The bankruptcy of Lehman Brothers, on September 15th 2008, turned the American financial crisis into a global one. It came as a bad surprise as the management of this centenary bank had never been questioned. The collapse of the US housing industry reminded us of the one endured by Japan, in 1991, which had entailed bankruptcy and a economic crisis.
How can we prevent such mistakes from being made again, and how will we correct the dreadful
consequences of it ?
This crisis made the governors aware of the need to act mutually and simultaneously to handle it. It revealed that no global institution could bear this responsibility, nor put into place the means necessary to shorten the range of its consequences.
Two world wars were needed to put into place the institutions of global political governance aiming at preventing our planet from new global conflicts.After the relative failure of the Society of Nations, where the USA were not involved, and who was not able to control the global rise of fascism and its dreadful consequences, the creation of the UN, in 1944, in Dumbarton Oaks, by the US, China, and Russia, which was finally adopted by 50 countries in 1945, prevented the world from a new world war - despite the risk of the frightening nuclear conflict between two military giants and their Marxist and liberal ideologies- which hopefully remained Cold.
After 1929 and this second international economic crisis, it is now time to reactThe financial crisis shows, if needed, the economic interdependency between continents and the lack of an international economic governance. This intercontinental independency, which is new when considered its width and the fastness of its expressions, is not only the one of the stock-exchanges of Tokyo, Frankfurt, Paris, London and New York, among others, the tendencies of which are parallel, under the influence of traders and medias : the ones in Europe are influenced as soon as they open by the ones in Asia, and when they close by the ones in America. This crisis is also economic and social as it has repercussions in the whole world on the levels of investments, of consumption, and thus of jobs.
It entails a fundamental trust issue in the American leadership, in the handling of financial institutions and in the very system of liberal capitalism.
No one had planned the width and the rapidity of this crisis where the stock exchanges experience unique variations that had never been seen before, making the economy collapse, like castles of cards, or wall of dominoes. It made us forget the benefits of a liberal and competitive economy, the technical, economic and social progress made during the last century, even if it is likely this evolution was too fast during the last fifty years.
Within the institutional framework that does exist, the reaction of the heads of state was exemplary, and they must be congratulated for it. Their methods, the width and the rapidity of their decisions were alike the strength of the crisis. We need to analyse the process of the consultations that enabled such considerable decision making. They reveal the weakness ofinternational institutions, and the power of concerted decisions of heads of states.
The remedies did not come from multilateral institutions - regional or global
Neither the European Commission, nor the European Parliament, the OECD, the UN, the IMF or the World Bank, the EFD or the ECB were able to intervene globally, in spite of generous contributions that were partly never seen before, and the availability of great amounts of money. They had neither the will nor the means to make more out of it.
Two actors were able to make difficult yet compulsory decisions : the president of the United States and the president of the European Union.
When president Bush announced a contribution of 700 billion dollars, he showed the way rightfully. The worries entailed by the rejection of this plan by the House of Representative allowed a major amendment in favour of the victims of the crisis, which enabled its adoption after a second reading by the American Congress. This emphasizes the importance of an elected - and close from being re-elected -
parliamentary assembly in a representative democracy.
The fact that public money was invested in private banks in this country of genuine Capitalism is
significant. The other countries don't have to follow the US, but the American example inspired a great deal of other governments.
Nicolas Sarkozy, the president of the EU, with a similar will to intervene, had to face and additional difficulty on the European level as his function did not gave him powers of decision such as the ones owned by the president of a federal state. His approaches were remarkable, and lead to a double result
in comparison with the US, if you count all the credits put to disposal by European countries.
The success of president Sarkozy is a consequence of his psychological, political and diplomatic skills. He had to convince each European head of state, which were often shaken in their authority and weakened by fore coming elections, along with the economic agents, and public opinion - always influenced and often frightened by the criticisms of the media, instead being comforted by their analysis.
Again, the main starters and actors were not the parliaments nor the political parties, but the governments who managed to convince them and to have them adopt the proper measures.
