Conference on Finance for Development and Peace
Economen voor Vrede (EVV)
in collaboration with
The Tinbergen Institute and The Dutch Committee 50 Years United Nations
September 29, 1995
The issues we face in this conference are by no means only technical. The financing of the United Nations System involves cultural, legal, political, and economic factors, and running through of all these are complex influences of information, disinformation, and resultant perception. As I hope I can illustrate in the course of these remarks we are, then, involved in a "sociology" of financing the UN, at two dimensions -- financing the core activities of the United Nations System, and mobilising the vastly larger finances needed to enable the UN to lead in building a peaceable and just world community.
I will speak to the main problems of core financing, and I will speak frankly, as a private citizen of the United Nations who believes that Europe's soft-spoken deference to so-called major powers, one in particular, is a whole part of our financing problems. The time is long past for polite talk; and the calculations we need to make are not merely intriguing academic problems or flights of imagination. Our United Nations is under an active threat of slow extinction, and the world community is in turn under active threat of escalating convulsion. I hope this conference will proceed in an atmosphere of impatience, even anger, and a determination to demand that our governments properly assume their responsibilities.
By the core financing of the System I mean the financing of the United Nations itself, and of the main Specialized Agencies (like UNESCO, FAO, ILO, WHO, UNIDO) by the mechanism of assessed dues levied on each member-state. The first and underlying need here is full and accurate perception of two outrageous absurdities.
The first absurdity is the prevailing perception of size; the charge flung about the Northern world that the UN System's budgets are huge, extravagant drains on our countries' treasuries. The impact of this propaganda can be illustrated through a true anecdote. When the eminent international financiers convened by the Secretary-General to review UN financing problems first met in late 1992 under the co- chairing of Shijuro Ogata and Paul Volcker, they expressed bewilderment about the data prepared for them on UN budgets. Were there not misprints in the tables? When they were assured that the figures were accurate they expressed astonishment: had they really been asked to look at the problems of mobilising such very small annual sums? Even such eminent financiers, with access to the best information, had believed the propaganda.
A major feature of this problem is deliberate disinformation facilitated by lazy journalism. The UN's budget figures are open matters of public record. The UN's presentation of the figures can be improved, but any serious and honest enquirer can work with them. However, right-wing politicians and foundations, and other groups intent on crippling the UN have for decades grossly misrepresented the real size of the finances of the UN. And Northern media editors who have an ingrained dislike of all bureaucracies and a worship of the major powers have readily accepted every epithet offered them about this. And as a result, not only have some of the world's most eminent financiers been successfully disinformed, but ordinary citizens are made confused and apathetic by the propaganda, and many parliamentarians are hesitant to get involved. Meanwhile, the UN sinks closer and closer to outright bankruptcy. There was serious official discussion even two weeks ago in New York about the possibility of having to cancel the 50th Anniversary celebrations.
Let me re-state this first gross absurdity. Our only universal public-service organization is confronted with a huge range of needs across the world, which the vast majority of its member-citizens want addressed and depend on the UN System to address. The Northern industrial powers have not allowed the UN to tackle the root causes of conflict and upheaval that were postponed, concealed, and in many respects exacerbated by the Cold War. As a direct result our world organization is now facing large new bills for peacekeeping and relief -- to try to cope with the violent consequences of neglect of the causes, and the resultant mass human misery which has seen the number of displaced persons in the world increase 45 times in 45 years. Even so, the total expenditure of the whole assessed and voluntarily funded UN System -- for everything done by the UN and the Agencies and Funds in every field of human need, and including grant development, peacekeeping, and humanitarian relief -- aggregates to only some 11 billion dollars, or some 17.6 billion guilders, per year.
That is less than 2 dollars, or 3 guilders 20 cents per human being alive on Earth per year. Dutch colleagues can undoubtedly find some astonishing Dutch consumer comparisons, but I can mention that this total expenditure of the UN System for a year would only keep British citizens in alcoholic beverages for 15 weeks. It would only provide Western teenagers half the accessories they buy for their clothing (half the belts and trinkets, not the clothing) in a year. Yet even the UN's own proportion of this total -- 1 billion dollars for its regular budget and an average 1.4 billion for peacekeeping -- was not fully paid by its members. The arrears have steadily increased.
