Jomo: Time for joint global action on economy

The world now stands at a historic crossroads not unlike in 1944, when 44 countries came together and created the Bretton Woods institution to forge a new international monetary and financial system.

Renowned economist KS Jomo said the Commission of Experts on Reforms of the International Monetary and Financial System - to which he was recently appointed by the UN - had its work cut out for it to change the current international system as its members have differing ideas as to what should be changed and how that change should be carried out.

But alarm bells were rung many times by many quarters as to the risks of governments going down the path of deregulating finance and investments, particularly in the areas of housing loans, currency carry trade and the commercialisation of social security systems, he said.

These warnings were ignored and have led to the current financial crisis that is spreading into 'real' economies and affecting the masses of innocent people who had nothing to do with causing the crisis in the first place.

If countries do not now seize the moment and come together to ensure reforms happen, the changes and reforms needed will either be postponed indefinitely or may never happen at all, Jomo warned.

"Once this crisis is over easy, it will be easy to move (the reforms) to the back burner and turn off the heat, and then there will be no reform," Jomo, who is currently the UN Assistant Secretary-General for Economic Development at the Department of Economic and Social Affairs, told a packed audience on Thursday in Kuala Lumpur in his speech on the global financial crisis.

According to the former Universiti Malaya lecturer, the crisis is not unlike the one that led to the Great Depression in the late 1920s and early 1930s. However, unlike the crisis in the past, this one should and could have been avoided.

"From our experience, we should have known from the writings of people like John Maynard Keynes that this crisis should have been avoided, that this crisis could have been avoided, and the effects of the crisis could have been mitigated," said Jomo.

"The irresponsible economists who had created the conditions of the bubble that has now burst, have to take tremendous responsibility.

"If there was an economists' (criminal) tribunal, quite a number of these eminent economists - including the maestro - would be in the dock," said Jomo in reference to Alan Greenspan, regarded as the primary advocate of deregulating the financial and investment markets.

A shift of focus needed

While the past three decades have seen the increasing marginalisation of such Bretton Woods institutions as the International Monetary Fund and multilateralism generally, the recognition now is the need for mulilateral regimes such as the latter to return, said Jomo.

There is also a shift of focus from the G7 countries to the G20 countries for assistance in handling the financial crisis.

But while many regard this shift as a cynical move on the part of the economies now in trouble for their excesses as "it's very apparent that they are brought to the table when their money is needed," there must be a commitment to bring in as many voices and stakeholders to reform the financial system.

In the short term, the challenges lie in containing the spread of the financial crisis, said Jomo.

There should also be efforts to ensure sufficient liquidity in the world's economies, especially those suffering from the crisis, as well as to ensure they have adequate fiscal stimulus packages, he added.

The larger task remains, however, in ensuring that the UN commission addresses and accommodates the views and needs of as many countries and stakeholders as possible, Jomo said.

"Admittedly, it is very difficult to have 192 people (representing the world's countries) to work things out, but it is important for all countries and stakeholders to have a say," he stressed.