The dreadful demagogical argument which said that that the banks - which were responsible for this mess - should not be helped financially in stead of the population suffering from their malfunctioning was a hard one to answer. First of all, the shareholders, the clients, the employees, or any other bank staff are not responsible of a crisis they are the first victims of. Moreover, if the bank system does not work, the whole of the population will eventually suffer from it even more.
President Sarkozy acted on every necessary level, starting with France. He directly gathered with the managers of the major banks and financial establishment, along with professional corporate, which was far more efficient, and easier, than using the Economic and Social Council or putting into place a
commission to analyse proposals that were often utopian. His approach favoured national gathering, the opposition having not voted against the measures proposed, in spite of the poor criticism uttered by defeated candidates, and the government got reinforced on his way out of it, in spite of the justified
worries of public opinion.
On the European level, he proved, throughout insisting and progressive approaches that it was possible to get to a consensus. He started by gathering the G4 (Germany, France, Italy and the UK), G5 with the US, and then the Finance Ministers of the Euroland gathered, before the summit of European Council where the 27 heads of state announced similar intervention plans, with the notable help of the UK.
However, those necessary approaches reveal the institutional weakness of the EU, which is marked by the lack of a permanent president. It is all the more so worrying that some of the presidents-to-be of the European Council are inexperienced in their function, don't belong to the Euroland, and are sometimes sceptical as regards the European construction. Such a crisis should enable the quick putting into place of the Lisboan treaty. On a global level, he managed to convince President Bush to gather a G8 enlarged to 20 members, historic event of reinforced cooperation between the main countries of the different continents.
Which measures should we take to prevent crisis alike this one?
The harmonized process of a society depends on three essential facts : the ethical and responsible behaviour of its members, an International State of Right the rules of functioning of which are regulated by him, and a global leadership in stead of the historic national dominations.
It is unfortunately obvious that human behaviour goes from the generosity of a mother Teresa to the violence of killers, and the functioning of the economy implies actors the only goal of which is to make profit, and others whom, out of their management skills, are the prime-movers of the creation and the distribution of wealth along with technical progress and that, throughout the success of their firms, ensure the growth of employment and the decrease of poverty. The taxes they pay and the foundations they create favour the redistribution of Wealth. But all of this is not enough.
The emphasis on the importance of the social responsibility of the companies, the creation of codes of good conduct, the moralization of Capitalism, are all many efforts that are needed. The transformation of Wild capitalism into a social capitalism, emphasizing the social responsibilities of the firms, a moral capitalism without which the functioning of the economy is unacceptable, and a global capitalism where the companies, prime-movers of globalisation, need to correct its inequalities and reduce its defects must go on this way.
The genuine issue lies in knowing if we can accept the essential freedom of enterprise and creation while avoiding the flaws and perversions - particularly in the amounts of risky credits - of hot money, irresponsible credits or grotesque remuneration. Let's avoid action paralysing administrative controls.
How can we make sure that the heads of firms, along with their boards, will act with responsibility, and with the degree of transparency that's needed ?
New relationships will establish between governments and firms, with the essential mutual trust and the clear redefinition of their specific roles will need be redefined. With a global right regulating the functioning of the economy still missing, we ought to plan new multilateral treaties making the rights and the duties of the companies clear. Even though major agreements do exist in the protection of labels and
patents, in the WTO and the ILO (International Labour Organization), there's no such thing as a business right globally known and acknowledged. It is the national of American right which is applied on the different continents.
The international dimension of the legal measures that need be put into practice ought to be one of the major preoccupations of those that are to propose a new global economic order.
A list of the domains concerned needs be written, such as : reviewing the prudential norms of the financial area, according to the principles of Bale II, avoid the perverse effects of company rankings, watch the amounts of cash and the ability to pay back of the borrowers, a better control of the new
financial products, and ensure the transparency of securitization. Firewalls will need be introduced in groups of companies, along with the creation of a body watching over the conjunction and ready to propose necessary approaches when they unfold.
This difficult and great task will have to be studied upon, and consulted on a global basis, within a lively ECOSOC or the OECD, throughout the redesign of its composition which is members of civil society only.
A global political leadership is missing, and it is high time we started worrying about that. The General Secretary of the UN, at the service of the General Assembly of States, cannot fulfil this role because of his role as defined in the Charter.
