A World Awash with Money, Not Wealth

All agree it needs fixing, but no one agrees how

At a morning plenary session on Friday at the State of the World Forum there was consensus on the need to restructure the global financial system, but there was no consensus on the nature of that restructuring. In fact, few solutions were suggested.

Over the last few years, the global financial system has been struggling to fix one financial crisis after another: in Asia, Brazil and Russia, to name just a few. According to David Korten, president of the People-Centered Development Forum, this is because there is so much emphasis on speculation instead of investment that would result in a solid economic foundation. "The financial system doesn't create wealth, it's a system that allocates wealth and determines who will benefit and who will not," said Korten. This was echoed later in the day by Surin Pitsuwan, the minister of foreign affairs in Thailand, who stated that the amount of money traded around the world everyday exceeds the amount of money exchanged for goods.

Judith Woodard, managing director of Bear, Stearns and Company, claimed that developing countries need a stable currency in order to survive. Wall Street traders can topple governments by undermining a country's currency, and Woodard believes that such speculation has to end if we are going to protect the environment and the politically unstable democracies of the developing world.

According to Mark Weisbrot, chief economist for the Center for Economic and Political Studies, there is an unquestioning acceptance in financial circles that globalization results in an economic growth that benefits most people. However, Weisbrot says that data provided by the International Monetary Fund (IMF), the World Bank and the United Nations Development Programme do not support these claims. In the developing world, per capita income growth has slowed dramatically during the globalization of the past twenty years. In Latin America, the income growth rate between 1960 and 1980 was 75 percent, whereas since 1980 it has slowed to seven percent. The situation is the same in Africa where the income growth rate was 35 percent between 1960 and 1980, but has only been 15 percent in the years since. According to Weisbrot, the IMF and World Bank cannot point to any area of the world as a success story.

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According to Korten, "Globalization is about economic competition, and the nature of competition is that there are winners and losers." Most of the panelists in the morning discussion agreed that there are many losers under the current global financial system. But as Ruud Lubbers, former prime minister of the Netherlands, pointed out, "I am not hearing anyone advocating any solutions."

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