It can be said that the value of the financial crisis is that we get to a point where we have become realistic about what is the correct way forward, what are the options globally and the major challenges we need to address? Prior to the global financial crisis, we just had globalisation and we did not realise the extent of the downward spiral we were in. People did not have the opportunity to ask these important questions during that time.
Till now the global financial crisis has affected America and Europe, but not really South Africa. The downgrade of South Africa by Moody’s can be seen as the first challenge our economy is faced with.
Economic tension has increased between member of the EU that want to move forward, and members that still has to resolve certain problems. This causes problems for economic integration. The tension between members in turn places pressure on operation policy formation and coordination.
It is therefore necessary to determine whether we are on the right road with globalisation. The effects of globalisation are both positive and negative. We want markets to expand, but we also have to make globalisation work for people and not just for profits. Another question that arises is whether it is possible to govern globalisation and how to govern and guide globalisation?
It is necessary to determine whether the World Bank, the IMF and other financial institutions are the right role players to guide globalisation. Do we need to replace them, reinvent them of do we need a completely new system? We need to confront and deal with the problems emanating from the financial crisis. Another focus should be to address the question whether more regulation is necessarily better regulation?
We are all aware of the causes of the financial crisis, but in addressing those causes are we creating a system that is just safer through just adding regulation and are we making sure that it prevent another crisis; or are we making sure that how it is regulated improves. Any regulation is just as good as the monitoring of it. If the regulations is not monitored and checked, the regulation is worth nothing.
Another question that arises is whether it is more benefiting to make regulations similar and standardised – or should regulations be more tailor made and county specific.
It is important to remember that the success of regulations is depended on the regulators. One option is to replace the regulators or implementing systems that properly monitors the regulators.
One problem with global economic governance is that the people on top are not representative of everyone. The monitoring of the regulators should be dealt with a system that represents all the parties involved. There is therefore a need to create systems at the top that are more representative of all the parties.
It can be said that there is no need for tailor made regulations for each country. Because rules and regulations across borders are possible, it is possible to have standard regulations, but if the regulations are not made more effective, the risks will again increase. It can be said that the only needed approach is not necessarily the one that is needed now.
Also adding to the global risk scenario is the gap between the people making the rules and decisions (government) and the people applying the rules and taking the decisions. This in turns can create a lack of trust and a lack of trust in governments and systems. Governance from below is able to create a pressure group that can influence the government – which puts accountability back into the system by giving people a voice.
Globalisation is pushing cross border expansion of markets and is forcing governments to collaborate. It does make governments more dependent on decisions that other governments make, which is not ideal, but the up side is that policies are being aligned between governments and putting accountability and trust back into the system.
Another problem is that our government is not necessarily in line with the requirements created by globalisation. This does create tension for the government but in turn forces them to change.
In Johan Fourie latest blog post he explains what governments need to do to support markets. Governments need to invest in things that are needed for markets to grow, including education, human capital and innovation. He claims that when looking at the industrial policy, governments needs to intervene more actively and more specifically.
It is important to remember that the government is influenced by different voices with different interests. The government in a sense tries to please everyone, so there is the option of creating a global system that gives everybody a voice.
The biggest priority at the moment is to create a new system that will be able to prevent a next crisis. This will not necessarily create the right environment and is only something that is needed now. What is needed is creative and innovative thinking that does not create a top down system.