A sustainable answers to Crisis

Perhaps no word is used more often to describe the current downturn of the global economy.

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. The current global financial crisis embodies for sure a chance for a new economic order. The Governments should act decisively to stimulate global demand and to preserve the stability of the financial sector. A 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. However 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. The recent economic crisis was Western in origin but had global consequences. As trade finance dried up, global trade fell and demand collapsed. It revealed a divided and disconnected world. 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.

Growth can be green. High food and energy prices may pose economic and social problems but these can be addressed through environmentally friendly policies, increased investment in commodity-producing regions, and by green technology.

Policymakers have been implementing an austerity agenda and ignoring growth, yet the euro crisis continues. Even when paying down debt there is much that we can do to boost demand and generate jobs. Debtor countries need to save more, while saver countries need to spend more. If only the debtor nations adjust, then a deflationary bias is built into the global economy.

Emerging economies need to switch from export-led to domestically driven growth. So we need to boost social safety nets to deter excess savings; support small and medium-sized firms that are the key to job creation; and develop deeper and broader capital markets to help underpin domestic-driven growth.

We need institutions that are accountable and share common goals. This is no time for purely national political agendas; our response must be global to be truly sustainable.

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