Economics Nobel laureate Dr Joseph Stiglitz called for a fundamental change of the world economic order by creating a new global reserve system and new multilateral institutions to restore the global economy.
The system is broken, evidenced by an elephant in the room:
“It's clearly a very strange global economic phenomenon that the global economic system requires the richest country to consume beyond its means to keep the global economy growing.”
Stiglitz points out additional evidence of the failed corporate free market economic system:
“Growing economic inequality means that we are moving money and assets from those who can spend it at the bottom to those who cannot spend it at the top. We told the people in the bottom to consume and kept lending to them.”
He went on to emphasize that the growing inequality “is not just in the US but in most of the countries in the world.” The abundance of empty houses and homeless people in the US and the problem of poverty and massive unemployment in developing countries show “the system of bringing together supply and demand is not working”, which is “a fundamental problem [that] needs to be addressed.”
Stiglitz is not alone in his call. He led a United Nations Commission of Experts to study the world financial crisis, which issued it's draft recommendations on March 26, 2009. A final report is due in May, 2009, which will serve as an input for the United Nations conference on the financial crisis in June.
The Commission's central recommendation, according to Stiglitz is....
The central idea is that the current system of depending on a single currency and the political and economic management of that currency is volatile.... It’s a matter of moving to multiple currencies. Over time you would replace the dollar as a reserve currency. No one thinks it would happen overnight.
The international decision making body on economic policy would also change. It has been the Group of Seven (G7) nations, but recently that has shifted to the G20 nations, recognizing the reality of a shift in the wealth. But that may be short lived if the Stiglitz Commission's ideas prevail, as described in this interview exchange:
Q – You are also proposing replacing the G20 with a United Nations body. What’s this all about?
A – We are calling for a Global Economic Coordination Council. There is no rhyme or reason to the current system other than who President Bush invited to it. The new body would have more political legitimacy and a broader mandate. It could demand, for instance, that the World Bank and the IMF report to it and evaluate how they are performing.
Q – Why not fix the G20 rather than creating a new body? Is what you propose likely to happen?
A – Yes. [German Chancellor] Angela Merkel is strongly pushing the idea. People in the G20 are saying this is how we need to go.
There would also be a move to break-up and prevent "too-big-to-fail" corporations.
Further, a financial regulatory board and competition authority – which would both answer to the Coordination Council – could prevent the expansion of multi-national firms that threaten competition or become problematic when they become too big to fail, the experts said.
Get ready for the value of the dollar to drop. Inflation is on the way.
Psssst... Do Something
- Contact the Broadcast Media
- Contact the Newspapers
- Contact the US Senate
- Contact the House of Representatives
Stiglitz Calls for a Change of the World Economic Order and China's Vital Role, Leanne Wang, March 17, 2009.
Business Week, The Oil and Glory interview: Joseph Stiglitz, March 25, 2009.
United Nations, Global finance structures must be revamped, says UN expert panel, March 26, 2009.
UN Expert Commission on Global Financial Crisis Releases Draft Recommendations, March 26, 2009.