U.N. Panel of Leading Economists Calls for Council to Replace G20

When it gathers next week in London for discussions on the global financial crisis, the Group of Twenty (G20) Finance Ministers and Central Bank Governors will be advised that the G20 should be replaced by a  new Global Economic Council under the purview of the United Nations, according to a report in today's Financial Times.

The proposal is one of 10 in a broad plan to be put forward by an 18-member U.N. commission appointed last October to study reform of international financial institutions, including the World Bank and International Monetary Fund, according to the FT. The panel, headed by Joseph Stiglitz, the Nobel-prize-winning economist, also calls for a new global reserve system that would provide support to developing countries on a regular basis and would not be subject to veto by industrialized countries that dominate existing international financial institutions, such as the IMF.

The commission's proposal to support emerging economies with a contribution of 1% from industrialized nations' stimulus plans echoes one offered by World Bank president Robert Zoellick who — writing in The New York Times and in a recent speech covered by Knowledge at Wharton — proposed that industrialized nations should devote 0.7% of their stimulus packages to a "vulnerability fund" that would help stabilize the poorest of the poor during the global crisis.

Still, according to the FT report, the U.N. commission was critical of “misguided policy recommendations” by institutions such as the International Monetary Fund, closely allied with the World Bank, that have prevented developing countries from adopting the counter-cyclical stimulus policies being pursued by the developed countries.