Articles and Documents
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Key Documents
Report of the Commission of Experts on Reforms of the International Financial System (September 21, 2009)
This report ranges broadly -- from system-related causes of the crisis to the lack of political accountability in the global response. The report proposes a structural change in the financial system in order to regulate the post-crisis global economy. (UN)
Outcome Document of United Nations Conference on the World Financial and Economic Crisis and its Impact on Developement(June 2009)
On Friday, June 26, the United Nations Conference on the Economic Crisis adopted an outcome document. All 192 member states agreed on strengthening the role of the UN within global financial and economic architecture, as well as the creation of a panel of experts and a follow-up working group. Nevertheless, the summit failed to implement an additional financial rescue package for the developing countries and did not establish the proposed Global Economic Coordination Council. (United Nations)
Civil Society Background Document and Key Recommendations on the UN Conference on the World Financial and Economic Crisis and its Impact on Development (June 2009)
More than 200 organizations met for the Civil Society Forum prior to the United Nations high-level Conference on the World Economic Crisis. The document they produced summarizes the present situation and points out past failures. In addition, the document gives key recommendations on how to respond to the economic downturn. It especially calls for an international stimulus package for development and systemic reforms on the global financial and economic architecture. The recommendations argue for "non-debt funding," in order to give developing countries a chance to escape from a new debt crisis. (Civil Society Forum New York)
Some Reflections on the Current Global Crisis from a Developing Countries Perspective (May 2009)
The distinction between developing countries and developed countries is essential in the analysis of the global economic crisis. Roberto Frenkel and Martin Rapetti identify differing key factors between developed and developing countries, as well as a crucial discrepancy in their policy responses. This briefing paper allows a more nuanced perspective on the economic slump with an explicit comparison between the global North and South. It also contains proposals on policy options for the developing countries to fight the crisis. (FES Briefing Paper)
The Implications of the Global Financial Crisis for Low-Income Countries (March 2009)
The International Monetary Fund (IMF) analyzes the implications of the global financial crisis on Low-Income Countries (LICs) and estimates that poor nations will need at least US$25 billion of additional funding in 2009. In order to investigate the extent to which the crisis will negatively affect macroeconomic growth, this report compares economic projections from January 2009, with those made before the crisis. Possible spillover effects include a reduced demand for exports, a decline in remittances, and a reduction in aid and foreign direct investment. Shrinking aid budgets exacerbate the risk of a humanitarian crisis in LICs. Therefore, the IMF recommends that donors increase their funding to enable poor countries to expand social spending programs, which will enhance the protection of the most vulnerable.
The Current Global Crises and their Impact on Social Development (January 20, 2009)
This note by the UN Commission for Social Development discusses the impact of the inter-related global crises which define the context of social development. It outlines how volatile food and oil prices, climate change and the financial crisis threaten to plunge millions more into poverty in both developed and developing countries. Key policy recommendations include measures to strengthen social welfare and social protection systems, investment in energy efficient agricultural production for food security, expanding trade and increased regional cooperation between developing countries.
Macroeconomic Imbalances in the United States and Their Impact on the International Financial System (January 2009)
Linkages between US debt and the world's unhealthy reliance on the US dollar result in global instability and imbalances, at the roots of the world financial crisis. Arguing that the world economy has grown overly dependent on the US deficit, the author explains how the US debt has been necessary to supply reserves for the global economy, which enables economic expansion and growth. If the US reduced its overall debt, the volume of money in the global economy would contract, harming everyone. The crisis presents a turning point, showing the need to supersede the dollar as the international reserve currency and replace it with a new source of money supply - not reliant on one country's national currency. This change could lead to greater stability and equity in the global economy. (The Levy Economics Institute of Bard College)
2009
Global Economic Crisis Rescues European Bank (October 7, 2009)
The European Bank for Reconstruction and Development (EBRD) has regained its popularity and power as countries in Central and Eastern Europe struggle with the global financial crisis. The bank declared in May that it would give $578 million to Eastern European subsidiaries of the Italian bank UniCredit, the main lending institution in the region. The President of the EBRD, Thomas Mirow, believes that the bank has developed many skills since 1991 and "the world is in great need of those skills." (New York Times)
US, UK are Hijacking G-20 Agenda (September 14, 2009)
Yaga Venugopal Reddy, former governor of the Reserve Bank of India, criticizes the unequal distribution of power within the G-20. Reddy believes that national interests of the US and the UK dominate the G-20's agenda and drive solutions that are short-term and self-interested. (Livemint)
