This article talks about how Bush is trying to hold off any talk there may be of a great reform or even revolution of the international market. This crisis has obviously highlighted some of the inadequacies of capitalism but in recent speeches Bush is trying to convince the International community that the answer is gradual reform to fix the problems faced, and that capitalism is still the best option availabe for the International system. Yet the article also highlights how French President Nicolas Sarkozy is talking about the increasing attractiveness of the Euro over the dollar for investors.
One of the points that this article does not discuss that I am keen to hear about is the international backlash from developed countries that were forced to convert to capitalism through a quite dramatic transition in order to receive loans from institutions such as the IMF and World Bank. If I were living in one of these countries that were forced to go through "structural adjustments" I would be watching the bail out of AIG and other instances with a mixture of amazement and resentment.
3 comments:
Jake, do you mean international backlash from DEVELOPING countries that were forced to convert to capitalism?
You make a valid point.
The current global financial structure has not been working well. It has also been unfair to the developing countries because as Joseph Stiglitz said in one of his articles, "[developing countries] will be among the innocent victims of this global crisis that wears the “made in America” label". Even those countries which have done everything right -- better regulated and managed their economy, used sound macroeconomic policies -- will suffer as a result of U.S. mistakes.
Bush talks about not restricting fair trade. But developed countries like the United States have offered huge subsidies to its farmers, whereas developing economies cannot always afford to provide such protection. So it also makes people question the hypocrisy of developed economies advocating free trade.
The article also talks about the IMF being more representative. But the IMF has demanded pro-cyclical policies (raising interest rates and taxes, lowering expenditures when an economy goes into a recession), whereas developed economies like Europe and America do just the opposite. This results in capital fleeing from developing countries in times of crisis, reinforcing the vicious cycle.
At this point, the developing countries will require huge amounts of money that are beyond the IMF's capacity. The sources of liquid funds are in Asia and the Middle East. But why should they turn their money over to institutions like the IMF that have failed them in the past?
I completely agree that the West has failed the developing countries with the hypocrisy of our current financial bailout vis a vis our structural adjustment instructions through the IMF.
I would say that, while there are liquid funds in the ME and Asia (i assume you mean oil), their governments would be better served in dealing with their own economic and social problems like poverty and unemployment before they should even consider giving the money to the IMF. This is simply because that is supposed to be their primary concern, and already NGOs in the west spend a lot of money in these countries tryign to help the very people that the governments neglect when they try to gain clout by giving to the IMF.
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