Calls for a new order to deal with worldwide financial crisis

Japan Press Weekly

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Calls for a new order to deal with worldwide financial crisis

Akahata, editorial

Leaders attending the Asia-Europe Meeting (ASEM) in Beijing issued a statement calling for a cooperative response to the ongoing financial crisis in order to improve the supervision and regulation of all financial actors and pledged to undertake an effective and comprehensive reform of the international monetary and financial systems.

The meeting, attended by heads of 45 Asian and European countries and financial institutions, was the first large-scale summit to be held since the start of the present worldwide financial crisis that began in the U.S. The fact that this meeting pledged to reform the international financial and monetary systems indicates that the U.S.-led neo-liberalism regime that has pushed for deregulations and left everything to market forces is no longer tenable.

Ways to prevent further crises

The financial crisis that started in the U.S. has had adverse effects on the real economy in many parts of the world.

ASEM called for policy coordination among countries as well as assistance by the International Monetary Fund (IMF).

It also recognized the urgent need to reform the international financial systems to prevent further financial crises from occurring by stating, “They [leaders] recognized the need to improve the supervision and regulation of all financial actors, in particular their accountability.”

European Commission President Jos? Manuel Barroso said in his speech that rules are essential for open markets, including, “transparency, responsibility, accountability, cross-border supervision and global governance.”

French president Nicolas Sarkozy pointed out the need to set regulations on speculative funds, rating agencies, derivative and other financial technologies, and tax havens, as well as maintenance of transparency in financial institutions.

British Prime Minister Gordon Brown proposed reforming the IMF in order to deal with the globalized financial risks. The ASEM statement reflected the ideas brought in these discussions.

Many Asian countries had a bitter experience with the 1997 Asian currency crisis in which hedge funds managers massively sold national currencies to Asian countries and bought them back when their values went down. In return for their acceptance of IMF loans, these countries were forced to adopt a policy of severe economic austerity, which worsened living conditions for the majority of the populace. Malaysia managed to overcome the crisis by controlling the movements of short-term funds, with the United States opposing.

In Europe, there is a strong opinion calling for strict regulation of international finances. In the G8 Summit in Heiligendamm, Germany, in 2007, the call for such regulation ended in failure. At a time when the international financial system is crumbling, increasing regulation of money markets is an urgent task in both Asia and Europe.

Effective proposals called for

While reaching agreement on the need for a comprehensive reform of international financial systems, ASEM in its recent statement failed to propose concrete measures to reform the IMF.

The IMF imposed austerity measures and deregulation on borrower governments, causing distrust from developing countries in Asia, Latin America, and Africa. It is necessary that a drastic reform plan should be proposed, in addition to stronger systems of supervision. The problem at present is that voting rights are proportional to the amount of financial contribution to the IMF. This makes it possible for the United States to use its veto power. Democratic reform is essential for drastically guaranteeing member nations’ voting rights.

A summit meeting of the United States, European countries, Japan, China, India, and Brazil will be held on November 15 in Washington. Attention is focused on whether it will offer effective proposals based on the recent ASEM statement.

- Akahata, October 26, 2008