Bretton Woods Project, October 30, 2008
On 28 October, more than 40 representatives of NGOs, development organisations, labour unions, think tanks, academia and the media came together in London to discuss how to take forward demands for a fundamental redesign of the international financial system. The participants included not only British organisations but also others from around Europe.
The main themes for the day were about creating a system that works to improve people’s live, reduce poverty, and protect the environment. The meeting follows calls from European leaders Nicholas Sarkozy, Gordon Brown, and Angela Merkel for an international summit on the crisis. Those calls have been seized upon by US president George Bush to organise a meeting of the G-20 leaders in Washington DC on 15 November. Bush ignored an offer from UN secretary-general Ban Ki-Moon for the United Nations to host the summit in New York.
The seminar started with the finding that the currently proposed international summit is too exclusive if a new financial architecture is going to be fashioned. A statement on the global summit was presented, demanding that the process be much more inclusive not only of developing countries, but also civil society and other external stakeholders. That statement, signed by more than 630 civil society organisations around the world and launched at the end of the day on the 28th, demanded: “a major international conference convened by the UN to review the international financial and monetary architecture.”
It also called for “full use to be made of the new UN task force on the global financial system, the upcoming UN Financing for Development meeting and other UN instances to begin preparing such a global meeting.”
Further presentations were made by researchers on the causes and consequences of the crisis. While the proximate causes were easily recognisable as the new lending instruments, lax regulation, excessive use of leverage and low interest rates; the academics indentified two fundamental causes: (1) the financialisation of the economy; and (2) the inequality that has been generated by a rising share of income going to capital rather than labour.
They identified the breaking of the link between corporations and banks as a key factor. As corporations accessed finance on capital markets as opposed to through banks, individuals were drawn into deeper relationships with the financial system. The increasing indebtedness of households, partly caused by a withdrawal of public service, served the banks need for a new market.
On top of this, further detail was given on the de-regulation that has occurred as countries raced to compete for financial capital. A key component has been tax havens which punched both regulatory and transparency holes in the international financial system. They have been fundamental to the subprime lending crisis in the US, as the securitised loans are held in special purpose vehicles located in tax havens. One element of a reformed system must be reduced complexity with more transparency and return to trust in the system.
Another international angle has been the liberalisation of capital flows and how this has fuelled the risks being taken in financial markets in the rich world, as well as created a contagion mechanism for transmitting instability to developing countries. While the IMF has been instrumental, this has also been pushed by the World Bank and especially its private sector arm the International Finance Corporation (IFC). Through a programme of research, policy advice and lending, the Bank and the IFC have pushed open banking markets in developing countries and brought increased foreign bank presence.
With these analyses of the problem in mind, participants turned in the afternoon session to discussion how civil society should respond. It was clear that hundreds if not thousands of proposals would be put forwarded, discussed, and debated over the course of any reform of the system; but the people in the room stressed again and again the need to fundamentally rethink the mechanisms by which we govern the international financial system.
Much stress was placed on not letting the institutions that created this crisis, simply try to fix it. The break we are seeing and opportunity for reform should push us to throw out the old models of governance and the old institutions which have failed in favour of new ones which are more democratically controlled and more accountable. The participants felt that we must not let the elites and those who have benefit from the failed system save it in order to save their own position within it.
One key conclusion was that there is now a real alignment of the interests of working people and ordinary citizens in the rich countries with the interests of those in poor and developing countries. Both need a root and branch reform of the international financial system that is people-centred and development-friendly.
In response to the impact on the real economy in the developed world, social mobilisation must focus on developing a new economic paradigm and a vision of a system of global social democracy. The conclusion was a need for much stronger social movements, and more activism, but that this must happen locally and nationally and also be linked globally to movements in the South and in other rich countries for a more just and equitable system.
There was discussion of numerous ideas, including whether there could be a single international financial regulatory institution, an independent institution to deal with problems of debt, the increasing financialisation of the environment and how climate change must be incorporated into the debate. The participants agreed that cooperation must increase across different kinds of movements, sectors, and organisations in order to better develop strategies and tactics. And most importantly that we must seize this opportunity and commit our time and resources to pushing the reforms we demand.
We give links here to a limited selection of video from the full-day long seminar. If you want the full unedited video of the full day of discussions please contact Zoe Young.
Jesse Griffiths introduces BWP seminar on the Financial Crisis
Welcome to a world without rules: How tax havens and secrecy contributed to the financial crisis , John Christensen, Tax Justice Network
The Financial Crisis Of 2007-8: Why And What Next?, Costas Lapavitsas, SOAS
On the Market and Policy Origins of the International Financial Crisis, Paulo dos Santos, SOAS
Financial Crisis Impacts, Sargon Nissan, new economics foundation
Discussion and questions (not yet available)
Please find below links to the presentations:
- Welcome to a world without rules: How tax havens and secrecy contributed to the financial crisis , John Christensen, Tax Justice Network
- The Financial Crisis Of 2007-8: Why And What Next?, Costas Lapavitsas, SOAS
- On the Market and Policy Origins of the International Financial Crisis, Paulo dos Santos, SOAS
- Financial Crisis Impacts, Sargon Nissan, new economics foundation
- Bretton Woods II conference FAQ (Eurodad and Halifax Initiative)
- Statement on the global summit
- ATTAC statement on the financial crisis
- Casinocrash.org statement on the financial crisis
- Dangerous derivatives – a 2 page briefing (Eurodad)
- Food speculation – a 2 page briefing (WEED)
- A European agenda on capital flight – a 2 page briefing (CRBM and Eurodad)
- A (Crumbling) Wall of Money Financial Bricolage, Derivatives and Power (Cornerhouse)
- Taking it Private: Consequences of the Global Growth of Private Equity (Cornerhouse)
- Alternative Investments and Secrecy Jurisdictions: Environmental, Social and Governance Issues in the Context of the Financial Crisis (Cornerhouse)
- Addressing development’s black hole: Regulating capital flight (Eurodad)