Friday, March 20, 2009

One blogger's thoughts in anticipation of attending the G20 summit in London

Do leaders of G20 nations imagine that they can gather behind close doors and -- covering for the misdeeds of their benefactors in the financial industry -- do nothing to repair a broken financial system? Are the presidents and prime ministers gathered in London squandering what could be the last opportunity to avert the collapse of the global economy, balking at any coordinated action plan, and mouthing mere platitudes? If there is even a whiff of a chance that the summit is headed toward either outcome, Jotman -- and 49 other bloggers -- will be there to call them on it.

I have accepted an invitation to attend the G20 summit in London which runs from April 1-3. G20 Voice, an organization formed by some leading NGOs has arranged for 50 bloggers to attend the summit with the same accreditation and access afforded members of the mainstream media. SkyNews indicates it is the first time bloggers have been afforded this kind of access to a world summit.

This G20 summit is not some kind of a political game or photo op. Putting the upcoming G20 meeting in context, the editors of the NY Times wrote, "In 1933, a global conference in London to plot a path out of a worldwide depression collapsed in acrimony. Next month, the leaders of the world’s 20 biggest economies are scheduled to gather in London and give the format another try. . ." Indeed, the world stands on the brink of the most momentous crisis since the collapse of the Berlin Wall. No country is immune from repercussions stemming from the collapse of the US financial system.

Based on a year of blogging the financial crisis, I have come up with a list of some key principles that I believe ought to top the summit agenda:
  1. The crisis represents a "systemic failure." It's not a case of a few "bad apples." In a real-world test, our market capitalist system has proven insufficiently resilient to tolerate the level of greed it fosters. The system itself is broken.
  2. Coordinated stimulus action is essential. The crisis is too big for businesses or banks to fix by themselves. Only governments have the resources to restore confidence in the economy. Moreover, no government acting alone -- not even the United States -- can turn the global economy around by itself. Most countries will have to increase spending and disavow the lure of protectionism if global mass unemployment is to be avoided. The alternatives to timely and substantial stimulus spending today are likely to prove far more expensive tomorrow. Recall that it was massive military spending by governments that finally put an end to the Great Depression. We don't want to go down that road again.
  3. The main problem with the financial system is that it rewards short-term speculation and market manipulation over long-term value creation. Bankers have been allowed to manage the capital markets as they were their own personal casino.
  4. Recovery funds ought not merely trickle down, but move from the bottom up. The economic crisis threatens to hit poor countries -- and the disadvantaged within all countries -- hardest. Efforts to mitigate the downturn must address the urgent needs of the most vulnerable. When money reaches the pockets of the most needy is likely to get spent, stimulating demand.
  5. Financial products will need to be better regulated. Consumers need to know what they are buying.
  6. If mismanagement pays, capitalism fails. Executives who have been at the helm of corporations in need of a government bail-out should be retired and compelled to return what they have plundered.
  7. No risk without equity. When public money rescues a private firm the public must be afforded the rights that would be accorded any private investor, and thus be granted a commensurate ownership stake.
  8. The present economic crisis was not some kind of freak occurrence. A number of high profile financial experts had seen it coming. Many people who ought to have seen it coming either failed to act or choose not to act. Common sense dictates that only those who worked to expose the growing problems should be turned to for designing solutions. The rest have been found lacking in either integrity or competence.
  9. Attempts to renew market capitalism and stimulate spending must adhere to the principle of sustainable growth. This will require that the prices of products and services reflect their true cost: not only the cost to the end consumer, but the long-term cost of consumption to society and the environment.
The collapse of the financial markets attests to the defects of our market system as surely as the collapse of the Soviet Union exposed the defects of the planned economy. For too many decades, in too many places, human beings have been tested by dubious economic theories. Enough.
Photo: By Jotman, shows Burmese kids. It is up to world leaders to ensure that the economic crisis does not worsen, lest the poorest children end up paying for the reckless behavior of the richest.

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