As of the end of August this year, the total arrears owed to the UN alone stood at $2.5 billion. Of this, $851 million was owed for the regular budget, and $1.67 billions for peace- keeping. An additional assessment for peacekeeping has just been issued totalling another $1.3 billion; we have to wait at least for the statutory 30-day payment period before we can begin to know how much higher the UN deficit may grow in coming months, but it will undoubtedly go beyond $3 billion.
This brings me to Absurdity Number Two, which is an outrage upon every other member-government and upon all the citizens of the UN, including the citizens of the United States who continue to show in repeated polling not less than 65 per cent support for it, despite the conduct of their elected representatives. It is the outrage that the very country to which the rest of us have for forty-nine years entrusted the unique and highly privileged responsibility of being Host to our United Nations is keeping it in a state of political siege and imminent financial bankruptcy. For of the $851 million arrears now outstanding against the regular budget, the United States of America -- I repeat, the Host Country to the United Nations -- owes $315 million or 37 per cent; and of the peacekeeping arrears of $1.6 billion it owes $648 million, another 40 per cent. And it is delinquent to this massive extent, in violation of international treaty law, not for reasons of economic difficulty but because it is with-holding its due contributions until every other member country accepts its unilateral demands about UN policies, decision-making, and management.
The Host-Country to the UN is engaged in political blackmail on all the rest of us; let us call it what it is.
But there is a further absurdity in this outrageous situation: the United States is not the only source of blame for it. Can any of us think of a single other public-service institution whose other members or constituents have allowed its host to behave this way, year after year? I will return to this issue.
From these two gross absurdities I want to suggest a number of principles and premisses for the core financing of the UN System. The first and paramount principle is implicit in Article 17 of the Charter -- that "the expenses of the Organization shall be borne by its members" -- and was made explicit in the first scheme of assessment adopted by the General Assembly in 1946. Here again we are confronted by induced counter-perception.
The General Assembly formula for each member's assessed share of the UN regular and peacekeeping budgets is based on the principle of relative capacity-to-pay, calculated from a 10-year average of each country's gross domestic product, with downward adjustments for low per capita income and high foreign debt. The same principle underlies the assessment mechanisms of major Specialized Agencies of the UN System like UNESCO and FAO. It is the root principle of democratic revenue-raising and governance -- and in the very countries that demand special influence in the UN on grounds of their contributing the largest money amounts.
It is the principle that it is as great a burden for the poorer citizen to find his or her smaller money amount of taxes as it is for the richer to find their larger money amount. Accordingly, since there is equity of burden, no one should have special influence in governance; no rich person and no corporat-ion is entitled to special posts in or influence on the policies -- or reforms -- of public-service institutions. The citizens of Europe had to struggle over centuries to overcome precisely this undemocratic premise in their own countries; if they now accepted it at home they would abandon democratic national governance to plutocrats and corporations.
And it is most certainly as great a burden for Jamaica, or Nepal or Tanzania to find their smaller money amounts of contribution to the UN budgets as it is for the United States or the other so-called "major contributors" to find theirs. Thus, and as within every democratic country, in the United Nations everyone "pays most".
The justification persistently used in the United States for with-holding part of its dues is that it "pays most" to the UN's revenues because its assessment is the largest amount, and it is therefore entitled to over-riding influence in every facet of the organization. But here again the blame is wider. For the same totally undemocratic talk is constantly heard in and from the European countries that, in effect are subsidising the US delinquency. The so-called "donor countries" as a group are guilty of such argument in every organization and agency and fund of the UN System, constantly demanding special influence, undemocratic representation in governing bodies, and automatic assignment of senior posts to their nationals. The very name they have long given themselves -- "donors" -- reflects this. It is a living lie, directly asserting that some 164 other member-countries are not "donors" to UN budgets.
The use of this term is an act of disinformation to their own citizens about the very nature of the United Nations community and its most fundamental ethical and legal principles. Using it in development assistance is just as outrageous, conveying to taxpayers in the North that the developing countries do not make the contributions of land, buildings, staff and their salaries, and often cash as well, that they do make to their programmes and projects assisted by Northern countries; that they are only inert "recipients". These terms have palpable undertones of cultural and racial prejudice -- and help to reinforce it.