A new multilateral institution is needed, as an Economic Council of the UN alike his Security Council, or an institutionalized G20 which will be further enlarged, with an international fiscality and an assembly elected by the Parliaments of the member states. His President would be fully committed, as he would not bear any other national mandate, and he would thus ensure a permanent authority during crisis like the one we are undergoing.
The modification of the Bretton Woods (1) agreements was contemplated into, even if the global crisis has no monetary origin, and is essentially not influenced by international speculation nor exchange rates. However, we may take the opportunity created by this stimulating concert mood to tackle the need of new institutions of economic governance and of global currency policies.
The current competition is biased by the low value of the dollar and the Yuan. The putting into place of a global currency can be fulfilled throughout steps alike the European currency system of the seventies that lead to the Euro, the one of the Snake inside the tube : a system of interventions from the central banks, and a world bank to limit the variations of the exchange rate, and aim at acceptable levels of their
respective values. It is possible a certain deflation and the decrease of the credit rate of the ECB might lead to a diminishing of the value of the Euro, thus improving the international competitiveness of the member states.
One day, probably, the "mondo" or the "globo" will be born, in addition to national currencies, in order to make international business, as it had already been evoked in 1945 under the name of "banco".
We are in a global social crisis with work offers that do not fit the needs of populations. It is true, and can be seen on a national level, for example, in France, with the lack of nurses, of skilled people, of craft workers, in the hostelry and building industries, meanwhile the demand for jobs is growing.
Some topics deserve a new global social approach, with the implementation of an institutionalized governance allowing the remedies and the policies needed to correct trends that are
leaving populations with nothing but poverty and unemployment : productivity -which grandly reduces the rural and industrial employments- and the retraining issue of workers involved in this evolution, along with the unbearable differences in wages and social protection whether it be in Europe or in the whole world.
Those modifications cannot be made by the only rules of market nor by non-harmonized national approaches on an international basis which only stress already existing and damageable differences. The clustered actions of States and institutions such as the ILO are not enough to comfort the world nor correct its insufficiencies and flaws.
May this frightening complex crisis favour a world that be renewed in its values, in its actions, structures, and political will
How can we prevent such mistakes from being made again, and how will we correct the dreadful
consequences of it ?
This crisis made the governors aware of the need to act mutually and simultaneously to handle it. It revealed that no global institution could bear this responsibility, nor put into place the means necessary to shorten the range of its consequences.
Two world wars were needed to put into place the institutions of global political governance aiming at preventing our planet from new global conflicts.After the relative failure of the Society of Nations, where the USA were not involved, and who was not able to control the global rise of fascism and its dreadful consequences, the creation of the UN, in 1944, in Dumbarton Oaks, by the US, China, and Russia, which was finally adopted by 50 countries in 1945, prevented the world from a new world war - despite the risk of the frightening nuclear conflict between two military giants and their Marxist and liberal ideologies- which hopefully remained Cold.
After 1929 and this second international economic crisis, it is now time to reactThe financial crisis shows, if needed, the economic interdependency between continents and the lack of an international economic governance. This intercontinental independency, which is new when considered its width and the fastness of its expressions, is not only the one of the stock-exchanges of Tokyo, Frankfurt, Paris, London and New York, among others, the tendencies of which are parallel, under the influence of traders and medias : the ones in Europe are influenced as soon as they open by the ones in Asia, and when they close by the ones in America. This crisis is also economic and social as it has repercussions in the whole world on the levels of investments, of consumption, and thus of jobs.
It entails a fundamental trust issue in the American leadership, in the handling of financial institutions and in the very system of liberal capitalism.
No one had planned the width and the rapidity of this crisis where the stock exchanges experience unique variations that had never been seen before, making the economy collapse, like castles of cards, or wall of dominoes. It made us forget the benefits of a liberal and competitive economy, the technical, economic and social progress made during the last century, even if it is likely this evolution was too fast during the last fifty years.