The Deficits of the EU Financial Reforms (September 2009)
The Center for Research on Multinational Corporations criticizes the EU financial reforms, arguing that they do not discuss the real causes of the crisis, but focus more on reforming institutions -- such as hedge funds -- that actually caused the crisis. According to the authors, the European Commission should restrict speculative activities that have negative effects, in order to fulfill the public interest in a sustainable way. (SOMO)
The Potential Development Implications of Enhancing the IMF's Resources (August 4, 2009)
In April 2009, the G20 agreed to a stimulus package of US$ 750 billion to be given to the IMF to fight the economic crisis. However, donor countries have not yet met their financial commitments. The author of this article takes note of the missing funding but he doubts whether the stimulus package could have had a positive effect on developing countries. The paper examines the Fund's lending policies, the potential of SDRs and the fiscal space for low income countries. (The Bretton Woods Project)
IMF Reform: Aged Wine in a New Wineskin (July 19, 2009)
The global financial downturn has greatly affected Jamaica, forcing it to return to the IMF for a loan. But the country has not forgotten the bitter memory of past relations with the fund. The author compares past and present IMF practices of nine countries, which have entered Stand-By Arrangements since September 2008. He argues that recent IMF reforms have not been substantial and that the fund remains dominated by the neoliberal "Washington Consensus". (Jamaica Observer)
The Reform of the International Monetary System (June 2008)
Since the beginning of the economic crisis, countries worldwide have called for a reform of the financial system. They question the dollar as the international reserve currency. The author points out that reform debates have ignored some key problems of the global economic system, notably the large persistent unemployment and the enormous global trade and currency imbalances. (The Levy Economics Institute of Bard College)
IMF Backs US$ 250 Billion Plan to Bolster Member's Reserves (July 20, 2009)
Since the economic downturn, many countries mistrust the dollar-based global reserve system. The IMF will vote on a US$ 250 billion resource to increase its member states' financial liquidity through so-called special drawing rights (SDRs). Each member receives SDRs in proportion to its quota. The SDRs can then be exchanged immediately for hard currency. However, the long-term outcome of the program for developing countries remains uncertain. The SDRs will mostly go to rich countries and worldwide interest may rise. (Reuters)
Towards a Renewed Debt Crisis? (June 2009)
The poorest countries suffer most from the economic crisis. They face a decline in exports, commodity prices, and capital flows, as well as currency devaluations. A renewed debt crisis may result. This paper analyzes the situation of heavily indebted poor countries in the crisis, with a special focus on sovereign debt. (Friedrich Ebert Stiftung)
Wall Street's Toxic Message (July 8, 2009)
In recent decades, the United States has promoted a deregulated market economy, which finally resulted in the worldwide economic downturn. Developing countries are the biggest losers, especially those which followed IMF and World Bank policies. Economist Joseph Stiglitz sharply criticizes the post-colonial economic order and notes the bitter legacy which the crisis has left. (Truthout)
Rich Countrie Block Reform at UN Summit (June 26, 2009)
The United Nations Summit on the world economic crisis demonstrated the problematic distribution of power within the UN. Rich countries have blocked serious reforms, especially in the financial sector. The conference addressed key issues such as the international reserve system and policy space for developing countries. It also agreed to a follow-up process. However, the summit underachieved by failing to adopt a clear aid program and significant governance changes within the Bretton Woods Institutions. (Bretton Woods Project)
Poor Countries Fight For a Say At Crisis Meet (June 5,2009)
The high-level United Nations meetings on the World Economic and Financial Crisis reveal the gap between the world's poor and rich countries. Developing countries are calling for a greater voice within the negotiations about the UN's final conference declaration. The General Assembly, by postponing the summit, has avoided an outright failure, but the delay showed the alarming divergence between the richest and the poorest in the world. (Inter Press Service)
Blame this Crisis on the Myth of Inflation (May 8, 2009)
The myth that low inflation would automatically lead to financial stability encouraged risky behavior and created the illusion that it was safe to borrow and invest more and more. Excessive self-confidence in the international banking system transformed loans into "investments" and debts into the safest of "securities." "Inflation targeting" omits the aspects of inflation that caused the crisis, such as mortgages and asset prices, thereby enabling the economic crisis to strike during a low inflation period. (Times Online)
The Quiet Coup (May 2009)
According to Simon Johnson, a former chief economist at the International Monetary Fund (IMF), the main problem the US is facing when it comes to tackling the financial and economic crisis is well-known in the IMF: as in many emerging countries in the past, the financial elite have captured the government's actions. Johnson describes how decades of triumphant finance in the US managed to convince everyone, from ordinary voters to politicians, that what is good for Wall Street, is good for the US. This a cult of finance supported by the Wall Street "Washington Corridor" not only laid the foundation for the crisis, but also hinders attempts to solve it. Johnson concludes that the government must force the banks to write down the true value of their assets or nationalize them. But solving the lending crisis is not enough. In order to break the oligarchy? the government must systematically break up the banks and overhaul antitrust legislation. (Atlantic)