A quick illustration of these ugly underlying facets was unconsciously provided in a television interview some years ago of the then President of the General Assembly. The American commentator asked as his last question, "Finally, Mr. President, don't you agree that there is something wrong in so many small, weak countries that also contribute so little to the UN's costs having the same one vote as the major powers and contributors?"
The President of the General Assembly looked at him for a moment and then replied, slowly, "I am not sure I understand your question: I am the Prime Minister of Luxembourg".
Here I make first recommendations. These terms and phrases have seriously poisoned relations within the UN family. They have confused decent citizens and taxpayers and enabled Northern authoritarians and neo-imperialists to attempt to compromise the democratic foundations of the UN while bringing it close to financial extinction. It would be a signal contribution towards a stronger United Nations if everyone here could pledge never again to stay silent when someone invokes the utterly undemocratic "pays most" argument, in spoken word or in print. And it would be another signal contribution to lessening the dangerously strained relationship across the North-South divide if everyone here resolved not again to use, and not to allow to go unchallenged anyone else using, the term "donor country" or "donor government".
I must next, however, urge what amounts to a deliberate qualification of the principle of relative capacity to pay. I recommend that we accept as a premise of reform in UN financing that, even if capacity-to-pay calculation assigns a large percentage of the total dues to one or a few countries, it is not politically safe, it has been proven too dangerous. It has made the UN far more dependent upon the respect for law and democratic behaviour of such members than the founders envisaged.
When the founders adopted the principle of capacity-to- pay, they were influenced by three forward perceptions, or forecasts.
The first was that this principle would result in the United States -- emerging more wealthy from World War II -- paying a very large share of the budget, until war-devastated Europe got back on its feet.
The second forecast was that the United States would behave decently and in a restrained way, as indeed President Truman was expressing, and not use its special budgetary role to dictate to other countries.
The third forward perception of the founders was that decolonization was many decades away, possibly not even in this century; therefore the number of very poor member- countries would be quite limited. Everyone here knows, I am sure, that the founders had so limited a forecast of increase in the membership that they instructed the architects of the new UN buildings in New York to allow for an expansion to only "some 70 members", and most of the additional 20 or so were to come from Europe.
Thus, the United States was assessed 49 per cent of the UN budget at the beginning. And the minimum, the "floor" assessment against the relatively few low-income member- countries was set at 0.04 per cent. As Europe recovered, its assessments increased and the US assessment could be decreased: from 49 to 33 per cent by 1952; down to 30 per cent in 1957; and to the present 25 per cent in 1972. 25 per cent is generally calculated to be about 5 per cent less than a strict application of the assessment formula to the US economy would yield.
When national liberation swept so unexpectedly early across the South, and the UN's membership exploded far beyond the envisaged 70, the early presumption was not unlike that for post-war Europe: that initially there would be small assessments for the Third World (the minimum "floor" was lowered to 0.01 per cent), but that these assessments would gradually be raised as the developing countries would climb out of their colonial impoverishment. It was assumed that this in turn would enable the US share to be further lowered, and thus a healthy "spread" of assessments would be achieved across the whole universal membership.
This has not happened. The industrial North has refused to adjust the basic terms of the world economy, offering instead only the marginal palliative of so-called "aid" (two- thirds of which is in fact disguised export subsidy). Far from climbing out of the impoverishment imposed upon them by the Northern empires, the developing countries as a whole have slipped backwards.
In 1960, as decolonization swelled towards its historic transformation of the UN, the poorest one-fifth of humankind could at least earn one-thirtieth what the richest one-fifth was earning. Today the poorest one-fifth cannot even earn one- sixtieth what the richest one-fifth is earning.
In 1972 when the universalization of the UN was virtually complete and the US assessment percentile was lowered to 25 per cent, the 80 per cent majority of humankind in the South did at least have a 28 per cent share of world trade. Twenty three years later, the 80 per cent have only 19 per cent of world trade, and according to UNDP they are deprived by North- South structural inequities of over $500 billion a year that they could be earning.
In direct correlation, 88 UN member-countries still remain assessable at only the floor of 0.01 per cent, and another 71 members are assessable at only between 0.02 and 0.5 per cent, of the total UN regular budget.
