Economic and Financial Committee
It is my honor to welcome you to the Economic and Financial Committee at the 64th session of Harvard National Model United Nations 2018!
My name is Chico Payne, and I am a sophomore at Harvard College. I am from Richmond, Virginia. For several years, I have been interested in the ways that different forces shape the systems that control our countries and our world; because of this interest, I intend to concentrate in Economics with a secondary in Government. In addition to MUN, I am involved in several programs within the Institute of Politics, including serving on a committee in the Harvard Political Union.
Last year, I had the pleasure of serving as an Assistant Director at HNMUN on the Committee on the Peaceful Use of Outer Space and at HMUN on the World Bank. This year I will be the Director for the ECOFIN Committee where we will combine elements of economics and public policy to better the prospects of developing nations. Both of the following topics have been persistent problems for many years, but current conditions have made them especially relevant.
Topic A focuses on increasing the range of access to basic financial services. The ability to save money at a bank or to take out a loan are often taken for granted; however, for billions of people these institutions are too far away to use. Just when access was being spread to developing nations, the 2008 financial crisis shook confidence in financial service providers. Accessibility has started to grow significantly again with the arrival of mobile financial services. Delegates will need to decide how best to spread access to financial services in developing countries.
Topic B concentrates on reducing the impact of sharp declines in commodity prices. These prices fall at the end of cycles where they first reach high levels. The most recent instance of this cycle taking place was the Commodity Super Cycle which started in 2000 and lasted until 2014. The end of this cycle continues to impact the growth outlook for many countries. Delegates will need to determine methods for how countries can better handle the effects of commodity cycles and how these methods can be put into practice.
I am looking forward to seeing you grapple with the economic and policy issues that will come up in committee. I am confident that all of you can write a resolution with solutions that would make a positive impact on the lives of others. Please feel free to email me if you have any questions or concerns about the committee. I am excited to meet you all at conference!
Director, Economic and Financial Committee
Harvard National Model United Nations 2018
Topic Area A: Global Access to Financial Services
As of 2015, two billion people lack access to a transaction account. Financial account inaccessibility is mostly concentrated in developing nations. Basic financial services have the capability of pooling money and spreading risk, which allows for investments in small businesses and other ventures. These businesses can help to increase the wealth of the area, lifting people out of poverty.
Digital financial services have made a push to bridge the gaps that more established financial services have left; however, there is some controversy whether they are effective at alleviating the core issues. The diffusion of these services seems to depend on the absence of existing financial service providers and the duration that digital financial services have existed in the area. In some developing nations, there is one registered mobile financial services account for every three adults. In other nations, it has been less effective. In spite of competition, traditional financial services are not being left behind: between 2011 and 2015, the number of ATMs in the East Asian and Pacific Region nearly doubled.
This committee will need to address how to expand financial services in developing nations to ensure that everybody has access to them. It should also keep in mind the role that digital financial services should or should not play in this development. Finally, it should be cognizant of a problem initially identified by economist Robert Triffin: countries that provide loans to other countries tend to run a currency account deficit. These deficits have become increasingly unpopular as populist sentiments sweep some nations.
Topic Area B: The Impact of Sharp Decreases in Commodity Prices
The end of the Commodity Super Cycle in 2011 has plagued the growth outlooks for many regions, most notably Latin America. The higher prices that they had enjoyed starting in 2002 helped many nations to grow; however, now that prices have fallen, the output for most Latin American countries has decreased. The October 2016 IMF Regional Economic Update forecasts that GDP will shrink by 0.6% in 2016 but recover by 1.6% growth in 2017. This should indicate the end of a regional economic crisis that began in 2013. Over that time, there has been a cumulative GDP growth of 0% compared to 11% for the rest of the world.
Delegates should keep this case study in mind when thinking about the effects of a sharp decrease in commodity prices. What can governments do to prevent the sudden shocks from negatively impacting its population? What role can the international community play to aid governments in this purpose?
With this case in mind, the committee should think about how to mitigate the severity of future commodity bubbles. One consideration might be how to encourage economies to diversify. Another might be how to incentivize countries to save money during “boom periods” to help the economy during those of “bust.” Following this principle is especially difficult for politicians whose constituents might not see the importance of higher savings when other countries are enjoying the immediate benefits. Committee members should always keep in mind the potential for moral hazard and how it pertains to their actions.