A presentation by Mario Lettieri, Professor, former Member of the Italian Parliament and Undersecretary of the Economic and Finance Ministry (2006-2008), made for Ninth Rhodes Forum Session, October 2011
“Surely it is not easy to think of a new more just and balanced world order. But, if there is a honesty of intentions, it is not impossible”.
Prof. Mario Lettieri on the effects of the financial crisis and prospects of the world economy.
The financial crisis which exploded in 2008 with the Lehman Brothers’ bankruptcy and the collapse of the American sub prime mortgages lending reverberated its devastating effects in all the countries of the Western world.
It involved the entire banking and financial system of the USA and Europe with very profound and heavy consequences for the economies and for the productive and social systems of each country.
Let us think at the increase of unemployment, at the productive and industrial crises and at the growing poverty.
Without any doubt, the giant level of debt and the disorders of the public balances of every country contributed to accentuate the dimension of the crisis.
It is not only the case of Greece alone which has become more and more dramatic. We hope it is on the way towards a solution with the support of the European Union.
We must be aware that speculation is leading an aggression against the euro system, putting the entire architecture of the European Union in jeopardy.
And one cannot exclude that the same speculation will attack other areas which have not been hit so far.
Greece is not the only country with a giant debt. Also the USA has today a federal debt of about 100% of its GDP. In Italy it has reached the level of 120%.
We must say with absolute clarity: these countries have lived above their possibilities. The present undeniable situations have been determined by an economic policy based on budget deficits.
The present crisis is systemic, not cyclical. We must realize that the deficit spending is the wrong way. It is not the solution.
In the Western world development will have to be carried forward together with a definite collective austerity.
We must also recollect that the growth of the Western economies happened by damaging or at least by slowing down a potentially more rapid evolution of other countries and of other continents.
In the last decade the BRIC countries accelerated their growth and assumed an always more important role in the world economy. This process has determined new geo political and geo economic arrangements.
With legitimacy today the BRIC countries put in discussion the dominant role of the dollar and demand that the USA currency should be included in a basket of currencies with the participation of other strong currencies like the euro, the yuan, the ruble, the yen, the real and other important currencies.
Therefore the dollar cannot be the only referent point for the international trade any longer.
The crisis has global dimensions and was provoked by the excessive “financiarization” of the economy against the functioning of the real, industrial and productive economy.
This has become intolerable particularly in the last 20 years also because the financial system has created and injected into the system many toxic and non transparent titles.
Let us remember that the OTC derivatives alone amount to the level of over 600.000 billions dollars. It is about 10 times more than the world GDP.
Aware of the distortions produced by this excessive “financiarization”, together with the economist Paolo Raimondi, in 2004 we elaborated an official parliamentary motion that I introduced in the Italian House of Representatives.
At the beginning of 2005 this motion was approved unanimously by the Italian Parliament.
We called the Italian governments to intervene in all the international economic and political decision centres to correct the distortions of the system, to change the course of the global finance and to support the real economy. We proposed stringent rules to be approved at the global level to stop any wild speculation that makes poorer the targeted societies as well as the sovereign States.
We dealt these questions in a more detailed fashion also in our book “The gattopardi di Wall Street” (The Leopards of Wall Street).
Today we believe that in the G20 and in the Financial Stability Board the priority is to adopt clear decisions to make all financial activities transparent.
We should freeze the enormous mass of toxic titles existing in the system. We should promote at the same time the economic growth of the world economy. This requires a sort of new Bretton Woods to finance large and long term networks of material and immaterial infrastructures together with research and technological innovation.
Also the big challenge of Africa must be faced from this point of view.
For sure the IMF and World Bank policies have been not adequate in respect to the necessity of the African countries.
We believe that the African continent, with over one billion people and with enormous resources, cannot be left any longer at the edge or outside of the world development.
It is today intolerable the persistence of a neo colonialist logics behind the interventions into Africa by other countries, particularly by the Western countries.
We must build a new vision of the world in which man and the peoples are at the centre, together with their fundamental rights, including environment, health, education, job and well being.
The world economic growth must have such an ambitious aim.
It is a matter of the political will of the world leaders.
After we overcame the ideological barriers and the cold war, the new peaceful multi polar reality demands a shared vision and clear decisions to create development and better living conditions in every part of our planet.
Surely it is not easy to think of a new more just and balanced world order. But, if there is a honesty of intentions, it is not impossible.