Opportunities arise from crisis

The last two weeks have been nothing short of a global governance marathon.

First there was the Sept. 22 UN Summit on Climate Change in New York City, then the Pittsburgh G20 Summit from Sept. 24 to 25. Currently underway, the International Monetary Fund (IMF), World Bank and G7 convene in Istanbul, Turkey for their annual meetings. Not to be left out, this past weekend Waterloo’s own Centre for International Governance Innovation (CIGI) hosted a gathering of its own.

From Oct. 2-4, CIGI held their annual conference. This year the topic was in step with that of those previously mentioned: “Towards a Global New Deal: Examining the systemic impacts of the global economic crisis.”

While the locale, attendees, and languages spoken may have been different, the underlying issue of this conference was very much the same as those being discussed on the world stage. A new world order is emerging; a global new deal is necessary; the time to act is now.

For once, the world is united and co-operating; regrettably, it is not under better circumstances. In the wake of the worst global economic crisis since the 1930s, the world’s leading academics, thinkers, leaders and players are sitting down to discuss, debate and problem-solve a way out of this international quagmire.

Ontario Minister of Finance Dwight Duncan said in an address to event attendees, “This CIGI conference happens at a time in world history when we are collectively confronting the challenges on all fronts: the economy, the environment, peace, security, disease and poverty.”

A dose of pessimism

Saturday evening’s keynote speaker was Princeton University professor and New York Times op-ed columnist Paul Krugman. Immediately Krugman wanted to “emphasize the extent to which this [crisis] is not over.”

“What is difficult now is to keep people focused on the fact that avoiding depression is not good enough,” he said.

Krugman argued that while the prospect of “the end of the world,” financially speaking, may have “been put on hold,” we must not let up on serious policy reform.

“I worry a lot,” Krugman furthered, “about the possibility that we may have a really, really prolonged period of economic weakness.”

The IMF has just released a “disturbing” new outlook.

Krugman explained that the report showcases “the extent to which the financial crisis has left us lasting damage.” On the whole, the world remains in an uncertain position.

Why the crisis?

“It is everything we have seen before all happening at the same time,” Krugman said of the crisis.

According to Krugman, “Sooner or later this crisis was inevitable … given the policy … and prevailing economic ideology.”

“We had a runaway financial centre,” Krugman explains. It was a system which had “too much risk taken on” and “too much financial activity going on.” Like others, Krugman admits that he failed to see the financial crisis coming.

“The spirit of deregulation,” as Krugman called it, is responsible for the mess. In fact, much of the crisis can be attributed to deliberate policies. “The political environment was one in which people celebrated these things instead of being suspicious.”

Krugman believes that the contemporary banking system outgrew the entrenched regulations. “We failed to learn the lessons of the 1930s,” said Krugman.

On track to recovery

While the world is beginning to recover, it unarguably has a long way to go. To date, one problematic factor remains that there is “no obvious driver for a full recovery.”

“This would be a really good time for somebody to invent the railroad, the Internet or something like that,” Krugman joked.

“We do not have role models for recovery from a global financial crisis,” he said.

Even in a look back to the Great Depression of the 1930s for guidance and inspiration, it is realized that the Second World War was the way out. Obviously, a world war is not a viable avenue for the international community. Nonetheless, Krugman believes that “if this is a truly global crisis” only with “international co-operation” will a solution and the effective prevention of another meltdown be possible.

Thus, all appearances suggest the G20 is our best bet at an international forum for recovery. However, Krugman notes that such a body remains “enormously contingent on personalities.” Ultimately, he reasons, we need a better setup.

Today’s agenda

Sunday morning’s keynote speaker, former Prime Minister Paul Martin, placed considerable faith in the ability of the G20 to live up to its potential in the post-crisis world.

Martin said that we live in a “world of 21st century danger” and that “the G20 came into being because the world has changed.”

According to Martin, the G20 is the future and the key to “making globalization work.”

Martin believes that “the time to act is now … if the G20 is to do its job.”

A Global New Deal

As memories of the crisis begin to fade, Martin argues that we must “never again allow the global economy to be put at risk” by the failure of major financial institutions, and we must recognize and harness the G20’s potential as “a global-steering committee.”

The concept that “sovereign has rights, but sovereign has responsibilities,” is another ideal Martin reinforced.

Martin believes that the G20 must resist desires to become a “small club of the self interested.”

At the same time Martin said that, “The question must not be how to keep New York, London and Frankfurt bankers happy, but how to keep the world economy healthy.”

New Deal

Originally a term used for U.S. President Franklin D. Roosevelt’s economic packages enacted during the depths of the Great Depression of the 1930s.

Martin’s to-do’s for the G20

  1. Poverty in African nations
  2. Climate change
  3. Current financial crisis

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