Reality Behind the Hype of the G20 Summit (April 5, 2009)
The G20's US$1.1 trillion package to save the world economy succeeded attracting the media's attention, but failed the world's poorest yet again. The summit missed the opportunity to begin deep reforms in the global economy, which could have benefited the poor. Instead, G20 commitments simply prop up the International Monetary Fund (IMF), without reforming policies. This eye-catching trillion dollar figure conceals the truth that some of the number is double-counted and is an "intention", which requires approval. Therefore, the actual amount of money to be disbursed is likely to be smaller. Furthermore, the headlines distract from the G20's failure to address and agree upon issues such as fiscal stimulus, regulation of cross-border financial flows and new approaches to developing country sovereign debt. (South Centre)
U-20: Will the Global Economy Resurface? (March 30, 2009)
Walden Bello explains that the "show" of the G20 Summit on the global economic crisis conceals the world leaders' deep lack of direction and uncertainty over economic recovery. He describes the minimalist IMF reforms, praised by the G20, as a "non-starter", and outlines how the proposed changes to the voting system do little to balance the overrepresentation of wealthier countries in decision-making. Despite talks of reform and counter-cyclical spending, IMF conditionality still requires that low income countries' deficit spending must not exceed 1 percent of GDP. (Foreign Policy in Focus)
China Urges New Money Reserves to Replace Dollar (March 23, 2009)
Just one week before world leaders meet at the G20 to discuss reform of the global financial system, the governor of the People's Bank of China announced a bold proposal for a new international monetary system. Because China possesses enormous foreign reserves, amounting to almost USD$2 trillion, the Chinese government calls for a new currency reserve system, controlled by the International Monetary Fund (IMF). The proposal suggests that expanding the role of the IMF's Special Drawing Rights (SDRs) could lead to the eventual creation of a centrally managed, autonomous international reserve currency. Such a strategy, aimed at achieving greater global economic stability, would require real commmitment and coordination. Are the G20 leaders ready for this? (New York Times)
No Safe Haven for Artful Tax Dodgers (March 18, 2009)
The Organization for Economic Co-operation and Development's (OECD) threat to blacklist tax havens has pushed Switzerland, Austria, Luxembourg, Liechtenstein and Andorra to review their rules on identity secrecy. Although tax havens are not a direct cause of the financial crisis, they deprive countries from revenues needed of domestic investment and economic stimulus. The OECD estimates that tax havens hold assets between USD$1.7 and USD$11.5 trillion. An Oxfam study reveals that tax evasion also affects developing countries whose citizens hold more than USD$6.2 trillion abroad and whose governments are facing capital evasion amounting to USD$300 billion a year. (Reuters)
AIG Lists the Banks to Which it Paid Rescue Funds (March 15, 2009)
American International Group (AIG) listed Goldman Sachs, Merrill Lynch, Bank of America, Deutsche Bank and Barclays among the financial companies which received multibillion-dollar shares of AIG's rescue package from the Fed. AIG disclosed that rich executives were also paid huge bonuses after the insurance giant received government rescue loans. As a result taxpayer money, amounting to USD$170 billion was passed along by the firm and rewarded the executives dealing with the high risk financial products contracts, which caused AIG's near collapse. (New York Times)
The IMF's Financial Crisis Loans: No Change in Conditionalities (March 11, 2009)
Based on their study of International Monetary Fund (IMF) financial crisis loans, Third World Network (TWN) argue that the conditions attached to the IMF loans remain restrictive and worsen the crisis for many poor countries. Based on tight monetary and fiscal policy, the IMF loans are in stark contrast with the countercyclical spending undertaken by developed country governments to speed up economic recovery. TWN warns that the IMF should not prescribe these austerity policies, which proved counterproductive in the Asian Crisis. TWN recommends that the IMF should not be the primary vehicle to disperse financial assistance. Instead, policymakers should direct greater attention to regional and national arrangements such as the Chiang Mai Initiative, as well as sovereign debt restructuring. (Third World Network)
A Rising Dollar Lifts the US but Adds to the Crisis Abroad (March 9, 2009)
The unfolding global economic crisis reveals a deep and perverse irony. Despite being the cause of the financial crisis, the US benefits from China's purchase of US debt and the surge of dollars from American and foreign investors, who consider the US a safe haven. Meanwhile, low and middle income countries are hit the hardest as they struggle to raise money. The flow of dollars into the US, rather than, for example, countries in Eastern Europe makes it difficult for those countries to refinance their debt, which in the longer term, raises unemployment and poverty. (New York Times)
A Bank Bailout That Works (March 4, 2009)