The overall resultant spread of assessments is not at all what was hoped:
25 members assessed at 0.5% and above contribute 89 per cent of the UN budget (including the American 25%, if it were ever paid);
71 members assessed from 0.02 to 0.5% contribute 9.5 per cent; and
88 states at the floor rate of 0.01% contribute the remaining 1.5 per cent of the budget.
And the United States, frequently supported by other so- called "donor countries" either overtly or by their meek acquiescence, is able to exert grossly undemocratic and profoundly unhealthy pressure throughout the UN System. Not only are weak countries subjected to extortion of their UN votes by economic menaces -- a criminal felony in democratic countries -- but the United States practices direct blackmail against the entire edifice and all its other members by its with-holding of dues.
I hope I have made clear the problematique we thus face. On one hand, the deepening impoverishment of most of humankind by an inequitable economic non-system is now compounded in more and more countries by internal unrest that is usually triggered by IMF structural adjustments. We must vigorously struggle to relieve the policy-elites in a handful of industrial countries, who dictate all this, of their short- sighted arrogance and their trance to the "magic of the market", and make them realise where they are plunging all of us. But in the foreseeable future the great majority of members of the UN will not be able to contribute more than the lowest, or gradually the lower assess-ment percentages to UN budgets.
And on the other hand, we now have far more proof than we could ever have wished, that the United States cannot be trusted to honour its legal financial obligations and pay its 25 per cent share assessed by the capacity-to-pay formula; and that it was also never safe to trust it to honour the Charter and refrain from exploiting the leverage its large share offers it for political ransom and blackmail.
In these circumstances and projections, I urge that we must qualify the capacity-to-pay principle by an imperative- to- protect principle. The late Prime Minister of Sweden, Olof Palme, formally proposed ten years ago that the ceiling should be lowered, so that no member-country is assessed more than 10 to 12 per cent of the total budget, and the difference should be re-apportioned across the assessment scale. We must now drive for this. The United States should be informed by the rest of the membership that its lower assessment will begin when it has made good all its arrears.
How would this be received? Ten years ago Olof Palme's proposal prompted a thundering silence from Washington. The US was annoyed by his proposal. Although American citizens were being lied to that the UN was impossibly expensive, the Administration did not want to have its assessment lowered and thus lose its political leverage. Europe also remained silent, determined not to approve anything that might allow the United States to default on its arrears altogether. This time things might be different: President Clinton has already told the General Assembly that he wants the US peacekeeping assessment rate lowered from its present 32 per cent, and indeed the US Congress has unilaterally -- without any permission from the rest of the membership -- lowered its peacekeeping assessment to 25 per cent (another violation of international law). But we should not count on anything; the majority of members should not try to negotiate the Palme proposal; they should simply adopt it as a fait accompli.
Suppose, then, that the US refuses to accept this and simply continues to with-hold the maximum proportion of its dues that it dares? As everyone knows, under Article 19 of the Charter a member must be in arrears for the equivalent of two full years of its assessment before it can lose its General Assembly vote. What if the US Congress under its present neanderthal Republican leadership simply keeps with-holding under that threshold? Or does not even bother to do that, counting on Europe remaining as meek as if it were one giant American colony?
Here, I believe, we must adopt some further clear and firm principles by some testing at law. The Charter makes no stipulation about refusal to pay dues for unilateral political reasons. There is partial precedent at the World Court. In the 1960s the General Assembly requested an advisory opinion on the refusal of the Soviet bloc and France to pay peacekeeping assessments because they opposed the relevant peacekeeping operations. The Court ruled that all peacekeeping operations duly authorised are "expenses of the Organization" under Article 17. We must get a further General Assembly request for an advisory opinion from the Court whether it is a violation of international law for a member to refuse to pay its dues for the regular budget on political grounds.
Will Europe at last, and late, have the courage to support such a move? France's statement in the Assembly yesterday suggests that irritation against the US may at last overcome all the trans-Atlantic politesse. If enough of the rest of Europe gets equivalent courage, the request to The Hague can be obtained.
But, some will already be thinking, the United States ignores World Court judgements whenever it wishes; so how can the rest of the membership impose any real pressure on this member? Here I would propose a new principle that the United States could not block.
