- "The WEF is not a government of the world,"
said organiser Andre Schneider wistfully in the crisp Davos air. At least
not yet, adds Eric Walberg
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- The world's economic elite gathered in a subdued atmosphere
at this year's World Economic Forum to assess the now global economic crisis.
New York University professor Niso Abuaf compared it to a funeral, though
not for the sake of the dead "ancien regime", but "for the
ones staying behind." Attendees at the wake included 40 heads of state,
1400 business leaders and the usual assortment of "social entrepreneurs".
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- There were significant departures from earlier gatherings.
The keynote speaker was Russian Prime Minister Vladimir Putin, who used
his 30-minute speech to portray Russia as a reliable partner in energy,
trade and politics amid the widening global economic crisis. He described
the world financial crisis as a "perfect storm" in which "we
are all in the same boat," acknowledging that Russia has been hit
by the plummeting oil prices and a virtual western financial boycott following
the war with Georgia last summer. Andrei Kostin, chairman of VTB Bank,
admitted that without a recovery in the West, "a Russian return to
stable economic growth is not possible."
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- United States President Barack Obama and his new cabinet
were conspicuous in their absence. Also conspicuous by their absence were
the private bankers - "banksters", in the words of US president
Franklin Delano Roosevelt. G8 central bank heads attended, with the notable
exception of US Federal Reserve Chairman Ben Bernanke, presumably to avoid
being tarred and feathered. Some of the other guilty parties were less
shy, with this year's sponsors including Citigroup, Bank of America, Merrill
Lynch, UBS and Satyam, the global technology services company that has
the distinction of being considered India 's biggest fraud. "The critics
do ask if those who have been part of the problem can be part of the solution,"
equivocated Schneider before insisting, "Yes, that's the only way
to find the solution." It never crossed his mind that the culprits
might better serve the "global public interest" from behind bars,
stripped of their ill-gotten gains.
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- One of the few voices of reason was Harvard economics
professor Ken Rogoff, who insisted that governments would have to take
over the failing banks, divide their assets into good and bad, and then
restructure them. Institutions like Citi and Bank of America will have
to go, boards will have to be fired and equity stakeholders wiped out,
Rogoff told CNBC.com. "They have to do a bad bank, but if that's all
they do then it's idiotic."
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- Nassim Nicholas Taleb also told WEFers that governments
had to nationalise the banks, limiting the rewards handed out to those
who work in what he calls the "utility" part of the system and
keeping a completely uninsured second leg that can take all the risks it
wants and lose its shirt. "They rigged the game... For someone who
loves free markets, a total nationalisation of the part of the business
that requires insurance and does clearing and payments needs to happen.
I want them poor and they deserve to be poor. You can't have capitalism
without punishment." If only.
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- Ex-World Bank economist and Nobel Prize winner Joseph
Stiglitz went a step further, advising the UK government not to prop up
a corrupt edifice, but to let the entire banking system collapse in order
to build up a well-regulated system from scratch under temporary state
control. "The UK has been hit hard because the banks took on enormously
large liabilities in foreign currencies. Should the British taxpayers have
to lower their standard of living for 20 years to pay off mistakes that
benefited a small elite?" he asked a Daily Telegraph reporter rhetorically
the day after the funeral wake was over. Of course, pulling the plug on
the British banks could mean the collapse of the entire international banking
system, but this may happen anyway.
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- The debate about nationalisation of banks led to one
about the need for a new "sheriff" to police global financial
markets. Pooh-poohed just last year, it is now virtually conventional wisdom,
showing how far the global elite has had to shift along the ideological
spectrum because of the crisis. The hardcore globalists argued that a new
international body is needed, with authority to prevent banks and corporations
from using so-called offshore banking (read: money laundering and tax evasion)
to bypass national governments. The softcore argue that those national
governments should merely work together in a less formal fashion to coordinate
policing. Even the Great Deregulator Bernanke said from afar recently,
"The world is too interconnected for nations to go it alone in the
economic, financial, and regulatory policies."
