Global Finances Can and Must Change - Here's How
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Contact: World Council of Churches, +41 22 791 6153 +41 79 507 6363 media@wcc-coe.org
MEDIA ADVISORY, Feb. 12 /Standard Newswire/ --
The following in submitted by Juan Michel (*):
As the global financial system falters, many civil society and church activists see the crisis as an opportunity to press for long-overdue, radical reforms. The first opportunity for them to do so will come in early April, when the G20 will meet in London.
For once, advocates for economic justice seem not to be alone in recognizing the need for changes in global finances. Stock markets faltering around the planet and giant banks falling into bankruptcy have convinced governments of the richest countries that they have to do something, especially as the financial crisis impacts the "real" economy with massive lay-offs in companies affected by the global credit crunch and shrinking consumer markets.
"But there is a fundamental difference of approach between those who try to refund financial capitalism and those who see a need for a shift of paradigm in the world's economy," says Brazilian economist Marcos Arruda from the Institute on Policy Alternatives for the Southern Cone (PACS). "What is needed is not just some regulations here and there, but real alternatives to the current system which represent a profound transformation."
Arruda was a speaker on proposals for a new international financial architecture at a panel discussion sponsored by the World Council of Churches (WCC) during the recent World Social Forum in Belém, Brazil. This forum is the biggest global gathering of the "alter-globalization" movement, which seeks to resist exploitative economic globalization, instead promoting alternative, value-based forms of social and economic organization.
The quest for viable alternatives to the current global financial system was one of the main issues discussed at the event that took place in the northeastern Brazilian city of Belém, ending on 1 February. Gathering 130,000 social activists from more than 140 countries over six days at the gateway of the Amazon region, the forum also highlighted the environmental crisis and the voices of indigenous peoples.
Aiming at the heart of "casino capitalism"
"Meaningful alternatives to current global finances need to fulfil two fundamental requisites," says Martin Gück, from Kairos Europe, a network of church-related justice movements. Gück was also a speaker at the WCC-sponsored panel in Belém.
"On the one hand, they have to reverse the imbalance of power in the current financial market system, which favours private and public actors - banks and international financial institutions - that are neither legitimized democratically nor accountable to the society. On the other hand, the dominion of finances over the 'real' economy must end."
In other words, what needs to be targeted is the heart of so-called "casino, or gambling, capitalism". For each dollar involved in transactions within the "real" economy - where products or services are exchanged in return for money - there are 35 dollars involved in transactions of a purely "virtual" nature through financial instruments ever more complicated and farther removed from real goods.
The other side of that coin, the so-called shareholder value principle, needs to be turned upside down. Summarized in the dictum of Milton Friedman, one of the fathers of neoliberal economics, the principle maintains that "a company's only responsibility is to increase profits for its shareholders".
According to Gück, "It is no longer acceptable that only the interests of shareholders - and even those understood exclusively in terms of maximization of short-term profits - are taken into account when international companies make decisions."
Solutions to a systemic crisis
In Belém, some 20 civil society organizations and networks concerned with economic justice issues were able to agree on a number of concrete proposals to reform the current global financial system. Complex as the system is, the proposed alternatives are also varied and, sometimes, of a quite technical nature.
However, the basics are clear: "We call for the United Nations, reformed and democratized, to be put at the centre of the reform of the financial system," says Marta Ruiz of the European Network on Debt and Development (Eurodad), who acted as spokesperson for the financial crisis caucus in Belém.
The list of key proposals includes mechanisms to control international capital flows, an international monetary system based on regional reserve currencies, citizens' control of banks and financial institutions, progressive taxation schemes both at national and international levels, prohibition of speculative funds and non-regulated markets, eradication of speculation on primary products including food and elimination of tax havens.
The crisis is not just financial but systemic, the activists in Belém agreed, and it encompasses multiple crises affecting the environment, social and political structures, food and energy supplies. Owing to this complexity, the solutions cannot be only of a financial nature.
"Behind the financial crisis is the ecological one," says Bertille Darragon, a French ecological activist. "We need to abandon the model of unlimited economic growth and start thinking in terms of 'de-growth' [décroissance] - that is, to decrease the consumption of resources and energy, beginning with the very rich but including the middle classes both in the North and the South."
"A change in our life-style is needed," agrees Wilfried Steen, a Protestant pastor who is executive director of the German Church Development Service (EED). "We Germans have a level of consumption that would require 1.3 planets to be sustainable. That needs to change. From a theological viewpoint every human being has a place in God's creation, so all have the same right to live and to consume."