It is a principle of international law that states parties to a treaty are entitled to enjoy the fruitful products of the collective commitment they make in it. It should follow that they are entitled to penalise any party to a treaty who wilfully denies them such products. My colleague drs. Marjolijn Snippe and I have launched a project to assess and review neglected elements of the international law of the Charter, including the law of financing the UN. We hope to find sponsors for a substantive review of these and other aspects, but let me summarise what we believe would be found fully consonant.
The General Assembly can adopt as a basic principle under Article 17 a decision that any member-state that with-holds its apportioned dues for any reason other than accepted economic difficulty is denying other members their share of the fruits of their UN membership, and will accordingly cease to be eligible for benefits from its membership. Specifically, the General Assembly could decide that these should include UN procurement awards. The United States currently gains about 400 million dollars a year from UN purchases.
A more drastic measure -- and one which some European delegates have already privately warned their American counterparts might yet happen if they continue their present behaviour -- would be to propose the withdrawal of the Seat of the UN from New York and the United States if the arrears are not paid fully in one year. The grounds for this would be plain and simple: the Host Country to the United Nations cannot behave this way. The American economy currently gains something like a billion dollars a year from its presence in New York, which would go into uproar and panic.
Some will be alarmed at such a prospect, lest the US Congress retaliate by withdrawing from the UN itself. This is possible. It does not alarm me. The UN would retain its member-ship among 95 per cent of humankind, and indeed faith in the organization among the many who now regard it as the captive of the United States might increase. The UN would not lose much financially because it hasn't had the full US contribution to lose. It would not lose US peacekeeping contributions because the Congress is determined not to make any in any case. The rest of us would lose our present subservience to the myth of American power. We would indeed lose the wonderful dedication of individual Americans in UN service. But we might gain after a while an awakening of decent American citizens to the shameful behaviour of their government, behaviour that they have never demanded and have never been asked to approve.
Let me now quickly recall what is left among our core financing problems. After the United States' 37 per cent of arrears against the regular budget and 40 per cent against peacekeeping assessments, all others in arrears are for reasons of economic difficulty. One distinct group is Russia, and eastern Europe and Central Asia. The Russian Federation and Ukraine alone are in arrears to a total of $73 million against the regular budget, or 8 per cent of total arrears; but they account for no less than 45 per cent of peacekeeping arrears. Most east European members, and every new Central Asian member, are in arrears. The high priests of the most dangerous fundamentalist religion in the world, that which worships the magic of the market, have ensured that the devastations of Cold War expenditures have been compounded by their magic.
This ironically counters another nastily racist piece of propaganda, that the developing countries of the South account for a huge proportion of the UN's deficits. They don't. If we exclude the accumulated South African arrears of $57 million under apartheid, the South's share of the problem is only 12 per cent, with a very close correlation with the 90-plus countries that have been devastated by the IMF's imposed prescriptions. All the rest of the arrears are from the North, West and East.
What can be done about the arrears of those of North and South who genuinely plead extreme economic difficulty in finding their assessed share of the costs? The problem would at least be eased by departing from the 49-year rule that all assessment contributions must be paid in US Dollars. Victims of the IMF and its market-magic partners find it very difficult to come up with such hard currency. There has been a proposal for many years for a United Nations Currency based on the Special Drawing Rights concept of value derived from a representative basket of currencies. This should be energetically re-examined, however the powers-that-be huff and puff against it. But until the Pied Pipers of market magic are sent whistling off on their own to their mythical wonderland, and we are thus enabled to regain some sane management of the world economy, the only way to liquidate these arrears is by a straight one-time assessment weighted towards the more affluent Northern countries -- or by the issuance of United Nations Bonds with long-term dividends.
Late payments-in is another part of the problem, especially as long as governments adamantly refuse to allow the Secretary-General authority to borrow even for a week to cope with short-term liquidity difficulties. That this is a blatantly political denial is proven by the fact that the same governments allow the Director-General of UNESCO to borrow. However, the Ogata-Volcker group have also recommended against such borrowing authority, but suggested that arrears caused by late payments-in could be reduced by three measures: dividing the UN payments calendar into four quarters; applying interest to late payments per quarter; and getting members whose parliaments have a later appropriation calendar to adjust their UN appropriations timing to fit the UN's calendar.
