system, western governments infused immense amounts of capital into their banks. Many countries, along with the United States, have proposed stimulus packages and rescue plans in order to improve the state of the financial crisis.
- United Nations Involvement
During June 24-26 in 2009, the United Nations held a conference on the “World Financial and Economic Crisis and its Impact on Development” in New York. In attendance, there were 60 member states at cabinet level, more than 170 member states had participated in plenary sessions, and over 200 representatives of civil society organizations. A “wide-ranging Outcome Document” was implemented on June 26 which included proposals for fighting the global collapse and contained follow-up procedures. The “Stiglitz Commission”, also known as the “Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System”, was set up by the President of the UN General Assembly, Miguel d’Escoto Brockmann. The Stiglitz Commission issued a temporary report about the global financial crisis and its consequences on development. From March 25-27 of 2009, the GA President assembled a debate on the financial crisis at hand. During the three week period from January 26 to February 13, 2009, an NGO, NGLS, arranged an online discussion where responses were given about financial regulation, multilateral issues, macroeconomic issues, and reforming the global financial architecture. On July 28, 2011, during a plenary meeting, a resolution was reached: “Recovering from the World Financial and Economic Crisis: a Global Jobs Pact”. During the London G-20 Summit, leaders of twenty primary economies assembled together on April 2 of 2009. The U.S. announced that it would pledge $1.1 trillion to assist the global economy. The amplified support for “regulation of the financial industry, control of illegal tax havens, and fairness in compensation of financial executives” was also guaranteed.
- Bloc Positions
Asian Bloc: Asia has not been hit as severely as other blocs, but a brief run on a bank in Hong-Kong caused a financial crisis that quickly spread throughout the Asian Bloc. Some countries in this bloc, like China for example, are in better shape than some, like Russia.
Latin Bloc: Once the United States had been hit, it caused Latin America to fall as well. Stock markets all around had failed. Oil exporters such as Brazil, Argentina, and Ecuador suffered from the oil price slump. Equity prices had fallen all throughout Latin America. Countries like Argentina faced high inflation problems. However, Latin America is better during this crisis than they had done in previous ones.
European Bloc: The financial crisis hit Europe quickly after it hit the United States. Governments had to immediately bail or seize banks. The Euro has not been doing too well since the financial crisis hit. Trading was even halted in some stock markets. Oil prices are also unstable.
African Bloc: When the financial crisis first hit in the United States, Africa’s banking system was not threatened but some decrease in investment flows occurred. Since Africa is not as burdened by the financial crisis as the U.S. or Europe is, Africa has been a place of investment.
Middle Eastern: Stock markets had declined but not as much as other emerging market economies. Some countries, such as Lebanon, had banking systems that were regionally safe. However, GCC economies dropped about 6.4%. Some banks had liquidity problems and housing bubbles have come apart.
- Possible Solutions
Although resolutions have been passed, many solutions still have either not been discovered or implemented. Some solutions that can offer some assistance to the global financial crisis might include enhancing the resources of the International Monetary Fund. Another solution could be augmented lending by development banks. Support for trade should be raised. Millennium development goals should be set for governments and their limits. Money needs to spent more wisely and budgets need to be set. Meetings between world leaders and the UN should be held more often so countries can be in check and they can work together.
- Guiding Questions
1. Was your country heavily impacted when the global financial crisis hit in 2008? How?
2. How can your country contribute to the international community in order to revitalize the global economy?
3. Has your country’s government improved after the crisis hit? If so, what solutions did it discover that helped their economy?
4. What bloc does your country belong to? How does your country’s bloc position affect its economy?
- Works Cited
"Global Financial Crisis - An Overview - United Nations - Non-governmental Liaison
Service."Global Financial Crisis - An Overview - United Nations - Non-governmental Liaison Service. N.p., n.d. Web. 18 Sept. 2012. <http://www.un-ngls.org/spip.php?article596>.
Elliott, Larry. "Global Financial Crisis: Five Key Stages 2007-2011."The Guardian. Guardian
News and Media, 07 Aug. 2011. Web. 03 Sept. 2012. <http://www.guardian.co.uk/business/2011/aug/07/global-financial-crisis-key-stages>.
"Global Financial Crisis - What Caused It and How the World Responded."Global Financial
Crisis - What Caused It and How the World Responded. N.p., n.d. Web. 03 Sept. 2012. <http://www.canstar.com.au/global-financial-crisis/>.
"Global Financial Crisis - An Overview - United Nations - Non-governmental Liaison
Service."Global Financial Crisis - An Overview - United Nations - Non-governmental Liaison Service. N.p., n.d. Web. 18 Sept. 2012. <http://www.un-ngls.org/spip.php?article596>.
"Department of Economic and Social Affairs: Financial and Economic Crisis."UN News Center.
UN, n.d. Web. 18 Sept. 2012. <http://www.un.org/en/development/desa/financial-crisis/index.shtml>.
Moscow., Mark Landler; Carter Dougherty Contributed Reporting From Frankfurt And Andrew
Kramer From. "At a Tipping Point."The New York Times. The New York Times, 01 Oct. 2008. Web. 18 Sept. 2012. <http://www.nytimes.com/2008/10/01/business/worldbusiness/01global.html?_r=0>.