The world after the crisis: designing the future

Rome
22 June 2009

The Conference discussion focused on the overall international scenario that may emerge after the worst of the economic crisis has passed. A fundamental question arises concerning the nature of the restructure currently in progress. Does it represent a new paradigm for global capitalism or, less ambitiously, is it just a partial reorganization based on more cautious attitudes and expectations? This choice between approaches also applies to reform of the financial regulatory framework, the relationship between the major international currencies, the management of environmental challenges and the level of representation of emerging powers in the major multilateral forums. To date, it has not become clear whether we are on the verge of a step up in quality or merely a partial adjustment.

At least two areas of strong consensus emerged from the discussions. The first of these related to the need for the almost chronic imbalances between major economic regions (that is, between countries in deficit and countries in surplus) to be reduced significantly. The second concerned the urgent need to adopt economic policies that are more long-term oriented. Another general deficiency that the crisis has highlighted is a collective inability to follow through on commitments already made, for instance, within the ambit of the G7-G8 but also at national level, seeing as the financial sector was in fact already regulated before the crisis, indicating a problem of poor enforcement rather than lack of rules.

Whilst the development of a post-dollar monetary system is only conceivable as a long-term goal (otherwise, there is a risk in the short term of heavy dollar devaluation with inflation), the crisis has revealed the need to make immediate changes to the existing exchange rate system.

In the United States, solving the debt crisis is destined to become a fundamental problem; in Europe, there is the issue of raising domestic demand (with the question of whether the enlargement of the eurozone is by definition “off the agenda” being answered in the negative); and in China, seen as one of the “winners” in this crisis, serious consideration is beginning to be given to the convertibility of the yuan, whilst the problem of reducing the degree of dependence of growth on exports is becoming more pressing.

One of the chief areas of uncertainty over the coming years will be who should bear responsibility for tax policies. Whilst this area is one of the key functions of the sovereign State, it is also one of the pivotal tools for managing problems that have become, by their very nature, global.

A decisive factor in overcoming the crisis will be the timing of interventions. Counter-recessionary measures should not be lifted too soon, nor should they be allowed to hamper recovery once it is triggered. Indeed, post-crisis policies should effectively facilitate the overall restabilization of the system rather than let things go back to essentially how they were before. This is particularly the case with respect to taxation and the role of the IMF – which, according to some participants, should readopt a tougher stance on conditionality.

In the final analysis, the consensus of the Conference participants was that the entire growth model that characterized the course of globalization in the 20th century has reached a turning point. The current model has had the great merit of reducing poverty significantly, but it has certainly not been capable of eliminating the many glaring inequalities that still exist, and has in any case carried a heavy cost in terms of damage to the environment. Precisely for this reason, one area that could drive the recovery is the “green” technology sector.

Naturally, a growth and development model also has a strong ethical significance. History shows that the evolution of capitalism has been closely linked to political institutions and more broadly to rules. In a global market, regulation cannot remain local, and principles – relating not only to the functioning of financial markets, but more generally to economic management and business conduct – become crucial.

Related documents:
A Monetary Order for the XXI Century, Speech by Lorenzo Bini Smaghi
Asia Needs to Reform to Rise, Paper by Pramit Pal Chaudhuri
The De-tax proposal: direct and solidarity-based democracy by Giulio Tremonti, excerpt from Il Mondo che verrà, Idee e proposte per il dopo G8, edited by Pino Buongiorno

Tags

Related content

Jeffrey Sachs
Paolo Savona and Giampiero Massolo
Strobe Talbott, Vittorio Grilli, Lord Eatwell, Steven Erlanger, Ricardo Lagos, Fabrizio Saccomanni and Dominick Salvatore
Lorenzo Bini Smaghi
John Elkann

articolo_video: Array ( [0] => Array ( [articolo_video] => WP_Post Object ( [ID] => 73411 [post_author] => 2354 [post_date] => 2009-06-23 14:40:28 [post_date_gmt] => 2009-06-23 12:40:28 [post_content] =>