Solving this financial crisis is a political matter
“Jimmy Galbraith didn’t mention that my father owed his life to Kenneth Galbraith, when he was arrested many years ago in Greece during the junta. I was then just a young teenager, and my father faced possible execution. Then Kenneth Galbraith called President Johnson, who answered with a number of superlatives, but was convinced to actually pressure the junta not to harm or execute my father. So it is a great honor and a pleasure to be with you tonight.
I usually had great difficulty mentioning my title in the United States without provoking shock and awe. That changed slightly when I was last here; that was the day that Wall Street crashed. I repeated my title, President of the Socialist International, at a charity function, and a lady said, “We certainly need more of you guys here in the United States.”
I later felt that I was in much better company when now President-elect, President Obama, was accused of being a socialist.
In all earnesty, I am very proud to be heading this movement, which has had active leaders in the past, such as Willy Brandt, Bruno Kreisky, François Mitterand. Our movement now does represent more than 160 parties around the world, from Latin America to Asia.
So our movement has been around, yet the world order has been dominated by neo-liberal and neo-conservative rhetoric over the past years, one which loathed any words of social justice, empowerment of our citizens, equity, democratic accountability and oversight, transparency, solidarity, stimulus packages, regulation of markets, unemployment benefits, fair distribution of wealth or green development. So we are pleasantly surprised that these words, these concepts, are again à la mode.
I am foremost here to tell you that throughout the world, and certainly our movement welcomes the arrival of a new American president, a new administration, and with it a new opportunity. And the drama around the success of an African-American in defeating a dominant conservative party has created great expectations, a new promise.
And this promise translates of course into a new challenge, and we progressives around the world are both ready and willing, and hoping, for a new partnership with your new president, with the new government of the United States, for change on our planet.
Solving this financial crisis certainly is not a technical matter, even though it is very important that we look at the technical aspects. It is fundamentally, I believe, a political matter. It concerns the most fundamental global values and choices that we in the twenty-first century face.
We need to solve today’s crisis in a way that empowers our citizens, peoples, societies, and with them empowers our global political and financial institutions, so that we can deal effectively, equitably, sustainably with the daunting planetary challenges.
International institutions, as Professor … said earlier, regulators are trapped into the national, as he said irrational boundaries. Whether it’s a WFO or a super bank, a global currency or a clearing unit, as Professor Paul Davidson mentioned, these institutions are important, are necessary, in one way or another, but they also need to have the legitimacy, I would say the necessary powers, and then we come to the question of who will decide, who will decide on this global governance.
And this is a fundamental question for a new geopolitical balance, and underlying this question is what do we mean by a democratic governance or a democracy at a global scale.
Unless we believe in an enlightened global aristocracy that will govern the world, the challenge is basic. It is of democracy, and that is why I think we also need to convey, and do so on behalf of the Socialist International, a message to those that are meeting tomorrow, the G20, in Washington DC.
It is a clear message that globalization must be for the people and by the people. We need democratic change for a democratic global governance, one that ensures the participation of the disempowered, the poor, the middle class, the small and medium-sized enterprises, the productive forces of the world, one that democratically sets new priorities at a global scale and new global institutions, and uses our common wealth and resources in a sustainable way.
New rules must emerge from a new understanding of democracy as both a global condition and a philosophy that includes economic institutions, not just political institutions. And this is the challenge, but this has also been the problem: How do our nation-states, our democratic institutions cope with globalization?
Think about it. A real paradox: Humanity today has amassed amazing capacities, technological prowess, wealth, innovation, knowledge and creativity, unheard power to influence our lives for the better. And our citizens see power, yet we very often feel very disempowered.
And not only that. Our generation, and certainly our next generation are facing the most difficult and complex issues humanity has ever faced: climate change on a vast scale linked to carbon-based energy consumption, new and old pandemics, poverty – the bottom billion, arms, drugs and human trafficking bringing in profits that overshadow the GDP of many countries in the world. Issues that theoretically we could deal with, if we had concerted, coordinated global efforts.
Yet what do we see? Instead of global solutions, our problems are compounded by the financial crisis, one which has revealed, has uncovered a major flaw, the amazing concentration of money by the few, and which of course is only paralleled by the concentration of media power, which in turn has led to the concentration of political power, and at the same time the corruption of our democratic institutions, the uncontrolled, if you like, power.
And this is a problem around the world. This is our democratic challenge. Our institutions, our political institutions, our democratic institutions, the rule of law have either been captured or circumscribed, as Paul Davidson said concerning labor relations and labor laws, by big interests. The state, the markets, politics have been captured.
So we could say that today we have, in a sense, a state welfare system for the rich and the powerful, a clientelistic capitalism. It is in this spirit that I asked Joe Stiglitz to chair a commission we set up for a global social democratic response to our financial crisis. We have come up with an interim report, and you can get it on the Web.
We mentioned that we need immediately to cooperate, to soften the consequences of this dramatic failure of unregulated markets, not just in the US but globally. As markets freeze, as recession begins, our duty is not only to think of Wall Street but also the billions of men and women and children around the planet. If we are to save banks, we should do in a way to, first of all, save the right to employment, pensions, accessibility of food, education, health services, strengthening the real economy.
Regulation of global financial markets must be thoroughgoing, must establish public control over private markets, and must be prepared at every turn to combat the excesses of speculation and greed that have brought us to this point.
Secondly, we need to put a floor under the slide into recession, maintaining and enhancing social protection systems, supporting work, working men and women, ensuring productive enterprises, avoiding layoffs, limiting damage to our productive capacity and the social fabric of our world.
We certainly need to continue development assistance to the less developed countries, protect the most vulnerable and show solidarity beyond borders.
And thirdly, we need to invest, and certain publicly investment, to stimulate our economies but in particular to create a new engine of growth around the concept of green development.
Mobilizing resources at a time of crisis has been done at times through wars, so our challenge is to show that we can do this through peaceful means, and do so in creating a new sustainable future for our planet. I would go so far as to say that either we move towards green development or we will be moving towards conflict and war.
Either we move towards democratic empowerment, social justice and solidarity, green development, or we move towards barbarism on our planet.
Now, no one can do this alone, not the US, not China, not the European Union, not others. But the US will have to play a leading role, for three reasons.
First of all, it has its huge responsibility in creating, if not fully creating itself, but very much responsible for a large part of the mess, the crisis we now see.
Secondly, not even the US can escape interdependency.
And thirdly, there is a new administration which will command great respect and therefore legitimacy around the world.
But it cannot lead by force. It cannot lead by dictate, as Professor Ping Chen mentioned concerning China and other countries. It can lead by example: preventive diplomacy rather than preventive wars, globalization for the people and by the people, markets that serve people and not profit only, taking the lead in renewable energy, leading on the issue of nuclear disarmament.
The challenge of global governance is immense. If we fail to move towards a democratic global governance, our peoples will be prey to all forms of extremisms, absolutisms, fundamentalisms and populisms. They will retreat either into passivity or into violence.
And this means that I see Obama’s victory in many ways as a revolt against the demise of our democracy, as a hope for a re-empowerment of our citizens and societies, certainly in the United States, but I think that is seen as the same sign and symbolism throughout the world.
It is a daunting challenge, a huge responsibility, and also a huge opportunity, and a new page to be written. But it must not be written in haste, but at the same time we should not allow the blanks on the page to be filled in by fate or happenstance.
Your role, as economists, as progressive economists, is and will be crucial, is and will be crucial in writing these new pages of our global political and economic history.
Thank you very much.”