An alternative development model needs to be "people-led, driven by local demand and based upon regional integration," says Percy Makombe, from the economic justice network of the Fellowship of Christian Councils in Southern Africa (FOCCISA).
In Makombe's view, African countries should "de-link" themselves from the global financial and trade systems, rejecting bilateral and free trade agreements and even repudiating any further aid from developed countries.
"We rely heavily on foreign aid," says Makombe. "But as it is channelled through international financial institutions like the World Bank and the International Monetary Fund, in order to receive that aid we are forced to open up our markets and put at risk our food sovereignty, and so the whole process ends up siphoning wealth out of Africa."
Reform within the system and reform of the system
Since it is clear that global finances cannot be overhauled overnight, a pressing question is how and where the changes will come from. The answer could be a two-way approach.
On the one hand it is necessary "to create at the local level new forms of 'solidarity economy' within the old system," Arruda says, "forms that are not driven by the logic of private profit and that are sustainable from an environmental and intergenerational perspective".
On the other hand, "we need to make sure that our alternative proposals become mainstream and are taken seriously," says Rogate Mshana, a Tanzanian economist working on the staff of the World Council of Churches.
Even if they do not believe the so-called Group of 20 nations - the eight richest countries plus 12 of the largest emerging economies - can actually put in place a radical transformation, many of the activists gathered in Belém will press their agenda at the meeting of the G20 leaders in early April.
According to Mshana, "nobody has a blue-print for a new model of a global financial system. But as the current system is not the result of some blue-print but of an accumulative step-by-step process along time, so we need to press for transformative reforms at different levels; civil society organizations and churches around the world have a lot to contribute in this regard."
[1,224 words]
(*) Juan Michel is the WCC media relations officer.
For once, advocates for economic justice seem not to be alone in recognizing the need for changes in global finances. Stock markets faltering around the planet and giant banks falling into bankruptcy have convinced governments of the richest countries that they have to do something, especially as the financial crisis impacts the "real" economy with massive lay-offs in companies affected by the global credit crunch and shrinking consumer markets.
"But there is a fundamental difference of approach between those who try to refund financial capitalism and those who see a need for a shift of paradigm in the world's economy," says Brazilian economist Marcos Arruda from the Institute on Policy Alternatives for the Southern Cone (PACS). "What is needed is not just some regulations here and there, but real alternatives to the current system which represent a profound transformation."
Arruda was a speaker on proposals for a new international financial architecture at a panel discussion sponsored by the World Council of Churches (WCC) during the recent World Social Forum in Belém, Brazil. This forum is the biggest global gathering of the "alter-globalization" movement, which seeks to resist exploitative economic globalization, instead promoting alternative, value-based forms of social and economic organization.
The quest for viable alternatives to the current global financial system was one of the main issues discussed at the event that took place in the northeastern Brazilian city of Belém, ending on 1 February. Gathering 130,000 social activists from more than 140 countries over six days at the gateway of the Amazon region, the forum also highlighted the environmental crisis and the voices of indigenous peoples.
Aiming at the heart of "casino capitalism"
"Meaningful alternatives to current global finances need to fulfil two fundamental requisites," says Martin Gück, from Kairos Europe, a network of church-related justice movements. Gück was also a speaker at the WCC-sponsored panel in Belém.
"On the one hand, they have to reverse the imbalance of power in the current financial market system, which favours private and public actors - banks and international financial institutions - that are neither legitimized democratically nor accountable to the society. On the other hand, the dominion of finances over the 'real' economy must end."
In other words, what needs to be targeted is the heart of so-called "casino, or gambling, capitalism". For each dollar involved in transactions within the "real" economy - where products or services are exchanged in return for money - there are 35 dollars involved in transactions of a purely "virtual" nature through financial instruments ever more complicated and farther removed from real goods.
The other side of that coin, the so-called shareholder value principle, needs to be turned upside down. Summarized in the dictum of Milton Friedman, one of the fathers of neoliberal economics, the principle maintains that "a company's only responsibility is to increase profits for its shareholders".
According to Gück, "It is no longer acceptable that only the interests of shareholders - and even those understood exclusively in terms of maximization of short-term profits - are taken into account when international companies make decisions."
Solutions to a systemic crisis
In Belém, some 20 civil society organizations and networks concerned with economic justice issues were able to agree on a number of concrete proposals to reform the current global financial system. Complex as the system is, the proposed alternatives are also varied and, sometimes, of a quite technical nature.
