By Nick Mann | 8 February 2012

The United Nations has called for ‘development-led globalisation’ to improve the economic situation of both developed and developing countries.

In a report published yesterday, the secretary general of the United Nations Conference on Trade and Development, Supachai Panitchpakdi, said worldwide economic recovery would require a move away from ‘finance-led globalisation’.

He added: ‘Financial markets and institutions have become the masters rather than the servants of the real economy, distorting trade and investment, heightening levels of inequality and posing a systematic threat to economic stability.

‘Finance needs to get back to the business of providing security for people’s savings and mobilising resources for productive investment.’

Surveillance and regulation of financial markets also needed to be strengthened at ‘all levels’.

Development-led globalisation: towards sustainable and inclusive development paths calls for governments in both the developed and developing world to take a more active role in ensuring the benefits of globalisation are ‘evenly shared’.

They need to be willing to correct market failures and promote collaboration among enterprises for long-term investment to become more resilient to global economic shocks, he said. Countries should also take a ‘strategic’ approach to globalisation, rather than adopting policies such as trade liberalisation wholesale.

Measures to diversify economic activity in developing countries should take into account job creation, food and energy security and the potential impact on climate change. This means looking outside industrial development, Supachai explained.

‘This time around, rebalancing will need a global new deal that can “lift all boats” in developed and developing countries alike,’ he added.

‘It is a basic truth that people everywhere want the same thing: a decent job, a secure home, a safe environment, a better future for their children and a government that listens to and responds to their concerns.

Supachai also said action was needed to change the focus of aid programmes for developing countries.

‘In recent years, aid programmes have focused increasingly on social outcomes, often at the expense of support for developing domestic resource mobilisation and the creation of new productive capacities,’ he said.

‘This has taken attention away from what should be the principal preoccupation of development co-operation, which is to move its recipients as quickly as possible to a position where they can mobilise their own resources for development

Instead, he said, aid should be ‘carefully and constructively’ linked to the ambitions of the recipient country. ‘This would make budget support, including through a large grant component, a desirable form of co-operation,’ he added.

Supachai’s report will be considered at the quadrennial UNCTAD summit, being held in Doha, Qatar, on April 21–26.