A major goal of the upcoming G20 is to achieve global financial stability. The question posed to me by a potential investor is “How is this mandate to be achieved?” A very difficult and involving question, one I admit is daunting, however I am always up for a challenge.
One must first be cognizant of the role that policy plays in the economic future of all nations. We live in a world dominated by capitalist ideologies which advocates less regulation and less involvement of the government to essentially keep markets "free". The question of sustainability is contradictory to this boom and bust ideology, (the Financial Crisis of 2008 being a prime example). This has left global policymakers cringing and with an understanding that this module is flawed. According to Jan Scholte “Although capitalism promotes economic efficiency, (although not consistently), global free markets often perpetuate more social issues such as ecological degradation, oligopoly, democratic deficits” and in my opinion short-sighted economic strategies.
This provides great food for thought, no? It does set a great point of view to answer the matter at hand yet it also poses a more interesting question: Is Financial Sustainability even possible or is it a fairytale notion?
I personally think the answer to achieving financial stability globally is to adapt a new ideology and I call it “The Reformist Revolution”. What is a reformist you ask? Well, a reformist understands that the capitalist ideology is here to stay, (at least for now), but that it can be a force of social good if it is re-formed and re-organized in a non-liberalist way which encourages economic efficiency and stability. This means that, it is understood businesses all over the world must think of the bottom line and generate revenues to remain afloat but that they must be aware of all major stakeholders and ensure what they are doing is not harming anyone or anything.
This sounds like wishful thinking but if governments began implementing certain institutional frameworks that encouraged their treasuries to monitor corporate responsibility, certain economic disasters could potentially be avoided.
In summary, the following could be adapted to help create further financial stability:
"Reform the notion of capitalism" but since this won't happen immediately, do the following:
1. Create institutional frameworks allowing for timely identification of risks as they develop while providing governments incentives to tackle those risks immediately. Furthermore, simplify the process for policymakers to deal with those issues before they get out of hand.
2. Create a set of indicators that allow policy makers to identify when certain bubbles are growing in severity and ensure that governments all have the understanding of what those indicators mean and how to act upon them.
3. Ensure more international focus and coordination in order to identify the degree that certain economic situations feed into that of other nations, which can eventually create another global meltdown. Essentially, one cannot wait until a crisis has emerged prior to engaging in meaningful cross-nation dialogue.
All in all, more collaboration worldwide is required and new ideologies need to be embraced by those in power. Profit can no longer be the main driver of our behaviour and the global population needs to begin developing new mentalities behind what constitutes success. While my answer may not fully encompass a full global solution it is definitely a great way forward to Financial Sustainability.
When I get back from the G20, I will once again tackle this question and then we will see what can be developed to make not only the financial system, but the world a more stable place.