GDN Conference Calls for New Global Financial Authority

Professor Guillermo Calvo has called for the creation of a new Global Financial Authority which would protect the global economy from future financial crises. He was speaking at a press conference to launch the forthcoming 11th Annual Global Development Network conference in Prague on Friday January 15th, the day before the conference officially opened.

The esteemed economist who predicted the 1994 ‘Tequila Crisis’ in Mexico, the Russian financial crisis, and the recent global financial crisis – despite many claiming that it was an impossibility – said that lessons must be learned if the world is to cope with future financial crises. He said that the sub-prime mortgage, originally little more than a minor problem, turned into a crisis because it expanded beyond the authority of national Central Banks. He added that it was completely understandable that politicians make policy responses to local circumstances, because they are put into positions of power by local people. But this makes obvious the need for a higher order institution to work outside of national borders.

“We don’t have an authority that can print liquidity at a global level”, he said. “The financial crisis brings into question whether we are capable of sustaining globalization from a financial point of view. If we are to have a global system that works”, said Professor Calvo, “we need the right financial system to support it.” He called on the G8 and G20 to create new institutions that have the power to assist global economies beyond the reach of individual nation states.

He warned against protectionism and individual nations serving their own state interests. While acknowledging that that some countries had been successful in limiting damage to their economies, Professor Calvo stressed that global-level co-ordination was necessary to ensure that country-level safeguards did not end up furthering global imbalances.

GDN President, Professor Gerardo della Paolera, urged everyone at the conference to make full use of the keynote speaker’s presence. He said, “Guillermo was the first to put a grain of salt of scepticism into the Washington consensus.”

GDN director of the conference Professor George Mavrotas said, “We are no longer embracing globalization with enthusiasm. The 2008 financial crisis has caused the international community to look afresh at the spectrum of issues related to the globalization process. We must expect the unexpected.”

However, Professor Mavrotas was positive and said, “The financial crises gave rise to new debate and alternative models.” He added: “It is great that we have 450 people from varying disciplines and leading thinkers giving debate on these important issues.”

Professor Paolera said: “It is as honour to have Guillermo Calvo as a keynote speaker at the conference at this particular point in the world’s economy. “It’s a new decade and it is a totally new paradigm in globalization. In light of the Haiti earthquake I am very conscious that we are sitting in very comfortable circumstances, discussing social and economic development. It is our urgent challenge to produce and communicate robust research which reduces people’s vulnerability to such shocks, and helps them to cope with the consequences.”

See more stories from the GDN 2010 Conference, watch participants’ videos interviews, download conference presentations and papers

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About Pier Andrea Pirani
Information, knowledge sharing and communications in international development - Social media and collaboration tools.

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