| Nothing quite like the current economic crisis has | | | | create long-lasting, incentive-driven jobs that will |
| happened before, with financial systems the world | | | | increase America's competitive capacity for decades. |
| over all failing in tandem. But it is worth noting that | | | | Revision of the statutes of the International |
| the boom that preceded the present downturn was | | | | Monetary Fund and the World Bank should also be |
| not an overnight occurrence; it gathered pace over a | | | | given top priority, to ensure that these institutions |
| decade of negative saving and under | | | | can dedicate greater resources to meeting the |
| investment--particularly in the U.S.--along with certain | | | | requirements of developing nations that in turn will |
| corrupt practices that were readily tolerated in the | | | | fuel U.S. technology exports as they advance their |
| midst of the "boom" period. | | | | own economics. |
| It was a sustained "boom" during which the rest of | | | | The idea of creating an institution to reconstruct |
| the world financed the large deficits of the U.S. and | | | | toxic or bad assets certainly deserves consideration |
| accumulated huge amounts of dollar reserves, leading | | | | to ensure that the banks will focus on clean assets. |
| to the fall in the value of the dollar. Along with the | | | | But this should not become an excuse for repeating |
| weakening of the dollar, many of the world's | | | | past mistakes, and help should be combined with |
| currencies linked with the dollar also weakened. | | | | enhanced regulatory supervision. Nonetheless, |
| Consequently, wholesale and retail price levels | | | | industrialized countries should take the lead by |
| increased in dollar terms. | | | | assuring that they will not resort to protectionist |
| Article Controls | | | | measures. The G-8 leaders should make |
| During this period, the regulatory bodies, auditors and | | | | commitments to this effect and urge others to |
| rating companies--in fact, the whole system--failed. | | | | cooperate. |
| Chairmen and members of the board of directors | | | | In the short term, an effective measure would be a |
| failed too; so have the management and compliance | | | | tax rebate for the year 2008 of up to 30% to 40% |
| officers. Add to that the failure of many "rank and | | | | to those taxpayers who have income of up to |
| file" employees. | | | | $100,000 a year, provided such rebates are spent |
| As a consequence, the existing gap between rich and | | | | within a specified time limit--a maximum of three to |
| poor has grown even wider. The poor, who | | | | six months. This would stimulate spending and revive |
| constitute a majority of the world's population, have | | | | the economy much faster. This may also be a much |
| suffered, and global conflicts have increased. Yet | | | | cheaper solution. |
| many among the rich have become richer, and the | | | | I believe that, in the medium term, the most |
| middle class has also benefited considerably from the | | | | effective way of confronting the economic instability |
| boom. | | | | throughout the world is by directing our attention to |
| Now the dollar is appreciating, the pound is | | | | the needs of the developing and less-developed |
| depreciating and there is excess supply in | | | | nations. A sensible way to approach this is by |
| commodities and products. However, human nature, | | | | investing in their physical and social infrastructure, |
| which reacted to the gap and the imbalance in the | | | | separately from any current aid program. Contracts |
| system, is now taking corrective action to bring | | | | placed for this purpose in the developed world would |
| about some balance, as it always does when events | | | | not only help preserve jobs there but would also |
| go to extremes. | | | | create new jobs and enlarge the consumer market in |
| The U.S. and the developed world have taken action | | | | the developing world. |
| to bail out the financial sector and some industrial | | | | In addition to mega-infrastructure projects, which |
| companies. This is to ensure that bankruptcies are | | | | have a long incubation period, for immediate results |
| avoided and people do not lose their jobs--or the | | | | financial resources can be directed to smaller projects |
| deposits they have with the financial institutions. | | | | such as feeder roads instead of major highways, |
| However, bailing them out by pouring billions of | | | | modest and alternative energy projects, |
| taxpayers' money into the system is not the answer | | | | development of water resources, and expansion of |
| for an immediate revival of the global economy. | | | | educational and health facilities. In this manner, jobs |
| At a purely pragmatic level, what guarantee is there | | | | can be created more quickly. |
| that the money will not be misused again, particularly | | | | With President Obama in office--a man who is |
| when greed and fear continue to determine human | | | | already a symbol of change--we trust he will |
| actions? What is there to ensure that some of the | | | | implement measures that will correct the failures of |