The concept of interest penalties seems entirely valid, provided that it is carefully administered against those member-governments whose late payments are for reasons other than real economic difficulty. And there certainly are some unacceptable anomalies: to cite but one example concerning my own country, Ireland has the same per capita Gross Domestic Product as Brunei Darussalam, but is assessed six times the amount of that immensely wealthy member-state.
The peacekeeping arrears are, of course, now overwhelmingly larger than those for the regular budget, and the tragedy of the UN having to undertake so many responses to neglected causes has circular effects. Troop-contributing countries are not reimbursed for anything up to five years. For developing countries, which contribute over half the troops, this causes reluctance to contribute more to new operations, and equally naturally makes more difficult finding the hard currency for their regular budget assessments. One proposal from some delegations is for peace-keeping redeemable certificates which member-states could purchase for a stated amount. They could be sold at a discount and be redeemable against future peace-keeping assessments. The only ultimate answer is for a substantial UN Peacekeeping Endowment, capitalised by new and alternative sources of financing such as will be so valuably and thoroughly discussed here in these two days.
In conclusion, then, I hope that I have managed to make clear that the danger of the lights going out at UN offices across the world is very real; that this is scandalously unnecessary; and that it is largely because of the sheer lack of courage of Europe to stand up to the United States. Europe does not have to fear the economic menaces and retaliation visited upon developing countries that dare to stand tall against this feckless bully who has trampled on the Charter that so many noble Americans of a more convivial generation helped to draft. And the part of the problem that is not caused by the United States alone is overwhelmingly caused by the refusal of the industrial powers as a whole to face up to a different world, and to allow the UN to lead in the formulation of macro-economic policies for -- and I quote the Charter obligation -- "the economic and social advancement of all peoples".
I would therefore urge three further principles for alternative and additional financing.
First, they must not in any way become substitutes for the fulfilment of the obligations upon all member-governments to make their apportioned contributions to the core costs of the UN System.
Secondly, the funds that may be mobilised from the various schemes we will be discussing must deepen the solemn commitments of our governments to the purposes and principles of the United Nations. If alternative funds were not very carefully and democratically governed, they could easily become assets for the fundamentalists of market magic, whose record vis-a-vis the poor of our human family is one of driving ever more of them into absolute poverty. Such funds must be democratically governed on behalf of the whole membership of the UN, otherwise they will merely further the blind and stupid efforts of elites within a minority of the membership to continue to control the UN, ensuring its early demise and leaving the world ever more violently sundered by economic apartheid.
Finally, let us be very careful not to be overwhelmed by the natural urge to provide new funds for the consequences of the long neglect of the causes of conflict and upheaval. For if the most perfectly designed early-warning, pre-emptive diplomacy, peacekeeping and humanitarian protection machinery were now both created and adequately funded, it will be totally overwhelmed within twenty years by the tidal waves of mass convulsion across the world which are now gathering as a result of neglecting their causes.
The only ultimately productive financing of the United Nations System will be that which at last enables it to get on with its primary mission as so clearly stated in the Charter - - to establish "the conditions of wellbeing and stability which are necessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples".
It is time, it is overtime, for the peoples of the United Nations to demand that our governments so resource and so govern the UN as to enable it at last to get on with this job. A part of any programme emerging from this conference should be the establishment at the UN of a Parliamentary Assembly, alongside the General Assembly of executive government. This new United Nations Parliamentary Assembly must be given clearly stated roles of oversight of the distribution and spending of additional and alternative funds.
Let me close with a moment of tribute to two people who should be here with us today. How richly we would be nourished in our deliberations by the giant mind and soaring, fearless vision of Jan Tinbergen. And how appropriate it would be if that brave and tireless American who chaired the negotiation of the Universal Declaration of Human Rights, Eleanor Roosevelt, could also be among us.
Let us do the best we can in their spirit. We have little time left before we may otherwise face the ultimate disgrace; the disgrace of looking at our children and knowing that, by our own neglect, we are allowing tired little elites to ensure that we bequeath to our children a world we ourselves would not wish to live in.