Commission on the Global Financial Crisis
21 September 2009
In advance of the meeting of the Presidium of the Socialist International at the headquarters of the United Nations, the Socialist International Commission on Global Financial Issues held a meeting on 21 September at the University of Columbia in New York with the G20 Summit in Pittsburgh and the current phase of the global financial crisis as the central theme of its discussions. Participating in the meeting along with Commission Chair Professor Joseph Stiglitz and SI Secretary General Luis Ayala, were Commission members Alfred Gusenbauer, former Austrian Chancellor and Vice-President of the SI; Elio di Rupo, Leader of the Socialist Party of Belgium and SI Vice-President; Eero Heinaluoma, SI Vice-President, Finnish Social Democratic Party; former President of Panama and SI Vice-President Martín Torrijos; Anatoly Aksakov, from the Just Russia Party; SI Honorary President Cuauhtémoc Cárdenas from the Party of Democratic Revolution of Mexico; and Pia Locatelli, President of SIW, as well as Akbar Khawaja and Muhammad Hassan from the Pakistan People’s Party, Maurice Braud of the Socialist Party of France and Paulina Lampsa of PASOK, Greece. Participating as special guests, were the Director-General of the International Labour Organisation (ILO), Juan Somavía, and Inés Bustillo, of the Economic Commission for Latin America and the Caribbean (ECLAC).
In the discussions, concerns were expressed first of all at the voices which were being heard, too early, about the economic crisis having reached its end. Participants noted that although it was true that financial indicators were showing better results at this time, at global level the unemployment figures remained unacceptably high, with a possible danger of them increasing. The present scenario of global growth of around 1% was far from leading to robust growth, and in the opinion of the Commission members, the measures taken to combat the crisis should be maintained. It was taken into account that the most vulnerable groups perceived the rescue packages as unjust, generating understandable feelings of anger and disaffection. To mitigate this discontent, participants stressed that it was indispensible that social policies and aid must not be affected or suppressed with the pretext of fiscal rescue.
Also taken into account were some of the characteristics of the crisis in Europe, where the levels of unemployment had risen significantly in the last year and where the outlook for 2010 was not much better. Along with this scenario of high unemployment levels, Europe was expected to grow in 2010 and 2011 to levels close to 1%, which clearly was insufficient to reactivate the economy and to return in the near future to the conditions which existed prior to the crisis. Participants at the meeting affirmed that the ‘exit strategies’ would bring pressure to bear on budget deficit considerations and the increase in public debt, and warnings were sounded on the risk of a ‘reversal in the containment of the crisis’, this time coming from the severely affected real economy to the financial sector.
The discussions also addressed the effects of the crisis from the perspective of jobs, considering that employment recovery to pre-crisis levels could take 4 to 5 years. This called for a reinforcement of pro-employment measures and the Commission considered details of The Global Jobs Pact proposed by the ILO which involves correcting the imbalances which already existed prior to the crisis, for example those which placed the economy above society or the environment, or productivity over salaries, or capital over jobs, and participants insisted on the need to re-establish an equilibrium between the State, society, the individual and the market.
The Commission also noted that the crisis had been particularly hard in Latin America and the Caribbean, which experienced an interruption of its best period of growth (between 2003-2008) that the region had seen in the last 40 years. During this time, poverty had fallen in the region by 10 points, from 44% to 34%, although high levels of inequality continued to exist. Situations such as those which had arisen following the 1982 crisis, which led the region into a period known as the “Lost Decade” must not be repeated.
It was noted that for a significant number of citizens, the financial and banking sector had, before the crisis, represented a certain security. Now, it was affirmed, politics needed to assume its full role in providing tranquility, and confidence in a better future. It was considered that the Socialist International should continue developing clear proposals in the fields of finance and economy, and speaking firmly and decidedly in favour of work, social policies, regulation, and reform of the international institutions.
It was observed that one of the situations which made it difficult for some countries to come out of the crisis arose from the concentration of aid packages in the larger institutions rather than in smaller banks and those with local and regional presence which easily could channel and enable access to credit for small and medium-sized businesses.
A number of national situations were also discussed, illustrating key aspects which had made it difficult for some countries to find a way out of the crisis. These included a lack of willingness by some governments to increase public expenditure, the impact on the economies dependent on their export sector affected today by the low international demand, and a weak consumer sector. Particular exchanges were also held on the vulnerability of the new democracies in different continents as a result of the economic downturn and the increase in unemployment in different regions of the world economy.
The Commission agreed to present a Declaration to the Presidium for its approval, which was subsequently adopted by that body at its meeting on 23 September at the United Nations.