Joseph Stiglitz argues that the shortsighted and risky incentives that drove reckless behavior on Wall Street to "pollute" America's banking system, must come to an end if the banks are to undergo successful restructure and refinance. He points to the failure of the Troubled Assets Relief Program (TARP) to restore bank lending and explains why the proposed bailout packages are unlikely to succeed. US Government proposals to take temporary control of banks, buying "bad assets" and dispose of them in a "bad bank" appeals to bankers because it is less transparent and avoids democratic processes. Other ideas include providing insurance assets to banks or assisting private investors like hedge funds, to buy bad assets through private-public partnerships, which reinforces a nontransparent approach, with taxpayers carrying the burden. Stiglitz proposes instead, the creation of a "good bank", which takes all the assets of banks that do not have enough capital, sells off the old, bad assets and restructures the bank for eventual sale. This returns banks to their original purpose: lend money to those with the ability to repay it. (The Nation)
Will the G20 Expand the Role of the IMF? (March 3, 2009)
To confront the detrimental impact of the global economic crisis and stimulate the economies of poor countries, the Executive Board of the International Monetary Fund (IMF) supports a doubling of the amount that the Fund can lend. However, policy makers lack consensus on the ways in which to boost these additional funds. The allocation of Special Drawing Rights (SDRs) - the IMF's own currency, would provide cheap access to international resources and offer governments much needed capital to revitalize their economies. Rich countries consider this a less attractive option, since lending would not come with strings attached. (BBC)
The Global Economic Crisis: Systemic Failures and Multilateral Remedies (March 2009)
The United Nations Conference on Trade and Development (UNCTAD) reports on the failures of financial globalization and points to deregulation of national and international trade and finance systems, as the root causes of the global economic crisis. UNCTAD urges regulators to close the loopholes in regulation, which led to speculative bubbles in futures trading markets and allowed financial investors to drive prices up, thereby manipulating markets. The report warns of the dangers of economic nationalism and recommends avoiding economic wars, by seeking a stronger and fairer multilateral approach, with global cooperation and regulation, under a global coordinating body, the UN.
Sold Out: How Wall Street and Washington Betrayed America (March 2009)
The report "Sold Out" examines how over the past three decades financial regulators and the US Congress deregulated the financial system, leading to the collapse of Wall Street. This executive summary from the report lists twelve distinct deregulation moves which resulted in the financial meltdown. These include abolishing regulatory barriers between commercial and investment banks, allowing companies to hide "money-losing assets" from their accounts and the Federal Bank's refusal to stop subprime lending. The document draws attention to Wall Street's influence over Congress, revealing that previous Wall Street employees hold the top regulatory positions. To enforce meaningful regulation, Congress must establish new financial rules which regulates and controls Wall Street, rather than extending Wall Street's power. (Wall Street Watch)
Taking the Credit; How Financial Services Liberalization Fails the Poor (March 2009)
Lax regulation in Western banking lies at the heart of the global financial crisis, yet the European Union seeks similar deregulation and liberalization for poorer countries. This World Development Movement (WDM) report examines the negative impact of foreign owned banks in Mexico and Brazil, which fail to make banking more affordable for the poor. Foreign banks prioritize richer customers and large companies; thereby excluding poor farmers and small scale businesses from access to credit - vital to stimulate local enterprise. Financial liberalization diverts credit away from "productive activities" such as investment in the local economy, and encourages medium and high income earners to consume using credit cards and mortgages - the same means which led to speculative bubbles and crisis in the rich countries.
Propping Up a House of Cards (February 28, 2009)
The US government will announce another package to bail out American International Group (AIG), as the company faces the largest quarterly loss in history. This article explores how AIG used its "triple A credit rating" to create an illusion of safe investments, allowing cheap borrowing, which AIG exploited on risky assets. Because of AIG's vital position in the Western banking system, the US government is obliged to provide support, in order to prevent a "domino effect" collapse. American taxpayers will pay the price for AIG's corruption, which some predict amounts to at least one hundred billion US dollars. (New York Times)
Globalization in a Turnstile: The Debate Ahead (February 25, 2009)
The editor of Share the World's Resources outlines the academic debate on globalization and argues that over-simplistic framing of the theory has polarized globalization as "good" or "bad". He states that we cannot blame globalization for the economic crisis, but rather "bad economics" and a lack of understanding of international trade. The crisis presents a turning point for globalization. Re-designing institutional structures, founded upon bottom-up participation could create fairer opportunities to re-distribute the benefits of globalization more equally. Skeptics must move beyond their opposition to free-market principles, and seek a new global trading system, one which balances protectionism and liberalization.
