Crisis. Perhaps no word is used more often to describe the current downturn of the global economy. The ancient Greeks used the word "krisis" to express the idea of a key moment, a turning point enabling people to take clear and unambiguous decisions. This implies that every crisis embodies a chance to change things for the better. That idea should guide us at the London summit on growth, jobs and stability on April 2.
The immediate challenges of the current financial and economic crisis are apparent. People all over the world are deeply concerned about their jobs, mortgage repayments and future pensions. However, there are two reasons why this crisis could also prove to be a turning point that enables us to make the global economic system more balanced and fit for the future.
First, governments all over the world have clearly shown that they can and will act decisively to stimulate global demand and to preserve the stability of the financial sector. The latter aim is not for the sake of bailing out bankers, but to protect the jobs and savings of their citizens and to avoid businesses coming to a standstill. An immediate meltdown of the financial system has been prevented and there is no doubt that ensuring the stability of the financial infrastructure and unlocking the credit flow remains a top priority.
Market Driven and Social
Second, the climate for international cooperation is more favorable than ever before. A spirit of shared responsibility already prevailed during the Washington summit last November. Everybody realizes that fundamental changes are necessary. Never before did all the main players in the world economy agree so rapidly on an elaborate agenda for action.
This crisis shows that some fears about untamed globalization are not unjustified. But it also proves that in today's world there is no alternative to globalization as a motor for growth and employment, thus fostering prosperity worldwide. So our goal must be a market driven and social world economy that is balanced, equitable and sustainable. In short: a system that generates not fear and uncertainty but confidence and stability.
A Global Governance Gap
Apart from the discussion on how to bring our economies back onto a robust growth path, the key challenge we face in London is to build a new financial architecture that meets 21st century requirements. It is clear that over the past few decades, as the financial system has globalized at unprecedented speed, the various systems of rules and supervision have not kept pace. This global governance gap must be filled in order to restore confidence and to prevent a crisis like this from happening again.
The credibility of the process hinges upon whether we deliver on our Washington commitments -- e.g. that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds, that may present a systemic risk. Furthermore we should tackle tax havens and put an end to a bonus culture that leads to unacceptable risks.
The current crisis has revealed that the globalization process is not sustainable if key market actors -- the most recent example being major parts of the financial industry -- neglect fundamental principles of sound economic behavior. In our view it is therefore indispensable that market forces are not only checked through regulations and oversight, but also by a robust global framework of common values that sets clear limits to excessive and irresponsible action.
This lies behind the idea of a Global Charter for Sustainable Economic Activity, aimed at developing a single framework relying on the unfolding of market forces but striving to ensure a stable, socially balanced and sustainable development of the global economy.
The charter is meant to be a collection of overarching principles linking economic liberty with accountability and responsibility as the basic cornerstones of economic activity. These principles should be drawn up collaboratively, taking benefit of existing concrete rules representing international consensus, but also drawing lessons form the current crisis. They would serve to guide policy makers in designing and implementing the necessary new architecture in the areas of economic, financial and social policy. We would propose that the leaders endorse the charter approach at the London summit. Of course, the project is in principle open to a broader group of countries as well as international organizations.
The starting point of the charter is the common interest that industrialized, emerging and developing economies have in sustainable globalization. It is a forceful attempt to set the weights of market forces and accompanying values, principles and rules into a new global relationship that fits best the needs of people in the era of globalization. Its ultimate goal is to restore confidence in the global economy and make the world less vulnerable to crises.
We strongly believe that the London summit can be a milestone enabling us to tackle the dangers and seize the opportunities this crisis brings. The challenge is to use the tremendous potential of free world trade in a responsible manner. This includes, for example, the speedy conclusion of the Doha round of negotiations on trade liberalization and the creation of opportunities for developing countries.
Moreover, we should use the present international spirit of cooperation to shape developments that define the lives of future generations all over the world. Pressing issues are the fight against poverty and the promotion of the economic development in poorer countries as well as the strengthening of internationally agreed social standards. Our moral obligation to fight climate change and develop renewable sources of energy also remains in place. Later this year, at the UN climate summit in Copenhagen, the world must deliver proof of this. This is a field where responsibility and opportunity meet, because creating jobs and greening the economy can go hand in hand.
Fighting this crisis demands resolve and commitment. There is no easy way out and it is clear that difficult times lie ahead of us. At the same time it gives us the chance to get it right. Let's seize this chance and make the London summit a success.