In this document we see several romantic, humane phrases, however no concrete “action” as of today. As a matter of fact, this has been the method since the onset of the global financial crisis at almost all G-20 meetings: come together, smile at each other, take nice pictures, give messages full of hopeful thinking and so on.
Therefore it is not surprising that we cannot expect much from such collective irresponsibility. We need not only a serious quality of leadership but also a serious intention to change the current global economic architecture into a more efficient one. Unfortunately, as of today we lack both of these things. The priority is still on the protection of the big corporations as they are “too big to fail.” Obviously this is an ideological bias.
As was noted by UN Secretary-General Ban Ki-moon at the High-Level Thematic Debate on the State of the World Economy and Finance in 2012, held on May 17: “Worldwide, more than 400 million new jobs will be needed over the next decade. That means policy-makers must get serious -- now -- about generating decent employment…It is time to recognize that human capital and natural capital are every bit as important as financial capital.”
In order to correct things in this state, we have to face the fundamental fact that the old model is broken. We need to create a new one -- a new model for dynamic growth. Ban Ki-moon continued, saying: “This is the moment for world leaders to rise above their differences; the moment to show political will and true global leadership. The choice is between the crises of yesterday or the opportunities of tomorrow. This is a once-in-a-generation moment. Let us seize it.”
He is definitely right because as we continue losing precious time, thing are getting even worse and becoming unmanageable. The cost of a solution is getting higher and higher because new waves of crisis are becoming more visible on the horizon.
Let me clarify my position by evaluating the Rio+20 conference’s outcome document. The Rio+20 ended with a declaration of purposes for the global community titled “The Future We Want.” In order to evaluate it, I will give special reference to the Caux Round Table (CRT) of which I have been a member and which has long advocated moral capitalism.
This 283-paragraph statement by governments has its achievements and its disappointments. First, it summarizes, rather well, the scope of an imagined, global capitalism that is inclusive, responsible and sustainable. This would-be capitalism is envisioned as a meeting place between laissez-faire, survival of the fittest, free markets and their failed socialist alternative. This proposed capitalism is precisely what the Caux Round Table (CRT) has long advocated as moral capitalism.
The Rio+20 conclusions define an “economically, socially and environmentally sustainable future for our planet and for present and future generations.” This future demands sustained, economic growth for all in the human family, social justice for all and sustainable living within our planet’s ecosystem. Bringing this future about is the collective responsibility of governments, the private sector and civil society organizations, the Rio+20 conclusions affirm.
Thus, the Rio+20 conference validates the work of the CRT in providing guidance for governments, business and civil society through the publication of ethical principles for these organizations. (For the basic philosophy of the CRT, please refer to our earlier article in this column, “An SOS from birds to human beings,” Jan. 14th, 2011.)
One of our priorities is the need for corporate social responsibility in business, as the global community moves toward its desired future. Equally important is to discipline the behavior of the corporate sector. These rules should be motivating and capable of enforcing the short-term and profit-oriented motives of individuals as well as institutions.
Until this stage, unfortunately, there is no reliable sign of progress or any steps taken in this direction. Therefore, currently corporate abuses are continuing with increasing irresponsibility. For instance, last week, long-standing suspicions about insider abuse of power in large and reputable financial houses were confirmed. Barclays admitted to unconscionable fixing of global interest rates in the London Interbank Offered Rate (LIBOR) and Euro Interbank Offered Rate (EURIBOR) markets. Other banks may also be found to have participated in this manipulation of private markets.
It is essential to note that setting LIBOR interest rates was fully a private market undertaking. It was not regulated by the government. When left to their own standards of responsibility and stewardship, private parties failed to serve the common good, since these rates should be set by full and free competition.
Obviously, market prices were manipulated, apparently, in order to avoid market discipline. This is unacceptable and dishonorable conduct and cannot be condoned. It is predatory rent-seeking that has no place in a civilized society. Interest rates on $10 trillion of loans were manipulated to favor a few banks. Interest rates on $350 trillion nominal face value of derivatives were manipulated, it seems, to permit a few large banking houses to profit from proprietary trading in derivatives, knowingly shifting certain losses to their counter-parties. As a solution to this, the Convention of Independent Financial Advisors and the CRT assert that “fundamental standards of conduct in global financial intermediation must be raised by the voluntary action of private institutions. The financial industry should adopt a Hippocratic standard to first, always act in the interest of their customers and not harm the local or global economy.”