Towards a Post-Bretton Woods Global Financial Architecture (February 6, 2009)
Financial crisis and economic downturn in the US, combined with Asia's accumulation of dollars, challenge the credibility of the IMF, which has long been dominated by the US. While there is consensus on the necessity to reform IMF governance, debate remains over the type of reform. This creates space for emerging economies to push for initiatives such as Asian financial integration and Latin America's "Bank of the South". The author outlines concrete strategies that the US could take to reform the IMF, but is skeptical about whether these would be enough to stop Asia and Latin America from opting for regional alternatives to the Bretton Woods Institutions. (World Politics Review)
Asia: The Coming Fury (February 4, 2009)
As Asia's once booming export-led industrialization faces severe decline, Walden Bello warns of the rising protests and potential resurgence of social revolution across Asia. He examines the illusion of "decoupling" Asia's supposed immunity to economic downturn and financial crisis arising in the West. This article argues that the US credit crunch brings an end to Asia's prosperous export era since economic growth in this region is based on complex export chains: China assembles parts imported from other Asian countries, which it then exports to the West. Thus, China's consumer-goods industry depends upon demand from US and Western Europe, which in turn, relies upon the availability of credit in the West. (Foreign Policy in Focus)
Fear and Loathing in Davos (February 4, 2009)
Policymakers at the 2009 World Economic Forum in Davos acknowledged the need to re-direct economic policy away from American-style, capitalist globalization and pointed to market failure as a major cause of this crisis. Blaming American financiers for their irresponsible behavior, which helped spread instability and risk to poorer countries, Joseph Stiglitz reflects on the role of the US in future global economic policy. As confidence in the US declines rapidly, and world economic prospects look bleak, Stiglitz asks whether the US will continue to take the lead in global economic policy, this time setting an example of heavy protectionism.(Guardian) Declaration of the Assembly of Social Movements at the World Social Forum 2009 (February 5, 2009)
The Assembly of Social Movements at the World Social Forum makes unprecedented political statements outlining measures to overcome the economic crisis. The Assembly argues that the solution to the crisis cannot be found within a capitalist system, one based on privatization and exploitation, since this system is the source of the problems. Instead, the Assembly calls for popular mobilization around some concrete suggestions such as nationalizing the banking sector without compensations. (Transnational Institute)
The Perils of More Globalization (February 3, 2009)
We should critically examine the globalization of the world economy and its impact on prosperity over the past thirty years. A UN study shows that poverty increased almost as much in countries that remained disconnected from the world economy as in those which fully liberalized their markets. The author challenges the pro-liberalization scare tactics of Gordon Brown, which imply that a move away from a liberalized economy automatically entails a retreat to extreme protectionism and autarky. Globalization has led to increased instability, and world leaders must acknowledge its detrimental impact, which hits the poorest countries hardest. (Guardian)
For a New Economic and Social Model, Let's put finance in its place! (February 1, 2009)
In response to the financial crisis, this letter, formulated by a collection of NGOs and social movements presents a voice from poor Southern countries to the G20. They urge world leaders to adopt a new approach in the reform of the global financial systems, demanding a system based on human rights, working to benefit the public. In an effort to establish a fairer balance of power, a democratized UN, which reaches beyond the G20 and sits at the heart of the financial system, forms the cornerstone of their policy proposal. (Choike)
Idea of Global 'Sheriff' to Tighten Regulation is Seriously Considered (January 27, 2009)
Ben Bernanke, chairman of the Federal Reserve and other leading voices in global finance, believe that a new system of global financial oversight is necessary - to confront the increasingly unstable global financial market. They argue that greater coordination, through a united global approach, would prevent conflicts of interest and promote financial stability. Skeptics question the reality of achieving a global front, pointing out that when faced with crises, countries actions reflect national interest, disregarding international consequences and actually represents a setback for global initiatives. (International Herald Tribune)
China Losing Taste for Debt from the US (January 8, 2009)
China has bought more than one trillion US$ of debt and the demand for bonds has kept borrowers' interest rates low in the US. Since the financial crisis, confidence in the US economy has decreased, and the Chinese Central Bank has encouraged Chinese banks to lend more domestically. If China stopped purchasing US Treasures, the US government would find it even more difficult to incur deficit spending, which would lessen chances for an economic recovery. (New York Times)
Fighting Off Depression (January 5, 2009)
Nobel laureate Paul Krugman defends Obama's proposed economic rescue plan, arguing that flooding the banking system with liquidity has not helped stimulate the economy. However, Krugman is concerned that it will take the US Congress months to pass it and that the final proposal might turn out to be "too cautious". He argues that the dominant economic thinking of the past decades and its focus on monetary policies have shown their limits and that politicians now need to acknowledge the old Keynesian prescription of large government deficit-spending. (International Herald Tribune)
The First Meeting of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System (January 6, 2009)
The international economic crisis increases the inequalities between rich and poor countries. Developed countries can run a larger deficit to provide bail-outs and stimulate their economy. Developing countries, on the other hand, do not have the financial capacity to take such economic risks. In its recommendations, the Commission emphasizes the need for additional assistance to developing countries and urges rich countries to consider "the adverse consequences" that their policies might have on poor countries. (United Nations)