However, the basics are clear: "We call for the United Nations, reformed and democratized, to be put at the centre of the reform of the financial system," says Marta Ruiz of the European Network on Debt and Development (Eurodad), who acted as spokesperson for the financial crisis caucus in Belém.
The list of key proposals includes mechanisms to control international capital flows, an international monetary system based on regional reserve currencies, citizens' control of banks and financial institutions, progressive taxation schemes both at national and international levels, prohibition of speculative funds and non-regulated markets, eradication of speculation on primary products including food and elimination of tax havens.
The crisis is not just financial but systemic, the activists in Belém agreed, and it encompasses multiple crises affecting the environment, social and political structures, food and energy supplies. Owing to this complexity, the solutions cannot be only of a financial nature.
"Behind the financial crisis is the ecological one," says Bertille Darragon, a French ecological activist. "We need to abandon the model of unlimited economic growth and start thinking in terms of 'de-growth' [décroissance] - that is, to decrease the consumption of resources and energy, beginning with the very rich but including the middle classes both in the North and the South."
"A change in our life-style is needed," agrees Wilfried Steen, a Protestant pastor who is executive director of the German Church Development Service (EED). "We Germans have a level of consumption that would require 1.3 planets to be sustainable. That needs to change. From a theological viewpoint every human being has a place in God's creation, so all have the same right to live and to consume."
An alternative development model needs to be "people-led, driven by local demand and based upon regional integration," says Percy Makombe, from the economic justice network of the Fellowship of Christian Councils in Southern Africa (FOCCISA).
In Makombe's view, African countries should "de-link" themselves from the global financial and trade systems, rejecting bilateral and free trade agreements and even repudiating any further aid from developed countries.
"We rely heavily on foreign aid," says Makombe. "But as it is channelled through international financial institutions like the World Bank and the International Monetary Fund, in order to receive that aid we are forced to open up our markets and put at risk our food sovereignty, and so the whole process ends up siphoning wealth out of Africa."
Reform within the system and reform of the system
Since it is clear that global finances cannot be overhauled overnight, a pressing question is how and where the changes will come from. The answer could be a two-way approach.
On the one hand it is necessary "to create at the local level new forms of 'solidarity economy' within the old system," Arruda says, "forms that are not driven by the logic of private profit and that are sustainable from an environmental and intergenerational perspective".
On the other hand, "we need to make sure that our alternative proposals become mainstream and are taken seriously," says Rogate Mshana, a Tanzanian economist working on the staff of the World Council of Churches.
Even if they do not believe the so-called Group of 20 nations - the eight richest countries plus 12 of the largest emerging economies - can actually put in place a radical transformation, many of the activists gathered in Belém will press their agenda at the meeting of the G20 leaders in early April.
According to Mshana, "nobody has a blue-print for a new model of a global financial system. But as the current system is not the result of some blue-print but of an accumulative step-by-step process along time, so we need to press for transformative reforms at different levels; civil society organizations and churches around the world have a lot to contribute in this regard."
[1,224 words]
(*) Juan Michel is the WCC media relations officer.
Listen to short interviews with the experts quoted in this feature:
http://www.oikoumene.org/?id=6581
World Social Forum - photo gallery:
World Social Forum - photo gallery:
http://www.oikoumene.org/?id=6576
Call from the financial crisis caucus in Belém:
Call from the financial crisis caucus in Belém:
http://www.oikoumene.org/?id=6582
WCC work on economic globalization:
WCC work on economic globalization:
http://www.oikoumene.org/?id=3117
Ecumenical presence at the 2009 WSF (in Portuguese)
Ecumenical presence at the 2009 WSF (in Portuguese)
http://www.ced-fsm.blogspot.com/
World Social Forum - official website:
World Social Forum - official website:
Opinions expressed in WCC Features do not necessarily reflect WCC policy. This material may be reprinted freely, providing credit is given to the author.
Additional information: Juan Michel,+41 22 791 6153 +41 79 507 6363 media@wcc-coe.org
The World Council of Churches promotes Christian unity in faith, witness and service for a just and peaceful world. An ecumenical fellowship of churches founded in 1948, today the WCC brings together 349 Protestant, Orthodox, Anglican and other churches representing more than 560 million Christians in over 110 countries, and works cooperatively with the Roman Catholic Church. The WCC general secretary is Rev. Dr Samuel Kobia, from the Methodist Church in Kenya. Headquarters: Geneva, Switzerland.