| money does not disappear again through corporate | | | | the financial system, instead of finding short-term |
| misjudgment or through undeserved incentives and | | | | solutions that only postpone the real problem. Britain's |
| bonuses? | | | | Prime Minister Gordon Brown and other G-20 leaders |
| Only a few months back, the monitoring and | | | | have also demonstrated their leadership in this crisis |
| supervisory institutions allowed billions of dollars of | | | | and presented concrete proposals to reform the |
| loans to be made on the strength of inflated books | | | | financial system. |
| that showed illusory balance sheets worth hundreds | | | | It is hoped that these suggestions will help the G-20 |
| of billions. We now know these balance sheets all too | | | | leaders meet their objectives to reduce global |
| often failed to reflect the real state of affairs. | | | | poverty by creating jobs and increasing productivity. |
| Again, the person in the street is suffering and will | | | | This will expand consumer demand and encourage |
| suffer more as unemployment rises. As for the | | | | further investment. Thus the real value of money will |
| people who have run the system, it is perhaps too | | | | be preserved, and economic stability regained. |
| optimistic to assume that they will be able to mend | | | | Of course, just as taking these steps will lead us to a |
| their ways overnight. | | | | better place, failing to do so will also have its |
| What we are witnessing is the trailer to the real | | | | consequences. Conflict will persist, the divide between |
| movie. The recession could last anywhere between | | | | rich and poor will grow, the impressive economic |
| three and five years, possibly even longer. The worst | | | | gains of the last 10 years will go without restored |
| pain is, I fear, yet to come. What governments are | | | | and nationalism will reassert itself at the expense of |
| offering by bailing out financial institutions and | | | | globalization. Accordingly, I am hopeful that all |
| industrial manufacturers is temporary oxygen in an | | | | participants in the G-20 summit will consider these |
| attempt to stave off the worst effects of the | | | | proposals. |
| deepening recession. As nature seeks to correct the | | | | To sum up: |
| imbalance, we have to recognize that both socialism | | | | --Our approach ensures that the funds for bailing out |
| and capitalism have failed. Giving large sums of | | | | financial institutions are used first and foremost for |
| money to the very people who caused the problems | | | | securing depositors' holdings in a world of |
| in the first place seems very unwise, to put it mildly. | | | | counter-party uncertainty that incentivizes money to |
| We know that this type of capitalism has failed. And | | | | leave the system. |
| yet, if we go back to nationalizing the financial | | | | --It ensures that a new and more rigorous regulatory |
| institutions, how will we decide which other | | | | system and new policies for reviving the economy |
| institutions deserve to be bailed out? Will we also | | | | are introduced. At the same time, governments are |
| have to bail out the automotive industry? Where | | | | cautioned not to resort to protectionism. |
| does it all end? | | | | --A tax rebate for the year 2008 would revive the |
| Yes, banking institutions and certain industries should | | | | consumer economy with immediate effect. |
| be rescued so they do not go into bankruptcy and | | | | --In addition to mega-projects, smaller and |
| employees do not lose their jobs. But while rescuing | | | | environmentally friendly infrastructure projects in |
| them, it has to be ensured that the right teams are | | | | emerging economies would produce immediate results |
| in place, so they will not commit the same failures as | | | | and enable the developed world to enjoy the |
| their predecessors. The first and most important | | | | benefits of expanding economies to create a new |
| step is to secure depositors up to a much higher | | | | consumer market share among the billions on low |
| level than at present. | | | | incomes and the unemployed throughout the world. |
| The second step is to make laws and rules for | | | | --The main message is that the developed and |
| vetting the membership of boards and the top | | | | developing worlds have to work together in the |
| management of banks. | | | | present crisis. Only in this way can the increasing |
| In a third step, support should be given to the banks | | | | wealth gap between rich and poor nations, with its |
| that legitimately require funds at reasonable costs for | | | | fateful consequences of conflict and terrorism, be |
| maintaining and expanding their credit activity to | | | | avoided. |
| satisfy the borrowing requirements of their | | | | --Finally, such an approach would reduce present |
| creditworthy clients. Funds should be deployed to | | | | political conflicts, create better understanding |
| guarantee re-employment and new job creation. The | | | | between nations and bring about global political and |
| spending in the U.S. from the large fiscal stimulus | | | | economic stability. |
| should focus on investing in people and technology to | | | | |