But, whether the US likes it or not, the dollar reserve system is fraying; the question is only whether we move from the current system to an alternative in a haphazard way, or in a more careful and structured way. Those with large amounts of reserves know that holding dollars is a bad deal: no or low return and a high risk of inflation or currency depreciation, either of which would diminish their holdings’ real value.
On the last day of the conference, as the US was expressing its reservations about even discussing at the UN this issue which affects all countries’ well being, China was once again reiterating that the time had come to begin working on a global reserve currency. Since a country’s currency can be a reserve currency only if others are willing to accept it as such, time may be running out for the dollar.
Emblematic of the difference between the UN and the G20 conferences was the discussion of bank secrecy: whereas the G20 focused on tax evasion, the UN conference addressed corruption, too, which some experts contend gives rise to outflows from some of the poorest countries that are greater than the foreign assistance they receive.
The US and other industrialized countries pushed globalization. But this crisis has shown that they have not managed globalization as well as they should have. If globalization is to work for everyone, decisions about how to manage it must be made in a democratic and inclusive manner — with the participation of both the perpetrators and the victims of the mistakes.
The UN, notwithstanding all of its flaws, is the one inclusive international institution. This UN conference, like an earlier one on financing for developing countries, demonstrated the key role that the UN must play in any global discussion about reforming the global financial and economic system.
Joseph Stiglitz, professor of economics at Columbia University, chairs a Commission of Experts, appointed by the President of the UN General Assembly, on reforms of the international monetary and financial system.
COPYRIGHT: PROJECT SYNDICATE
RSS