“On the present moment” № 11 (83), 2008.
Bureaucratic despair in Russia and global project “Obama”
CONTENTS
Russia’s place in the global crisis
1.1. Key question to Russian and foreign bureaucracy with an answer
Global financial crisis forced heads of number of states to gather for two meetings: first on November 13 and 14 in Nice in EU + Russia format and then on November 15 in Washington in the format of twenty most economically powerful countries. Judging by media reports even though both meetings paid significant attention to global financial system malfunction (subject was impossible to ignore), it did not deliver any worthy results, because delegates of both summits do not take into account and therefore do not discuss the fundamental principles of functioning of the system of global finances and credits. As consequence, no one either discussed a complex of alternative principles for building global system of finance and credits nor ways of switching to them without revolutionary and post-revolutionary shocks, all aimed at eliminating even the possibility of such crisis’s occurrence in the future.
Therefore G-20 summit in Washington turned out to be just pointless talks, for which none of the delegates would be accounted for, and it ended with same in its essence pointless declarations of goodwill, even though all participants might be sincerely convinced that they have completed a big deal of preparation work and in the summit’s course produced constructive results guaranteeing an overcoming of the current crisis and economic prosperity of the humanity.
“The leaders of the Group of 20 nations, including the world's richest countries and such major developing economies as China, Brazil, India and Russia, issued a joint statement and detailed action plan after their meeting Saturday pledging to take a variety of steps to combat the current economic crisis and make sure it doesn't happen again.” – reports .
In this article Martin Crutsinger, a corresponder of Associated Press agency, lists key points of the statement and the action plan.
According to the delegates, the root of the crisis lies in the fact that investors did not fully recognized the risks involved in their actions. “Part of the problem stemmed from the fact that the global economy had been doing so well for so long that that investors were lulled into a false sense of security.” - states the author, pointing out that this joint statement does not actually acknowledge the boom of high risk mortgages in the USA, which many believe to be the epicentre of the current crisis.
In the statement the leaders took an obligation to, when necessary, continue money transfers from central banks to commercial ones, aiming at restoration of normal lending and at stimulation of consumer demand, states the newspaper. According to them, Bush’s administration was opposed to these new pricey obligations especially now, in the times when USA budget is deep in deficit.
Mr. Crutsinger also mentions the improvement of regulation mechanism: G-20 leaders agreed on establishing before March 31 2009 a number of “supervisory colleges” which will include all major regulators of financial system from all over the world and which will meet regularly to discuss the state of largest banks, operating in several countries[1]. The article also says that the participants pledged to improve regulation of derivatives.
In addition The Washington Times reports that the leaders agreed to quickly expand the “Financial Stability Forum” organization encompassing high-rank officials, management of central banks and regulator-agencies from a number of countries.
Leaders stated that International Monetary Fund (IMF) and the World Bank need to be comprehensively reformed to give more influence to developing countries and to expand the duties of IMF in economic monitoring of countries, mentions the author.
“Concerned that this severe financial crisis not lead to the same beggar-thy-neighbor trade policies that contributed to the Great Depression, the group pledged to refrain from erecting new trade barriers for the next 12 months” newspaper reports.
G-20 leaders pledged to meet again before April 30th 2009 and gave their ministers of finance an extensive list of measures to be taken before the next summit, concludes the newspaper ().
Many expected Washington summit to be sort of second Bretton-Woods (back then world leaders met to discuss post - WWII depression which resulted in creation of current financial system, oriented to US dollar as global currency). Gordon Brown, UK prime minister, held especially high hopes for such turn of events. However, breakthrough did not happen, delegates only outlined agenda for the nearest future. The only consolation to Brown was probably the fact that the next G-20 meeting in March 2009 which might bring the breakthrough might take place in the UK.
Dimitry Medvedev did not expect this summit to repeat Bretton-Woods, but in his speech he pointed out that “now world is in need for the ideas as powerful as decades ago”. Here is one of the many ideas expressed by the president before the summit: to establish an international organization of “recognized and independent “financial gurus””. Another one – make G-20 a main coordinator of reforms and development of global financial system – was supported in Washington. Consequently countries forming G-8 were named responsible for global financial security architecture.
Summit’s final declaration encompasses general principals for financial markets reform and tasks that all members of G-20 should give to their ministries and experts. Reformation plan also includes measures to be taken both in short term (before March 31 2009) and in mid-term. Those measures will affect standards of financial accounting, increasing requirements to rating agencies, management of risks. Declaration also mentions that Bretton-Woods financial organizations should undergo complete reformation. This concerns in the first place IMF and World Bank. For example, it has been decided to analyze if their resources are sufficient and to increase them if necessary. IMF will also inforce it’s role as a consultant in macro-economic policy[2].
All of the above show typically bureaucratic approach:
a problem forced the biggest layer of international bureaucracy to gather in order to take measure towards this problem’s resolution
however, bureaucrats themselves are not completely competent in the field and therefore could only direct financial resources and delegate problem resolution to the group of “financial gurus”, which come to think of it, has itself created the problem last year – same financial specialists were acting in the field of monetary exchange and providing consulting services to the same bureaucrats.
On October 12 2008, on the eve of the Nobel prize in economics winner’s announcement, a “news of the weeks” informational tv-show on Russian tv-channel “Rossia” dedicated it’s air time to financial crisis that has taken over the world. There was an attempt to figure out what was the role of Nobel prize in economics winners in the course of global economic processes. As a result, Nobel winners Harry Markowitz (USA) (also shared the prize in 1990 with Merton Miller and William Sharpe “For their pioneering work in the theory of financial economics”) and Robert C. Merton (USA) and Myron Scholes (Canada) (shared together the prize in 1997 “For the nez method to determine the value of derivatives”) were explicitly declared the creators of current economic crisis, because it was precisely them who theoretically proved the harmless nature of speculative machinations for the global economy, which reality proved were exactly the causes of crisis.