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- The silver lining in the current crisis is that everyone
agrees that something must be done and fast. Bankers are at long last in
the dock, a golden opportunity for governments to push for better regulation.
Obama's Chief of Staff Rahm Emanuel's philosophy is, "You never want
a serious crisis to go to waste." This crisis is an "opportunity
to reweigh your life", as Abuaf calls the funeral gathering mourning
the overweight corpse, a chance to tame the world banksters.
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- It is unlikely that some World Financial Control Centre
will be agreed any time in the near future, nor would this necessarily
be a positive development, given who would most likely fill its seats at
this point. Giving the IMF, World Bank or Bank of International Settlements
greater authority would be putting the fox among the chickens.
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- There is still plenty of room for regional institutions
to better coordinate their activity. During the recent crisis - when it
was already too late - it became clear that there was no budget for EU
financial intervention in an emergency or even a pan-European banking supervisor.
The failed bank Fortis was carved into chunks which national governments
dealt with separately. A plan to correct this yawning gap will be presented
this month, no doubt providing the European Central Bank with greater powers.
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- Charles Goodhart, a former top official at the Bank of
England was pessimistic: "The only people who can take up action are
the nation states. I think the crisis has set back globalism and world
federalism by a long way."
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- One national government which intends to do something
about the problem is Obama's. There are signs Obama may be biting the financial
bullet. Incensed by the $18.4 billion Wall Street bonuses for 2008, Obama
told reporters, "That is the height of irresponsibility. It is shameful."
He pointed to a $50 million corporate jet that Citigroup ordered "at
the same time it was taking TARP money," demanding the plane order
be cancelled and stating a cap on Wall Street incomes would be part of
TARP II. Waste not (the serious crisis), want not.
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- He was one of the signatories of last year's congressional
Stop Tax Haven Abuse Act that blacklisted Jersey , Guernsey and 32 other
jurisdictions. Eighty-three of the largest 100 US corporations use tax
havens to avoid taxation, and Obama promised to introduce a law to stop
this within weeks of taking power. France and Germany are drawing up a
similar blacklist, much to the UK's disgruntlement - if Jersey and Guernsey
go under, they would topple London from its role as premier world bankster
(sorry, banker). French Prime Minister Francois Fillon told French parliament,
"Black holes like offshore centres should no longer exist. Their disappearance
must be a prelude to a reform of the international financial system."
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- Transparency International France estimates that about
$10 trillion are stashed in secret offshore accounts away from the prying
eyes of regulators or tax inspectors. Given the importance of tax havens
and offshore banking to both the biggest corporations and to the biggest
drug and arms dealers, if Obama holds firm - against intense lobbying,
you can be sure - this could be the most important legacy of his presidency,
fulfilling his fervent wish to make it into the history books beside his
beloved Lincoln, who famously said during the Civil War, "I have two
great enemies, the Southern Army in front of me and the bankers in the
rear."
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- This push for global regulation of the criminals is part
of the process of greater globalisation for us all. Schneider may be right
that the WEF is no world government, but it and the likes of it are where
economic policy is formulated these days. The Bush regime already agreed
to a proposal by Britain and France for a "college of supervisors"
at the G20 summit in Washington last November. We are being globalised
whether we like it or not. The question is: who will supervise the supervisors?
It all comes down to responsible national governments with the interest
of their citizens in mind, not just of their banksters and corporate sponsors.
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- As each country goes to the ballot box over the next
few years, the crisis will play itself out in electoral populist battles,
and this time, voters will be expecting action, not just more of the same.
To get it, they will have to mobilise their own "sheriffs" to
police their fair-weather politicians. Stay tuned for the G20 update of
the global soap-opera in April.
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- Eric Walberg writes for Al-Ahram Weekly. You can reach
him at www.geocities.com/walberg2002/
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