Macroeconomic Imbalances in the United States and Their Impact on the International Financial System (January 2009)
Linkages between US debt and the world's unhealthy reliance on the US dollar result in global instability and imbalances, at the roots of the world financial crisis. Arguing that the world economy has grown overly dependent on the US deficit, the author explains how the US debt has been necessary to supply reserves for the global economy, which enables economic expansion and growth. If the US reduced its overall debt, the volume of money in the global economy would contract, harming everyone. The crisis presents a turning point, showing the need to supersede the dollar as the international reserve currency and replace it with a new source of money supply - not reliant on one country's national currency. This change could lead to greater stability and equity in the global economy. (The Levy Economics Institute of Bard College)
World Economic Situation and Prospects 2009 (January 2009)
This executive summary provides an overview of global economic performance, detailing the origins of the global financial crisis and its impact on world trade and finance. The report examines the implications for developing countries, the policy challenges ahead and reform of the international financial structures and institutions. (DESA/UNCTAD)
Free Market Myth: Regulation Is Everywhere. Let's Choose Who Benefits (January 2009)
The global financial crisis opens up debate about re-regulation. While regulation can help to provide market stability, it does not necessarily lead to generally positive outcomes. Patent and copyright laws skew income distribution towards a few well-placed corporations. Financial regulation can also result in monopolistic control and income advantages for insiders in the regulatory system. Re-regulation must avoid these pitfalls. (Boston Review)
Capitalist Fools (January 2009)
Professor Joseph Stiglitz identifies critical mistakes, made during the Reagan, Clinton and Bush II administrations, which led to the financial crisis. Under chair Alan Greenspan, the Federal Reserve neglected its role as a regulator and helped inflate both the high-tech and the housing bubble. The US Congress allowed commercial banks to invest in high-risk projects, the government's economic policy led to excessive borrowing and lending, and politicians failed to address the underlying weakness in the US economy, even when the crisis hit. Most of the mistakes made boil down to one fundamental flaw: the belief that "markets are self-adjusting". (Vanity Fair)
2008
Principles for Economic Recovery and Financial Reconstruction from Progressive Economists (December 22, 2008)
This statement, issued by a group of progressive economists, calls on the Obama administration and the new Congress to go beyond a mere economic stimulus package. In addition to short-term measures that stimulate the economy, the new administration must undertake institutional changes as part of the recovery and reconstruction program. In particular, the financial sector must be reformed so that it serves the needs of people and communities. A successful economic program thus must reject the extreme free market and neoliberal policies that contributed to the current financial and economic crisis. (Political Economy Research Institute)The Triumphant Return of John Maynard Keynes (December 5, 2008)
Nobel Laureate Joseph E. Stiglitz describes the US and other rich countries' shift towards Keynesian interventionist policy as a "triumph of reason and evidence over ideology and interests". However, the author fears that Keynesian doctrines will be used and abused to serve some of the same interests, if government intervention is limited to bailing out the financial sector. (Guatemala Times)Citi's Taxpayer Parachute (November 25, 2008)
This editorial from the Wall Street Journal notes that while the bailout of Citibank is a good deal for equity holders, the benefits for taxpayers are uncertain. Ninety percent of the money used for the bailout of the US biggest bank comes from taxpayers' money. The author stresses that it is not the first time Citibank needs "resuscitation", which makes it questionable why Citibank director, Robert Rubin and other directors still are employed.Statement on the G-20 Summit on the Financial Crisis (November 15, 2008)
Contrary to the Europeans, who call for more global regulation of cross-border financial flows, the US argues that the nation state should be the primary regulatory authority responding to the financial crisis. According to this article, the US defends the primacy of the nation state to avoid external financial regulation and to protect its own financial sector's "competitiveness". (Casino crash)Financial Bailout: Government Criticized for Opting for IMF Loan (November 12, 2008)
While Western governments have played an active role in the financial crisis, paying billions in bailouts to banks and financial companies, the IMF still insists that poor countries cut back on government spending in return for loans. Civil society organizations recommend that governments in poor countries look for local alternatives to IMF loans so they can respond to the financial crisis by increasing spending on health, education and agriculture. (Dailytimes)Ditch the Smooth Transition. The People Voted for Change (November 14, 2008)
Sixty percent of the US population strongly favors stricter regulations on financial institutions while only twelve percent support aid to financial companies. President-elect Barak Obama has appointed individuals to the government that are unlikely to start regulating the market and he did himself support the use of taxpayers' money to bail out Wall Street. Further, the Democrats are not demanding the Federal Reserve to reveal which corporations received almost US$ 2 trillion in emergency funds. Author Naomi Klein argues that if the Democrats applied new rules across the board, the market would stabilize and adjust. (Guardian)Banking on Change: Towards an Economic System that Works for People and the Planet (November 2008)
