Credit rating agencies have been criticized for their role in exacerbating the European debt crisis – but it is Western governments that delegated authority to these unaccountable gatekeepers.

Credit ratings agencies (CRAs) have been in the news almost continually for months – for failing to downgrade ratings before the financial crisis struck; for exacerbating the crisis in the Eurozone; and for the recent downgrade of the US’s sovereign credit rating by Standard & Poor’s.

Many of the criticisms launched against the CRAs have focused on perceived conflicts of interest, as the agencies charge the entities they are rating rather than the investors that will use the information. Critics argue that the agencies were, as a result, slow to downgrade ratings before the crisis – even though action might have helped avert the crisis in the first place. But this is only half the story.

Thundering statements from Western governments denouncing the agencies as unaccountable monsters mask two important issues. Firstly, the agencies preform a valid and vital function factoring risk in the market – if they didn’t exist there would need to be some other way to do this. Secondly, it is the actions of governments themselves, in large part, which has given the agencies the authority they now possess.

CRAs live in the dimly lit world of private authority – with that authority delegated to them implicitly and explicitly by Western governments over the past 30 years as the market economy and something approaching a neo-liberal hegemony has developed.

The agencies have been given a key role by governments in domestic financial regulation, as well as international regulation through agreements like Basel II and Basel III. The requirement, in many sectors and jurisdictions, of an investment grade rating by a recognized agency has created artificial demand for ratings and enabled the CRAs to effectively control access to bond markets without any real accountability for the ratings they give – as ratings are currently held to be opinions and protected by free speech in the US (the biggest bond market).

It is only recently that the agencies have come to be seen as a threat by governments across the West, but the writing has been on the wall for a while. Governments have been living beyond their means (in a long term business-cycle sense beyond any short term Keynesian policies to boost demand in recession). As a result no Western government can continue to finance its core functions without the ability to borrow on the markets.

The authority of the CRAs has forced or, from a different viewpoint, enabled democracies to take tough budget decisions that wouldn’t have been possible otherwise. In the initial stages of the Global Financial Crisis it could also be argued the neo-liberal hegemony relied on the CRAs to force weaker countries to conform to the neo-liberal agenda. But central parts of the neo-liberal hegemony are now getting close to being burned themselves. Core parts of the Eurozone and even the US have moved directly into the firing line.

The power of CRAs to bring about self-fulfilling prophesies of unsustainable debt, as seen in Ireland and Greece, is as much down to their lack of accountability – nurtured by Western governments – as it is to conflicts of interest. But at the end of the day the reality is still brutally harsh – the West has lived beyond its means for a generation or more, and is now facing pay back time.

Time is running out to achieve the Millennium Development Goals. With only three years left, many of the (fairly narrow) goals are unlikely to be met. But what happens after the 2015 deadline? This is what participants at an event organised by the All Party Parliamentary Group on Debt, Aid and Trade, IDS and Beyond 2015 met to discuss on Wednesday 13 July, in an interesting session called ‘Tackling global poverty: is our approach fit for post 2015′.

Speakers Amy Pollard (CAFOD), Allister McGregor (IDS) and Kudaskwashe Dube (African Decade of Persons with Disabilities) set out some interesting perspectives on a new post-2015 framework, highlighting the need for a radical change in approach, but also making clear the daunting challenges in securing any kind of agreement by 2015 or thereabouts.

With much less time now remaining than it took to bring about the original MDGs, the timeline is more that just tight. What’s more, the chances of the UN championing and leading a process that can deliver a new framework ready to follow the end of the MDGs in 2015 seem minimal, and a civil society-led process to agree a framework and then persuade governments to adopt it would probably take considerably more time to build the required momentum.

But this event was a useful catalyst for thinking about where we want to get to. For Allister the end point needs to be a much broader model looking not at a restricted view of people’s lives through poverty, but at a wider view of well-being and the obstacles that stop individuals achieving their aspirations. For Kudaskwashe one of the disappointments of the MDGs has been the lack of focus on disability – something which affects an estimated 15% of the world’s population. Few countries have mainstreamed disability into their MDG strategies, something he thinks has contributed to the absence of voices of poor people in the process. Any post-2015 framework needs to better reflect disability and, even more fundamentally, understand what it is that poor people want and help remove the obstacles.

As for the process towards a post-2015 development framework, Amy reported that CAFOD has had discussions with its partners in over 50 countries (100 Voices) with some interesting results – very strong support for a holistic framework that is jointly developed by and applicable to rich as well as poor countries. In a post-financial crisis world this will resonate much more strongly than a decade ago – and would put the corrosive effects of inequality within and between countries bang in the middle of the debate.

But inequality is by its nature a much more political beast than simply reducing absolute poverty or eradicating hunger, and with countries like the US and UK scoring particularly badly on inequality indexes, I’d be surprised if there was much support from many developed government’s on this idea.

Another challenging prospect, raised by Amy, is how to incorporate the wider implications of the environmental and climate change agenda into a new post-2015 framework – namely how reducing consumption to promote a sustainable planet can fit in with a development agenda up until now focused around growth. Again in a post-financial crisis world, with many rich nations struggling with debt and ageing populations, it is difficult to see much appetite for this part of a new agenda either.

What seems clear is that the world has changed dramatically since the MDGs were drawn up over a decade ago, and approaches to tackling global poverty will need to change radically too.