SWBP is Solutions for the World's Biggest Problems;
A 2007 book edited by Bjorn Lomborg, Director of the Copenhagen Consensus Center
The first chapter; first of 23 discussed global problems:
Financial Instability
Each chapter is written by a different author/specialist;
Peter Blair Henry from Stanford authors this topic/proposes a solution:
If Jesus is the answer: Male anger in a stable? (manger, get it?)
Moderation in all things (including moderation?)...
I say open all markets, and really go for true value, with REALLY strong policy guiding society (humanity, I mean) toward HAPPINESS, primarily. Does that help, lol? Actually, can we make the animals happier, too?
First off, fyi, there's a distinction between the words 'economic' and 'financial'
Economic means:
Financial means:
(Fyi means 'for your information', fyi).
Financial Instability is when the graph of a country's growth over time gets jumpy, I believe. And by jumpy, I mean going negative (otherwise it wouldn't be a problem).
The chapter doesn't say this. Maybe I'm wrong. In any case,
The book just refers to "financial crises," which come in 3 forms and have 4 solutions. (forms: banking crises, currency crises, and combinations of both) (solutions: reregulation of domestic financial markets (for banking crises), reimposition of capital controls (for currency crises), a single world currency, and engineering an international financial solution.
He seems to think a world currency is a hopeless and unachievable objective; I think the case just needs to be made that it's in everybody's self-interest. Challenge to economists: How great would the reward be?? Let's Do It! (The chapter says for a 16 billion dollar cost, the world would reap a 107 billion dollar benefit).
I read the chapter and I don't actually know what these banking crises, or currency crises, might in actuality be; but I DO know that they are calculated to cost more than 1% of economic growth/9% of economic output, which is no small sum, especially that the economic devastation happens in developing countries whose ability to care for their most vulnerable citizens is reduced. They happen an average of once every 12 years. The solution to this problem is amazing; for an estimated 0.5 billion dollars annually, the annual gross benefits could be over 150 billion dollars (!).
What's the solution?
It's "Build developing nations' capacity to design and implement institutional reforms that are suited to their own circumstances." Geez. I coulda thought of that. Sounds simple enough. But the beauty of this book is it assigns economic values to various solutions, so you can get a handle on what might be the best option(s). They're only guestimates, though.
Policy-reforms and institution-development in developing countries need to be done in their local contexts (all politics is local, he says), so enabling the training of domestically skilled people by providing funds would increase productivity and reduce the incidence of financial crises.
I remember this solution from back during my time at Davis. We think we're superior, in so many ways, and that we therefore need to solve developing countries' problems for them. The empowering solution is thought to be to provide enough capital for domestic citizens to get local institutions on their feet, to solve their own problems the most creatively. "Engineering an international financial solution" would be a hubristic exercise in over-generality, seems to be what he is saying. In other words, the "international" solution is national, or perhaps at even smaller levels.
I would add that we should erase the country mindset, however, anyway, and people anywhere should be open to ideas from anywhere else. Ideas know no borders, but I would agree that it is probably far more likely to have the best ideas for development coming from the developing regions themselves. In this case, it's a matter of adapting the well-developed financial institutions throughout the world -a product of trial and error- to local conditions and circumstance.
Bjorn says solving this problem could even lead to better overall governance and faith in public institutions.
2 days ago
1 comment:
You are right that a Single Global Currency is not hopeless at all, as we can see from the success of the euro. The $107 Billion benefit mentioned by Mr. Lomborg is actually only for undeveloped countries. The total benefit for the entire world from a Single Global Currency would measure in the trillions, and several hundred billion annually.
The Single Global Currency Association promotes the implementation of a Single Global Currency, with a Global Central bank, by the year 2024. With the successful use of the euro and other common currencies, more and more people and organizations and nations are seeing the advantages of monetary unions. Our website is at www.singleglobalcurrency.org.
The Association recently published the 2008 Edition of my book, The Single Global Currency - Common Cents for the World. A copy of the 2007 edition is available at the Munchen personal archive at http://mpra.ub.uni-muenchen.de/5879/. and on the Association's website.
The goal of 2024 is only 16 years away. If one looks at the world before the 2002 distribution of the euro to the people of the EMU, you would have seen in 1986 a Europe with a Soviet Union, an East Germany and a Berlin Wall. At that time, most Europeans would have scoffed at the idea of a new monetary union.
The benefits of a Single Global Currency include:
- Zero transaction costs to exchange currencies. Presently, $3.2 trillion is traded every trading day and all this trading and its associated costs, approximately $400 billion annually, can be eliminated.
- The end of currency fluctuations and currency speculation.
- The end of "Balance of Payments", "Current Account" and "global imbalances" problems for currency areas. There will, of course, still be trade and wealth inequalities, and more visibly; but they will not be compounded by the problem of foreign exchange transactions and reserve requirements. There would be no need for countries to maintain international reserves of other currencies.
- Zero manipulation by countries of their currencies, and thus no more need to cajole and jawbone any particular country or currency area about the value of its currency.
- Zero risk of national and regional currency crises such as occurred in the 1990's in Mexico, Argentina, Malaysia, South Korea and Russia.
- Minimal inflation, assuming that the future global central bank sets and achieves a low inflation rate, just as the European Central Bank has done. It's not clear that a zero inflation rate can be secured, as that would bring an economy perilously close to deflation and a deflation spiral, but certainly a low rate of inflation would be better for the world than the current rates.
- Worldwide asset values will increase by about $36 trillion due to the elimination of currency risk. Such an increase in asset values will cause annual worldwide GDP to increase by about $9 trillion.
- With no currrency risk, worldwide interest rates would be lower.
- With zero risk of currency failure and zero manipulation and minimal inflation, the Single Global Currency would satisfy the moral obligation that a stable currency should be considered as a fundamental human right, as is the right to own property. A Single Global Currency would be far more stable than the currencies presently used by billions of human beings
While all these benefits are expected upon the implementation of a Single Global Currency, considerable benefits will also come during the implementation processes which will see the reduction of national currencies as predicted and welcomed recently by Benn Steil in Foreign Affairs.
Of course, not all economists agree with the goal of a single global currency. For those who would label the single global currency utopian, we call their attention to the euro, which began as a plan only about 30 years ago. Who would have thought in the 1970's that Europe would not only adopt a common currency, but also that its member countries would discard their old currencies?
The single global currency might be an enlarged transformation of one of the current major currencies (dollar, euro, yen), perhaps with a new name such as "dey", "eartha", "geo","globo" or "worldo" or it might be a new currency with such a name. How we get to that point is, of course, a major challenge, but there are several possible routes. One is to continue the trend of creating and expanding regional monetary unions, and then combine those monetary unions into one. Another is for smaller countries to continue to "ize" their nations' legal tender, as in "dollarize" and "euroize", as has been done in El Salvador and Monaco. Compatible with all these and other routes is the need to convene an international monetary conference of nations, monetary unions and related organizations, and begin planning for the implementation of a single global currency.
Organizations such as the IMF and the Bank for International Settlements, and individual economists should begin to carefully research and write about the benefits claimed above for the Single Global Currency, and about the costs, too. When the vast benefits become better known, the people of the world will demand a Single Global Currency and ask why we have been burdened so long with the existing multicurrency system, which Robert Mundell describes as "absurd."
Morrison Bonpasse
Single Global Currency Assn.
Newcastle, Maine USA
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