|
Paolo Raimondi, Presidente del Consiglio di Amministrazione
The global financial crisis which precipitated the entire world in an economic depressions worse than of the Thirties, has also evidenced the end of the monetary arrangements created at Bretton Woods in 1944. To say, as recently also French president Nicolas Sarkozy did, that “the world cannot base itself on a unique currency”, it cannot be seen as a declaration against the dollar and the United States. It is simply a rational way to recognize that the world and the international economic relations have deeply changed and that a reform of the system is needed. Also in the Forties Great Britain strongly resisted the idea to loose her world monetary, economic and political primacy, but at the end she had to recognize that the events leading to WWII had definitively changed the old-style colonialist system and favoured a new balance of powers.
With the creation of the Euro and the surfacing of the BRIC coalition and of other important new economies, we entered into a multi polar world. The international monetary, financial and trade arrangements have to follow sue. To resist this process it will create dangerous instabilities and even conflicts of unforeseeable consequences for peace and prosperity.
Already on July 6 2008 together with some Russian and Italian friends, both economists and political leaders, I organized a seminar on the effects of the ongoing crisis, before the banking collapse began to shake the entire world. This event was part of the larger Modena conference organized by the East West Dialogue of Civilization with the participation of Mr. Vladimir Yakunin and other organizers and participants of the present Rhodes forum. We produced a declaration called the “Modena Initiative” which had a significant impact in the economic discussions and also on the international medias.
We analyzed of the causes of the crisis, such as the effects of a wild neo liberal ideology and economy without rules and without controls, such as the banning of any positive role of the state and the uncontrolled growth of different speculative bubbles, above all the derivatives bubble. Then the Declaration presented the following proposals for a global reform, for a new architecture of the financial and economic system:
“With the purpose to overcome the above mentioned crisis, the following primary measures should be implemented:
The Reform of the international currency system, including the introduction of;
- the system of fixed exchange rates, that could be changed only within the context of agreements signed between states, connected with the development of the real economy;
- the linkage to gold reserves or to a basket of major natural resources and/or a basket of selected currencies;
- defining a new currency (unit) or a basket of currencies (not just the US dollar) for the system of international settlements;
- taking under control currency speculation;
- taking under control capital flows;
- creation of a "double approach” credit system -- one with low long-term interest rates for industrial investments and one with high penalty rates for purely financial operations. Thereupon, the functions of international organizations, such as the IMF and World Bank, need to be redefined, also in consideration of their role in the current crisis.
The Reform of the world financial system including the introduction of:
- regulation of existing derivatives instruments;
- enforcing rules that will ban speculative OTC deals, minimize the derivatives bubble and define the rules and regulations for future financial operations;
- liability for bidding by using derivatives instruments at the stock exchange;
- liability for setting up rating standards and introducing authorization and supervision by a special authority;
- cancellation of off-shore centres;
- a ban on hedge fund speculative operations and so called collateralized debt obligations (issue of securities "backed” by debt);
- increase of taxation of financial speculative operations as well as of profits from them;
support of public and private banking and credit intermediary institutions, necessary for a policy of real industrial and other productive investments.
The Reform of international trade system, including:
- the revision of WTO agreements, that have deregulated industry and trade sectors at the expense of the effectiveness and productivity of the economic system as a whole;
- promotion and support of large infrastructure investment projects of continental scale in the transport, energy, communication and R&D sectors;
- establishment of financial institutions for crediting the above mentioned sectors through the issue of project-tied bonds in accordance with the plan of Jacques Delors (European Union Commission President 1985-1995);
- the reform of the taxation system, that will promote investment and effective reinvestment of profits into industrial, productive sectors;
- defining of customs rules and regulations, social standards rules and guarantees for environmental protection, involving trade unions world-wide. “
This was a real “stimulus package” of ideas to engage, already at a very early stage of the crisis, economists and world leaders on the path of exit strategies of the crisis.
I was really pleased to see that at the VI Annual Session of the World Public Forum held last year here in Rhodes, Mr. Yakunin made clear references to the Modena Initiative.