Within the institutional framework that does exist, the reaction of the heads of state was exemplary, and they must be congratulated for it. Their methods, the width and the rapidity of their decisions were alike the strength of the crisis. We need to analyse the process of the consultations that enabled such considerable decision making. They reveal the weakness ofinternational institutions, and the power of concerted decisions of heads of states.
The remedies did not come from multilateral institutions - regional or global
Neither the European Commission, nor the European Parliament, the OECD, the UN, the IMF or the World Bank, the EFD or the ECB were able to intervene globally, in spite of generous contributions that were partly never seen before, and the availability of great amounts of money. They had neither the will nor the means to make more out of it.
Two actors were able to make difficult yet compulsory decisions : the president of the United States and the president of the European Union.
When president Bush announced a contribution of 700 billion dollars, he showed the way rightfully. The worries entailed by the rejection of this plan by the House of Representative allowed a major amendment in favour of the victims of the crisis, which enabled its adoption after a second reading by the American Congress. This emphasizes the importance of an elected - and close from being re-elected -
parliamentary assembly in a representative democracy.
The fact that public money was invested in private banks in this country of genuine Capitalism is
significant. The other countries don't have to follow the US, but the American example inspired a great deal of other governments.
Nicolas Sarkozy, the president of the EU, with a similar will to intervene, had to face and additional difficulty on the European level as his function did not gave him powers of decision such as the ones owned by the president of a federal state. His approaches were remarkable, and lead to a double result
in comparison with the US, if you count all the credits put to disposal by European countries.
The success of president Sarkozy is a consequence of his psychological, political and diplomatic skills. He had to convince each European head of state, which were often shaken in their authority and weakened by fore coming elections, along with the economic agents, and public opinion - always influenced and often frightened by the criticisms of the media, instead being comforted by their analysis.
Again, the main starters and actors were not the parliaments nor the political parties, but the governments who managed to convince them and to have them adopt the proper measures.
The dreadful demagogical argument which said that that the banks - which were responsible for this mess - should not be helped financially in stead of the population suffering from their malfunctioning was a hard one to answer. First of all, the shareholders, the clients, the employees, or any other bank staff are not responsible of a crisis they are the first victims of. Moreover, if the bank system does not work, the whole of the population will eventually suffer from it even more.
President Sarkozy acted on every necessary level, starting with France. He directly gathered with the managers of the major banks and financial establishment, along with professional corporate, which was far more efficient, and easier, than using the Economic and Social Council or putting into place a
commission to analyse proposals that were often utopian. His approach favoured national gathering, the opposition having not voted against the measures proposed, in spite of the poor criticism uttered by defeated candidates, and the government got reinforced on his way out of it, in spite of the justified
worries of public opinion.
On the European level, he proved, throughout insisting and progressive approaches that it was possible to get to a consensus. He started by gathering the G4 (Germany, France, Italy and the UK), G5 with the US, and then the Finance Ministers of the Euroland gathered, before the summit of European Council where the 27 heads of state announced similar intervention plans, with the notable help of the UK.
However, those necessary approaches reveal the institutional weakness of the EU, which is marked by the lack of a permanent president. It is all the more so worrying that some of the presidents-to-be of the European Council are inexperienced in their function, don't belong to the Euroland, and are sometimes sceptical as regards the European construction. Such a crisis should enable the quick putting into place of the Lisboan treaty. On a global level, he managed to convince President Bush to gather a G8 enlarged to 20 members, historic event of reinforced cooperation between the main countries of the different continents.
Which measures should we take to prevent crisis alike this one?
The harmonized process of a society depends on three essential facts : the ethical and responsible behaviour of its members, an International State of Right the rules of functioning of which are regulated by him, and a global leadership in stead of the historic national dominations.
It is unfortunately obvious that human behaviour goes from the generosity of a mother Teresa to the violence of killers, and the functioning of the economy implies actors the only goal of which is to make profit, and others whom, out of their management skills, are the prime-movers of the creation and the distribution of wealth along with technical progress and that, throughout the success of their firms, ensure the growth of employment and the decrease of poverty. The taxes they pay and the foundations they create favour the redistribution of Wealth. But all of this is not enough.
