Resolution 4: The Global Financial Crisis

Cairo 2009

FOLKPARTIET (SWEDEN)

The Global Financial Crisis

• notes that the 181st Executive committee gathered in Strasbourg (France) on the 25th of January 2009 gave a mandate to LI Vice-President in the Bureau, Juli Minoves-Triquell, to prepare an essay on liberalism and the World Economic Crisis
• recalls the aforementioned essay by LI’s Vice-President in the bureau entitled “The World Economic Crisis: an essay on its origins, characteristics and possible outcomes from a liberal perspective” presented and discussed at the 182nd Executive Committee in Vancouver (Canada) on the 2nd of May 2009
• recalls, in the context of that paper, that the causes of the crisis include unparalleled expansion, unbridled optimism, lack of perspective in the economic profession, blind belief in the unbreakable strength of large financial and economic institutions, the failure of regulatory supervision, unwillingness to assess real risks, and accumulation of debt, both public and private, in an environment of expanding optimism, and that all these constitute failures of stewardship
• notes that the International Monetary Fund, which has a leadership mandate, near universal membership, and a blend of macroeconomic and financial expertise, is instituting steps to increase global coordination
• recalls the huge benefits created by free trade during the past decades and its ability to lift people out of poverty,
• recognizes with satisfaction that there is an understanding among many policy makers of the benefits of international trade to the world and to individual countries,
• notes however also that protectionist measures and tendencies have surfaced in some countries in response to the economic slowdown and to difficulties in individual companies,
• believes that national protectionism distorts competition, involves large costs for tax payers, imperils the functioning of the world economy and makes a sustainable economic recovery more difficult,
• believes that the global economic crisis can be an opportunity to create an Ecoefficient Economy that manages to create more wealth and new, sustainable jobs at the same time as we use less natural resources and cause less impact on the environment
• urges national governments not to resort to protectionism, but instead respond to the crisis by efficient short term policies to support the economy and by introducing reforms which supports sustainable growth in the longer term,
• urges world leaders to honor their commitments made within the framework of the WTO and to press ahead with the Doha round of trade negotiations
• urges international financial institutions to work on a new warning exercise that can bring together scattered macro-financial expertise, piecing together macroeconomic and financial sector developments into a big picture that takes into account crosscountry spillover effects and can drill down on key threats, and to review its lending framework to make sure it is well-suited to members’ needs.
• acknowledging that the bureaucratic ways and rigid power structures that characterize large financial institutions have shifted the policy debate towards smaller, more flexible groups, including to the G-20 and the FSF, notes that these smaller groups have their own problems of legitimacy and capacity for follow-up, and urges to make decision-making more accurately reflect today’s global economic landscape which would require a further rebalancing of voice and representation among IMF members.
• notes that the world will not be the same at the end of the current crisis. Important changes will reflect new attitudes toward stewardship, including a new industrial revolution impelled by ecologically sustainable development. In many countries, research for new production systems, conservation, and the thrifty use of energy are already expected to be a means for creating new jobs. The fundamental stages of human economic development have always coincided with the ability to capture new sources of energy: fire, wind, water, sun, natural gas, petroleum. But solutions cannot rest on technology alone; in many ways heightened financial technologies abetted the current monetary crisis and a variety of biological innovations have the potential to alter the world’s commodity markets.

Part of an Amendment Proposed by the Bureau of LI

To be debated in Plenary — Centrepartiet (Pro) — Det Radikale Venstre (Against) And a rapid return to the rate of economic growth of the past decades—the aim of many policy makers around the globe—would increase the emissions of greenhouse gases that are altering the climate. Moreover, in this urgent crisis, Liberal International urges political actors to avoid the danger of restarting economic growth by any available means: returning to the levels of consumption that characterized the recent past would run up an environmental bill that the planet would surely collect.

• acknowledges that liberalism, in the sense not only of economics but of the classical regard for economic and social progress for all, will become a crucial force in the process of solving the crisis. To rebuild a new economic system, it will not be enough to improve the regulation of the banks, make balance sheets more transparent, regulate speculative funds, and refurbish the economy through public spending. Remembering that the market is an instrument in the service of economic progress, Liberal International reasserts that liberals put liberty in first place as a creative force that multiplies opportunities for everyone. Liberal International urges a return to those classical principles—principles that call for responsible stewardship of both human and natural resources— which must become part of our future.