The G20, the world's twenty leading countries, should not decide on global economic politics on behalf of the entire world population. Civil society organizations argue that all governments and civilians must collaborate to build a new set of principles that strengthen national and local economies. For instance, governments should renegotiate free trade agreements, control capital flows, call for debt cancellation and close tax havens. (Choike)The World Turned Upside Down: The Centre Won't Hold Any More (November 6, 2008)
For two centuries, Western countries have dominated world trade and global politics. Now, the western neoliberal model is in crisis and emerging countries in East and South Asia, and Latin America challenge the world hegemony, making global governance more diversified. For example, after the collapse on Wall Street, the US asked China and Singapore for financial help. (Le Monde diplomatique)Towards a New Global Economic Compact (October 30, 2008)
After the Asian financial crisis at the end of the 1990s, many people called for reform of the global financial architecture. But the international financial institutions resisted comprehensive reform and they continued to exclude the poorer countries from decision making. The head of the UN High Level Task Force on the global financial crisis, Joseph Stiglitz, argues that the UN is the only institution that has broad legitimacy and that it should take a lead role in reforming and monitoring the global financial system. (World Economy & Development In Brief)UN Chief Calls for Protection of Migrants amid Financial Crisis (October 29, 2008)
Secretary General Ban Ki-moon urged countries to deal with the financial crisis by allowing foreign workers into their country. The ILO estimates that over 200 million people will lose their jobs in 2009. The crisis can deepen the inequalities between rich and poor in the world, and force millions of people to migrate in search of a better life. (Integrated Regional Information Networks)Statement on the Proposed "Global Summit" to Reform the International Financial System (October 29, 2008)
Over 550 organizations from 88 countries call the G20 summit on the financial crisis "a New Undemocratic Washington Consensus." Although rich countries are responsible for the financial collapse, the crisis strongly affects the poorest countries. Therefore, all governments must be involved in developing global solutions for the benefit of the majority of the world's people. (Eurostep)Return of the State (October 28, 2008)
To avoid future financial crises, national leaders should put into practice the ideas of the late economist John Maynard Keynes, regarding government intervention in the economy. Governments must regulate banks and financial speculation and pursue fiscal policies that strengthen the role of the nation-state in the global economy. (Frontline)A Crisis-Opportunity Moment (October 23, 2008)
On November 15, 2008, leaders of the world's 20 largest industrial and emerging economies will meet to discuss responses to the financial crisis. This article urges the political elite not to focus solely on the financial markets, but also address problems of ordinary people. Governments should lessen the rising inequality of people living in cities, as the majority of the world population now live in urban areas. (openDemocracy)Reversal of Fortune (October 13, 2008)
Nobel laureate Joseph Stiglitz describes how neoliberal "fundamentalists" with their narrow focus on free market and deregulation of the economy caused the deep financial crisis. Stiglitz urges governments to refrain from using standard monetary policy, such as lowering and raising the interest rate. Instead, governments should invest in infrastructure, education and technology to create stable international growth. (Vanity Fair)The Crisis and the Environment (October 17, 2008)
The financial crisis affects the environment in different ways. Global Co2 emissions might decrease because falling incomes force people to use less energy. But on the other hand, due to the crisis, investors will refrain from putting their money into energy projects, thus decreasing greenhouse gas reductions. (Foreign Policy In Focus)A World in Flux: Crisis to Agency (October 16, 2008)
The financial crisis provides a rare opportunity for world leaders to reform the structures of global governance. This article suggests that a global summit should launch a reform of the financial system. Governments should in future regulate financial companies and control currency speculation through a tax on all currency transactions across borders. A new financial system must also reduce income inequalities. Today, 20 percent of the world's population receives over 80 percent of the world's income. (OpenDemocracy)The Question To Be Asked: "Where Will the Money Come From?" (October 13, 2008)
In India over 2,000 farmers committed suicide in the past 15 years, and more than 40 percent of Indian farmers cannot make a decent living from agriculture. The Indian government claims it cannot afford to support the farmers financially. But the government easily rolled out money to save the rich people in India from the negative effects of the global financial crisis. (Share the World's Resources)Farmer in Chief (October 9, 2008)
This article urges the next President of the United States to reform the US food system in order to improve health care, energy independence and to alleviate climate change challenges. A new food system must improve infrastructure for a regional food economy and support diversified and ecological agriculture based on solar energy. Further, the next president should campaign to change the unhealthy and unsustainable fast food culture in the US. (New York Times)The Financial Crisis and the Developing World (October, 2008)
This article argues that the current financial crisis presents an opportunity to replace the dominant view that markets can be self-regulating. The author reviews the different channels through which the crisis will negatively affect developing countries and emerging markets, pointing out that those who liberalized their financial sector are now the most vulnerable. In addition, he points to the double standards of the US and Europe, as they did not follow the belt-tightening economic policies they prescribed for developing countries, but instead adopt stimulus measures that widen the budget deficit. (Third World Network)Seized: The 2008 Land Grab for Food and Financial Security (October 2008)
