G-20: Reform the Global Casino

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© Hazel Henderson, September 2009
(word count 1076)

Hazel Henderson www.ethicalmarkets.com

The awful truth is emerging: globalized rogue finance is disordering human societies and destroying our ecological life-support systems on a worldwide scale. A spate of books and studies examining the role of finance finds deep flaws in the way money is created and credit is allocated. The age-old invention of money which extended opportunities for trading beyond barter has become a computerized global monster. Blind to other human values and goals, this global casino has decoupled and abstracted from real economies.

Financiers make money out of money by automated high-frequency trading – buttressed by faulty “financial economics” and its bogus models engineering only corruption and using false indicators of profit and national progress such as GDP. French President Sarkozy and economist Joseph Stiglitz stated, September 14th, that the unreformed global financial system today is more dangerous and risky than before the 2008 crisis, and governments are still blinded by “GDP-fetishism.”

How did global finance turn from its earlier role as a useful service to the real economies into an overgrown “too big to fail” monster which tyrannizes democratic governments through its political power of the purse?

In the USA, control of the young nation by banks were feared by its founders. Thomas Jefferson in 1816 said, “banking establishments are more dangerous than standing armies,” and in 1814, “I hope to crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.” Benjamin Franklin voiced similar warnings as did many other Founders, and as early as 1777, Samuel Webster warned, “Let monopolies and all kinds and degrees of oppression be carefully guarded against.”

The story of the battle against bankers’ control of US and European politics is told by many authors and now is told on TV series such as historian Niall Ferguson’s The Ascent of Money. Millions of US voters now support re-examining the role of money and how the Federal Reserve Board (owned by the private banking system) came to take control of US money creation which the Constitution gave exclusively to the US Congress.

In the last presidential election, tens of millions of US voters, from the Conservative supporters of Congressman Ron Paul to those across the spectrum who supported Congressman Dennis Kucinich, attest to the growing understanding of money itself which has no intrinsic value. These millions of voters now support the over 200 members of Congress whose bill calls for examining the role of the Federal Reserve Board, founded by a secretive group of politicians and bankers in 1913.

Since then, central banks and the world have modeled themselves on the US “Fed” and promoted their claims to secrecy and independence from political control by even the most democratically elected governments. The profession of economics (never a science) promoted this cause with thousands of academic papers and theoretical models of finance. The Central Bank of Sweden lobbied the Nobel Committee to set up their lucrative prize in economics – The Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel – to confer on economics an aura of scientific legitimacy. This prize has been openly challenged by many winners of real Nobel Prizes and descendent Peter Nobel, joined recently by mathematicians Nassim Nicholas Taleb of The Black Swan and Paulo Triana of Lecturing Birds on Flying.

At the G-20 meeting in Pittsburgh, September 24-25, some leaders such as France’s Sarkozy, Germany’s Angela Merkel, Brazil’s Lula da Silva and China’s Hu Jintao are calling for the reform and downsizing of the global casino. They rightly call for restricting huge bonuses, raising capital reserve requirements on all banks and financial companies, curbing excessive risk-taking and regulating derivatives that are simply bets, such as credit default swaps. This is necessary but not sufficient.

The entire system of global finance must be restructured. China has rightly led the debate over the need to phase out reliance on the US dollar and create a more stable global reserve currency supported by the UN General Assembly and their Stiglitz Commission. Beyond this, Britain’s Lord Turner has called for a small financial transaction tax to curb speculation and downsize the overblown financial sectors. Such a tax was advocated by James Tobin in the 1970s and by Larry Summers in his 1989 paper “When Financial Markets Work Too Well: A Cautious Case for a Financial Transactions Tax” as well as experts in The United Nations: Policy and Financing Alternatives (Elsevier 1995). Financial transaction taxes have been debated ever since as the best way to reduce speculation and use the billions it would raise for deficit reduction, repaying taxpayers for their bailouts and investing in the low carbon Global Green New Deal supported by most governments, private investors, trade unions, UN agencies and by 72% of the public in 20 countries in the BBC-Globescan poll, September 14, 2009.

Further, a new level of insurance against risks of systemic financial crises can be created. This Systemic Financial Crises Insurance Fund (SFCIF) would have all financial firms above a certain size pay to insure themselves against future bankruptcies and panics. Similar to the FDIC which all US banks pay into, this new SFCIF would shift risk from taxpayers to where it belongs: the financial sector. In addition, governments must finally tackle reform of central banking and their money creation and credit allocation activities which are widely seen as shockingly unfair. Their trillion-dollar bailouts of Wall Street and the financial casinos, while claiming that there is not enough money to make healthcare available, educate our children or help the hundreds of innocent victims of financiers’ excesses, is now revealed as politics in disguise.

All these reforms must be enacted globally by the G-20 and by widening these agreements to include all countries of the UN. This more democratic G-192 can join with the G-20 in finally facing down the bankers, downsizing and taming the global casino and returning it to its traditional role of facilitating businesses, production and innovative sectors of societies and in growing a cleaner, green, more just global economy that works for all.


HAZEL HENDERSON, co-editor of The United Nations: Policy and Financing Alternatives, author of Ethical Markets: Growing the Green Economy, is a vice-chair of the global Climate Prosperity Alliance, a co-organizer of the Beyond GDP Conference in the European Parliament in 2007 and co-creator of the Calvert-Henderson Quality of Life Indicators, updates at www.calvert-henderson.com.  She can be reached at [email protected]