All on this thread, do yourselves a favor and read Jeffrey Sach's article in the Sept. 12th issue of "The Economist". The article is titled: "Global Capitalism, Making it work".
Here are 4 excerpts:
1. Instead of the next G8 summit, we should immediately begin preparations for a G16 summit: the G8 plus eight counterparts from the developing world. Such a meeting would not seek to dictate to the world, but to establish the parameters for a renewed and honest dialogue. One standard should apply for participation: democratic governance, since the only reliable way to build for the future is through participatory political processes.
2. Part of the problem is that na‹ve 25-year-old investment bankers who do not know much about world politics think that the will to reform hangs by a thread in emerging markets; that India has turned inward; that Malaysia is irredeemably xenophobic; and that South Africa lacks the stomach to reform. These are all false propositions-these countries deserve the benefit of the doubt. But there is no convincing way to prove this.
3. So this free-marketeer [Milton Friedman] has long championed government-mandated deposit insurance as a protection against bank runs. We now need an international equivalent, to forestall panics in international lending. The best idea around is that developing countries should impose their own supervisory controls on short-term international borrowing by domestic financial institutions. To avoid panicky capital outflows, it is best to prevent banks from exposing themselves to excess short-term indebtedness in the first place. Chile does this by taxing short-term flows; other approaches may be worth exploring.
4. Even with all of the turbulence and value destruction of the past year; even with the failures of IMF-World Bank programmes in Africa in the past decade; even with the collapse of the post-communist transition in Russia; even with all of these things, no developing countries are closing the doors on markets and globalisation. In Malaysia and Russia, certainly, there has been a backlash. But even there, policymakers know they cannot get by without the outside world; and they know that only markets can deliver the chance of sustained growth.
It is that final sentence that I have been hanging my hope on during this whole crisis. Would love to hear comments on this article.
-Robert
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