“At the beginning of July in Modena (Italy), with the support of WPF “Dialogue of Civilizations”, there was held International Economic Forum “Dialogue West-East: integration and development”, which convoked experts from Russia and Italy. The Forum resulted in launching “Modena initiative”, which particularly states that the crisis bears a system character. Violently growing fictitious capital together with floating currency rates led to the separation of the financial system, mainly speculative, from real economy. “Modena initiative” offers specific recommendations, urgent measures that need to be taken in order to soften the collapse consequences. The text is available in the materials of “Modena initiative” workshop of the present Forum, so one is welcome to discuss the materials and, if there is a wish to, join the initiative.”
Later, in December 2008 the spirit and the ideas of the Modena seminar were taken up in a large international conference “Crise: Rumos e Verdades” in Curitiba, the capital of the Brazilian state of Parana with the participation of Mr. Roberto Requiao, the Parana governor. There, the main agenda was the process leading to a strong continental alliance around the leading role of Brazil in the BRIC and the necessity to create a Latin American continental common market similar to the European Union.
One of the key aspect of the new global monetary and financial architecture is the construction of a new monetary arrangement both in terms of a currency unit for international trade and payments as well as for the future of a monetary reserve system.
Indeed, the world of today cannot base itself on a unique currency. The USA economy cannot support any longer the entire world monetary system. On the contrary, the dollar is going to face dramatic crises and in the future it will require the support of the rest of the world economies to stabilize itself..
An economy with a yearly budget deficit of 1.580 billion dollars (in reality about 2.000 billions), equal to 11,2% of the GDP (of about 14.000 billions) , with a trade deficit of 700 billions in 2008, with a yearly increase of public spending of 24% and a loss of tax revenues of 17%, with a public debt of 11.700 billions (which is expected to increase of other 9.000 billions in the coming 10 years), with a private (household) debt of 14.000 billions, with a derivative bubble of over 200.000 billion dollars and with financial speculative bubbles in the real estates, in the mortgage sector, in the credit cards sector, etc, etc. has to be recognized at least as a “troubled economy”.
Consequently, its currency, the dollar, cannot be demanded to be the international reserve currency and the currency unit for international trade and financial transactions.
Also because the geopolitical and the geo economic situation of the world have dramatically changed in the past 20 years. The European Union, despite its shortcomings and needed corrections, is the main market and the main machine tools and technology producer of the world; China engaged itself in an impressive accelerated process of modernization and development, India as well; Russia has become an Eurasian partner and the Latin American, the African and the Asian continents have greatly progressed towards a modern political and economic integration.
Today the main challenge in the world is not security and contraposition but dialogue, how to manage competently a global process of dialogue and cooperation.
All this should lead us to formulate the proposal of a new monetary system based on a basket of currencies. This should include for sure the Euro, the US dollar, the Russian Ruble, the Chinese Renminbi, the Indian Rupia, the Brazilian Real or a future Latin American currency, and other regional and continental currencies, with a special attention for the inclusion of Africa.
The added value of this basket of currencies is dialogue, exactly the fundamental aspect of our Forum. Dialogue is the ‘conditio sine qua non’ of the success of such a monetary reform. It is no longer the strength of the leading economy to dictate the rules but the collective participation of the peoples and their economies in the agreement.
The BRIC countries began to partially develop alternatives to the dollars for trade and investment deals among themselves. This is an important process that should help to quickly promote a new monetary agreement of a basket of currencies, or we are going to face the risk of greater monetary instability.
I believe that the project of a basket of currencies is to be preferred to the idea of the Special Drawing Rights (SDRs) as the world currency because we need to engage directly the authorities of the states in this process and the currencies have to reflects the real underlying strength of the national or continental economies. We know how difficult this process was and still it is for the creation of the Euro. A world currency is today still an abstract idea which is too distant from the present economic realities. The SDR can have a place in the basket of currencies. Also gold should have a role in the monetary reserve system.
The first most important step is to discuss, to dialogue, on these matters publicly, to engage everybody, to involve all the actors of the world economy, not to create the suspicion that somebody is operating for his own interest against the interest of others.
For this reason I suggest that the World Forum organize in the coming weeks a special international seminar dedicated to the new proposals and solutions for a global monetary and trade architecture.
|
Panel № 2 Economic