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Those who know J. Stiglitz's work (compulsory reading) see his mighty stamp on this hard-hitting and all important report for the future of mankind.
Facts and figures
The 2007 crisis showed blatantly the interdependence of all (inter)national economies.
In the US, 1 out of 6 people has no full-time job; worldwide 200 million people were driven into poverty by becoming unemployed. The havoc on pensions was also tremendous.
The crisis exposed deep flaws in the evangel of neoliberal free market fundamentalism. Markets are not stable, not self-regulating and not efficient (information asymmetries between seller and buyer).
For the authors, ethical and moral values should be decisive factors in economic decision making. In a world with huge unmet needs, a plague of massive unemployment is unacceptable.
The Report proposes to install, not only, a new global economic order based on stability and faster growth, but also, more democratic governances (those who suffer have no say, those responsible are not held accountable).
To tackle the huge problems of poverty, malnutrition, environmental pollution, climate change and social insecurity, the world economy needs more stability and growth of global aggregate demand: less volatile exchange rates and asset prices, a social insurance system, more income equality, no protectionism and no `too big to fail' institutions. The latter should function with less leverage and give easier access to their resources.
Financial deregulation was one of the main causes of the global crisis. The financial sector became an end, not a means of economic activity. But, it was not capable to manage risk, to allocate capital efficiently and to mobilize savings at the lowest possible cost.
In order to protect the consumer and avoid disastrous externalities (unemployment, poverty), the Report proposes the creation of a `New Central Bank' (instead of the do-wrongly's) and a `Financial Regulatory Authority". Together, those new institutions should impose transparency (no creative accounting), limit the size of financial institutions, regulate credit rating agencies, create a deposit insurance system, allow public alongside private banking and prohibit the use of tax havens.
International Institutions - solution
With its counter-productive policies, which undermined social protection, the IMF made crises worse than they were. Its policies should, on the contrary, support employment worldwide. In that case, its lending capacity could be enhanced. But in any case, its governance should be more democratic.
The first task of the WTO should be the implementation of anti-protectionist measures.
The Report proposes two new institutions, the `Global Economic Coordination Council' and an "International Panel of Experts' in order to coordinate economic policies worldwide.
A new global architecture is needed to manage the global good.
The global reserve system should be improved by the creation of a supranational international new currency (e.g., the SDRs of the IMF).
An `International Debt Restructuring Council' should be installed for the management of sovereign debt defaults.
The risk between lenders and borrowers could eventually be managed with GDP- and commodity-linked bonds.
Also, novel financial mechanisms, like `solidarity levies', should be imposed in order to diminish living standard inequalities.
This report is a must read for all those interested in the future of mankind.
One minor remark: the report has no index.
It is evident, that all the world's problems cannot be solved by economic measures.
There are also pure ethical or moral problems, like the world's demographic explosion.