The emphasis on the importance of the social responsibility of the companies, the creation of codes of good conduct, the moralization of Capitalism, are all many efforts that are needed. The transformation of Wild capitalism into a social capitalism, emphasizing the social responsibilities of the firms, a moral capitalism without which the functioning of the economy is unacceptable, and a global capitalism where the companies, prime-movers of globalisation, need to correct its inequalities and reduce its defects must go on this way.
The genuine issue lies in knowing if we can accept the essential freedom of enterprise and creation while avoiding the flaws and perversions - particularly in the amounts of risky credits - of hot money, irresponsible credits or grotesque remuneration. Let's avoid action paralysing administrative controls.
How can we make sure that the heads of firms, along with their boards, will act with responsibility, and with the degree of transparency that's needed ?
New relationships will establish between governments and firms, with the essential mutual trust and the clear redefinition of their specific roles will need be redefined. With a global right regulating the functioning of the economy still missing, we ought to plan new multilateral treaties making the rights and the duties of the companies clear. Even though major agreements do exist in the protection of labels and
patents, in the WTO and the ILO (International Labour Organization), there's no such thing as a business right globally known and acknowledged. It is the national of American right which is applied on the different continents.
The international dimension of the legal measures that need be put into practice ought to be one of the major preoccupations of those that are to propose a new global economic order.
A list of the domains concerned needs be written, such as : reviewing the prudential norms of the financial area, according to the principles of Bale II, avoid the perverse effects of company rankings, watch the amounts of cash and the ability to pay back of the borrowers, a better control of the new
financial products, and ensure the transparency of securitization. Firewalls will need be introduced in groups of companies, along with the creation of a body watching over the conjunction and ready to propose necessary approaches when they unfold.
This difficult and great task will have to be studied upon, and consulted on a global basis, within a lively ECOSOC or the OECD, throughout the redesign of its composition which is members of civil society only.
A global political leadership is missing, and it is high time we started worrying about that. The General Secretary of the UN, at the service of the General Assembly of States, cannot fulfil this role because of his role as defined in the Charter.
A new multilateral institution is needed, as an Economic Council of the UN alike his Security Council, or an institutionalized G20 which will be further enlarged, with an international fiscality and an assembly elected by the Parliaments of the member states. His President would be fully committed, as he would not bear any other national mandate, and he would thus ensure a permanent authority during crisis like the one we are undergoing.
The modification of the Bretton Woods (1) agreements was contemplated into, even if the global crisis has no monetary origin, and is essentially not influenced by international speculation nor exchange rates. However, we may take the opportunity created by this stimulating concert mood to tackle the need of new institutions of economic governance and of global currency policies.
The current competition is biased by the low value of the dollar and the Yuan. The putting into place of a global currency can be fulfilled throughout steps alike the European currency system of the seventies that lead to the Euro, the one of the Snake inside the tube : a system of interventions from the central banks, and a world bank to limit the variations of the exchange rate, and aim at acceptable levels of their
respective values. It is possible a certain deflation and the decrease of the credit rate of the ECB might lead to a diminishing of the value of the Euro, thus improving the international competitiveness of the member states.
One day, probably, the "mondo" or the "globo" will be born, in addition to national currencies, in order to make international business, as it had already been evoked in 1945 under the name of "banco".
We are in a global social crisis with work offers that do not fit the needs of populations. It is true, and can be seen on a national level, for example, in France, with the lack of nurses, of skilled people, of craft workers, in the hostelry and building industries, meanwhile the demand for jobs is growing.
Some topics deserve a new global social approach, with the implementation of an institutionalized governance allowing the remedies and the policies needed to correct trends that are
leaving populations with nothing but poverty and unemployment : productivity -which grandly reduces the rural and industrial employments- and the retraining issue of workers involved in this evolution, along with the unbearable differences in wages and social protection whether it be in Europe or in the whole world.
Those modifications cannot be made by the only rules of market nor by non-harmonized national approaches on an international basis which only stress already existing and damageable differences. The clustered actions of States and institutions such as the ILO are not enough to comfort the world nor correct its insufficiencies and flaws.
May this frightening complex crisis favour a world that be renewed in its values, in its actions, structures, and political will
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