OVERCOMING THE CRISIS

“We urgently need much stronger international institutions"

Summer 2009
What will beat this crisis and what will prevent another are two very different questions, both intellectually and politically.

In terms of crisis-prevention, the answer to the first question seems much more urgent than the second. There are many things in the financial rule-book that ought to be fixed – including extreme short-termism in rewards, off-balance-sheet vehicles that make a mockery of solvency requirements, lack of transparency in bizarre derivates-markets and so on. As the next crisis will be different, these steps will not in themselves prevent future, unpredictable follies.

What is urgently required to alleviate the present crisis, and strengthen our defences against prolonged and future storms, is the creation of much stronger international institutions with the capacity to act globally and collectively. Unfortunately, those who want to act now are not interested in strong institutions, and those who are interested in strong institutions don't want to act now. The result being that the crisis will most likely be long and deep.


Further articles in this  OVERCOMING THE CRISIS section
   
  • Edmond Alphandéry 
"It's up to Europe to set a global example of concertation"
  • Jerzy Buzek
"Let's return to the grassroots and base growth on savings and productivity"
  • Mark Eyskens
“My 10 point rulebook for the globalised economy”
  • Franz Fischler
“What we need first and foremost is a change in public consciousness”
  • Nicole Gnesotto
"We need a new global political deal now the West is no longer master of the world"
  • Béla Kádár
“To save the market economy and democracy, governance has to step in where corporations ruled and markets failed”
  • Noëlle Lenoir  
"My five courses of action"
  • John Monks
“The financial markets are where the re-building must start”
  • Poul Nyrup Rasmussen
"The EU must pull its weight and demonstrate real leadership"

  • Klaus Regling
“Better regulation and supervision, and the greater legitimacy of international financial institutions”
  • Onno Ruding
“Implement de Larosière and then consider further reform”
  • André Sapir
"Restoring the health of banking is no longer a financial problem but a political one"
  • Tøger Seidenfaden
“We urgently need much stronger international institutions"
  • Constantine Simitis
“Fiscal stimuli, yes. But social goals are also crucial”
  • Loukas Tsoukalis
"To be a major player on the new global architecture, Europe must end its IMF over-representation"
  • Alvaro de Vasconcelos
"Now it's the West that needs the Rest"

  • George Vassiliou
"How to beat this crisis and head-off another"
  • Nicolas Véron
“Institutional innovation, not streamlining, is today’s priority”
  • Stephen Wall
“We need a eurozone regulatory structure, and if Britain wants a role it must manage its eurozone entry”
 
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1 COMMENT(S)
  • Re:“We urgently need much stronger international institutions"

I'd more or less argue, in support of your thesis, that the global financial crisis, in fact, was a product of globalization - GATT/WTO liberalization of international terms of trade and services.
Services includes not only IT but also what Clinton Admin pushed - under WTO - and got was international financial transactions (by push of a mause!) across national boarders. In other words, the global financial system finally superceded the concept of national-state and its inherent sovereign rights.

The Asian financial crisis was a first class case of such a bissare laissez faire capitalism gone wild....

Now, what will beat this financial meltdown of international finance and how? And is there a preventive policy available to avoid it in future?

Strengthening of IMF/IBRD and other revlevant institutions, I fear, will NOT address the systemic core faillure of exisiting transactional system. What, in fact, will make it possible to avoid similar situations from arising - slow down process - is by enforcing statutory rules and regulations on operating financial centres - ie. Lond City - to forego their penchant for laissez faire capitalism. Preventive policy framework must include besides other things the final rejection of global derivatives (commodity) markets; hedge funds and investment banks. In other words, as long as we can't monitor and supervise these uncontrolled global transactions - by click of a mause - the financial markets will inevitably mushroom into another bubble and more.... That is the nature of the beast called *free market* capitalism.

ECB must be allowed to setup transparent operating system for our financial institutions including banks that are too big to fail. And ECB must be made legally responsible to EP for its management of all financial transactions inside EU-27, thereby enforcing Euro/Single Market to be adopted by all current and future members - including Denmark.

By Hari Naidu on 8/17/2009 21:34
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