The global financial crisis is prompting investors to seek new sources of profit. Many are buying cheap agricultural land in developing countries to make a profit from the soaring food prices. But privatization of land threatens small-scale farming and food security in the world's poor countries, as fertile land concentrates into the hands of a few private companies. (GRAIN)Making Financial Markets Work for Development (October 2008)
This working paper for the International Follow-Up Conference in Doha November 2008, proposes a new financial architecture including a special tax on capital assets and improved supervision of investors. The paper describes the current financial system as a "casino economy," based on competition, speculation and pursuit of profit, which contributes to increasing food prices and makes the poor pay the costs of the global financial crisis. (Evangelischer Entwicklungsdienst)Global Financial Crisis: Does the World Need a New Banking 'Policeman'? (October 8, 2008)
This article argues that neither the World Bank, nor the International Monetary Fund nor the World Trade Organization have the power to solve the global financial crisis. In order to adapt to the economic situation of the 21st century, the Bretton Woods system, founded in 1944, needs to be reformed. A new way of economic governance must be based on regulation and restrained rules to manage the risks of banks and financial institutions. (Telegraph)Food and Markets: A Crisis of Faith (September 30, 2008)
This article argues that the financial crisis provides an opportunity for world leaders to review their political performance. They can continue to rely on a "self-regulating" market, which caused the crisis. Or they can put forward a new agenda for food security and redistribution of the world's resources. (Share the World's Resources)No "Bailout" for the World's Poorest (September 30, 2008)
During the High-Level Event on the Millennium Development Goals, Secretary General Ban Ki-moon urged participating countries to raise an additional US$72 billion to help reduce poverty. This article argues that governments spend "peanuts" on eradicating poverty compared to the US$700 billion proposal to bail out Wall Street. The World's impoverished people do not receive a bailout, yet they pay the tax bill for the economic crisis. (Inter Press Service)Wall Street Meltdown Primer (September 26, 2008)
In this article,Walden Bello analyzes the history of finance-driven capitalism and argues that overproduction, greed and speculation are key factors behind financial crises. Neoliberal economic policy produces speculative bubbles with short-term profits for very few actors. The author warns that the collapse on Wall Street will spread and translate into an Asian recession. (Foreign Policy in Focus)Charity Coffers Face Credit Crunch (September 26, 2008)
NGOs worry that the Wall Street crisis will tempt governments to reduce international aid and make investors more cautious about supporting development projects. The economic crisis also affects individual donors, who have already lowered their donations to charity organizations. (Integrated Regional Information Networks)The Week that Changed Everything (September 22, 2008)
In this article, Ann Pettifor says that the global financial crisis has compelled even the more conservative voices in media to challenge the neoliberal economic model of deregulation and liberalization. Pettifor argues that John Maynard Keynes' writings from 1936 can serve as a guideline to alleviate the crisis. The author argues that "Money-lenders, speculators, and orthodox neoliberal economists" must give way to pioneers promoting capital control and regulation of the global economy. (openDemocracy)The Fall of Wall Street Is to Market Fundamentalism What the Fall of the Berlin Wall Was to Communism (September 16, 2008)
The financial crisis on Wall Street - with major banks and financial institutions running to the government for help - marks an end to a market-oriented economic organization. Former World Bank Chief Economist Joseph Stiglitz proposes a new economic model with "speed bumps" to dampen expansions of assets, and a "financial product safety commission" to make credit safer. Stiglitz further urges world leaders to make the new economic model more comprehensible to the public than the collapsing system of economic liberalization.(Huffingtonpost)
USA 2008: The Great Depression (April 1, 2008)
This Independent article notes that a record high number of US citizens - 28 million - rely on food stamps to feed themselves and their families. According to the author, this constitutes a "sure sign the world's richest country faces economic crisis." Though the global hike in food prices disproportionately affects poor countries, this article shows that rich countries, such as the US, are not immune.2008: The Demise of Neoliberal Globalization (February 4, 2008)
Immanuel Wallerstein argues that in the global economic system, two main ideologies have always been "cyclically in fashion"- neoliberalism and Keynesian thinking. He argues that neoliberalism and the unrestrained market system it advocates have led to global financial turmoil. Consequently, the public and economic policy makers are moving back towards Keynesian and more socialist thinking. Wallerstein asks whether this shift in ideology will be able to restore economic order despite the damage done by neoliberal policies. (Yale Global)Don't Cry for Me, America (January 18, 2008)
This article compares the US economic recession with the past decade's financial crises in Latin America and Asia, arguing that they have similar causes, though the consequences in the US will be less severe. Investors, spotting an opportunity for significant returns, pumped vast amounts of money into the US financial market. These investments ended up financing a "housing-and-credit bubble." Once it became clear that this bubble would burst, investors quickly began to withdraw their invested capital, causing an economic downturn. (New York Times)The Naked System (January 8, 2008)
This National Post article argues that several "paradoxes" in the global finance system caused the financial crises of 2008. One such paradox is the fact that there is no single, consistent policy on currency rates, and that nations vacillate between fixed and flexible currency systems. Another paradox discussed by the author is the existence of government controlled sovereign-wealth funds (SWF's) in a world where the private sector is generally considered more productive.
