Lukas Moeller writes from the Global Ecumenical Conference on a New International Financial and Economic Architecture initiated by the World Communion of Reformed Churches in São Paulo, Brazil.
As Joan Robinson, the English post-Keynesian economist, once said: “The purpose of studying economics is not to acquire a set of readymade answers to economic questions but to learn how to avoid being deceived by economists.”
Richard Jolly, keynote speaker at this conference, clearly states economists cannot deceive us anymore. The world is in a bad state. For example, the prestigious US National Bureau of Economic Research recently reported that inequality in the US was now higher than ever before, even higher than during the slave era of 1774. Jolly believes that the crisis is unnecessary, if Europe and the US start learning from the action that some emerging markets have been taking. At the same time international action is needed, particularly as outlined by the Stiglitz commission.
Asia went through a financial and economic crisis 1998 to 2000 and took impressive action to strengthen the economy. They established regional development banks, expanded reserves of foreign exchange and introduced a regional currency. Through a country-by-country action for economic stimulus, the economy could regain strength. Structural changes also have to be made to address unemployment, inequality and sustainability to have a long lasting effect.
Jolly refers to the Stiglitz commission for examples of international action that must be taken. These present some essential points for the United Nations. The first suggestion is the establishment of a new international reserve currency. Secondly, the commission calls for new mechanisms to diminish global instability – stronger counter cyclical policies, for example. Next to the general strengthening of international financial regulation, the commission is specifically pressing for an international financial transaction tax. Lastly there is the very important call for restructuring international debt and especially an international court for debt restructuring that Jolly also emphasizes. It would replace the unofficial procedures of the International Monetary Fund and the World Bank who press for neoliberal policies and open market in exchange for loans, regardless of the country’s situation.