Trading disagreements
Bill Emmott
In recent decades, every financial crisis that has had cross-border dimensions or implications has brought forth widespread calls reform of the international financial system. Such calls have often featured suggestions that it is time for a new Bretton Woods, referring to the United Statesled conference in New Hampshire in July 1944 that gave rise to the post-war monetary system and its institutions. Less grandiose, but with similar intent have been calls for changes to the international financial architecture.
The global crisis that first became visible in August 2007 has proved to be no exception to this trend. Indeed, both France’s President Nicolas Sarkozy and Britain’s Prime Minister Gordon Brown have been heard to declare that a new Bretton Woods is imminent, perhaps taking the modern form of agreements and statements made by the G20 countries, which first met at head-of-government level in Washington in November 2008 and then in London in April 2009.
The G20 is a symbol of change, since this wider body, taking in China, India and Brazil as well as many smaller middle-income and developing countries, is intended to gradually supersede the old G7 structure which since the 1970s has convened the richest countries of the world as a sort of global steering committee. The G7 (now G8, with Russia) lives on but looks increasingly anachronistic. Even so, nothing that truly compares to the 1944 agreement has come even close to emerging either from the G20 or the old G8.
This talk of Bretton Woods or of new architecture, whatever that really means, appears to arise more from the desire of political leaders and their speech writers to sound important. Nevertheless, there are reasons to believe that the global crisis could prove different from its predecessors in the 1980s and 1990s and may eventually lead to substantial changes in the international financial system. The contention of this article is that this will occur not in a “big bang” as at Bretton Woods nor as the result of a new architectural blueprint but rather
in a gradual yet inexorable process, over five to 10 years.
For a start, while previous crises—including the Third World debt crisis of the 1980s, the Mexican peso crisis of 1995, and the East Asian financial crisis of 1997-98—have had some cross-border characteristics and implications, the current financial collapse and sharp economic contraction have been truly global, taking in rich countries and poorer ones alike. This is producing a strong sense that if the problem is shared, so too should be the solution.
Secondly, the financial origins of this collapse can be connected directly with the freedom of capital to flow internationally, which came about thanks to the dismantling of exchange controls in the 1980s and ’90s, and with failings in efforts during the 1990s and the present decade to establish global standards in banking regulation and supervision. Thirdly, the boom that preceded this bust was associated with growing macroeconomic imbalances between surplus and deficit countries of precisely the sort that the Bretton Woods conference of 1944 set out to control. At last, this historical parallel may have some relevance. Connected with this, and finally, the boom and now the bust have also become associated with a longer-term shift in the balance of economic power around the world, as China and other big developing countries increase their weight in trade, in capital flows and in flows of official funds.
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Obama's health Bill at crucial stage
10 Mar 2010
The Canberra Times
In this article Lesley Russell examines the likelihood of the new health Bill being signed prior to President leaving for this month's scheduled visit to Australia and Indonesia.
This week, President Barack Obama will begin making what White House officials are calling the ''closing arguments'' on why the Congress must urgently move to enact health-care reform, focusing on steep increases in insurance premiums and an insistence that a comprehensive overhaul is needed rather than the incremental approach Republicans are demanding.
In his weekly media address last weekend, the President set a new deadline for action, stating that he's asked leaders in both of Houses of Congress to finish their work and schedule a vote in the next few weeks. Later, White House spokesman Robert Gibbs was more specific, saying the president wants the Bills passed by both houses before he leaves the country on March 18 for his trip to Indonesia and Australia.
That timetable may not be met in full. The House leadership is preparing for a vote on the Senate Bill, quickly followed by a vote on the reconciliation Bill that will effect the President's proposed compromises, on March 17 or 18. But the Senate will still need to vote on the reconciliation Bill, and in the absence of firm prior agreements and strict controls over process, any amendments added on the Senate floor could set up a ping-pong process that will add days or weeks to the time for a Bill to land on the President's desk for signing.
The scramble is on to get the votes needed for passage: reconciliation means that only a simple majority is needed in the Senate, but the House Speaker, Nancy Pelosi, will need all her formidable skills to marshal the 216 votes needed in the House. The hope is that anyone tempted to drop their previous support for the Bill recognises that this will be seen as a flip-flop stance that will draw no votes in the mid-term elections.
Despite the White House summit on health-care reform and Obama's inclusion of Republican proposals from the summit in his plan, health-care reform will almost certainly be enacted without a single Republican vote.
The conservatives are in full rallying cry on why health-care reform must be stopped. They are ignoring the assessments of the independent Congressional Budget Office that the Bill costs around $950 billion, is fully paid for, and will in fact help reduce the deficit, and are now using their own calculations to claim that the Bill involves $2.5 trillion in new spending.
Their mantra is that it will increase taxes, cut Medicare, and represents a government takeover of health care. Their confected rage at the use of the reconciliation process ignores the fact that this is precisely how president George W.Bush got his tax cuts passed measures which have added $2 trillion to the federal debt.
Obama's efforts to drive passage of this key election promise must take place against the backdrop of an economy and employment that is struggling to emerge from a deep recession. That's why he so often refers to the rising cost of health insurance and the industry practice of dropping those who need care. These consumer protections test well in opinion polls. He has also revived his criticism of the United States' political culture, something he promised to change during his 2008 campaign. His efforts have been rebuffed at every opportunity by a Republican party that ultimately wants less not more government intervention in the health sector. Republicans who might once have been willing to engage in bipartisan efforts are now intimidated by the Tea Party ultra-conservatives into doing nothing.
For Australians anxious to see Obama and his family Down Under including surely the Prime Minister and his government the chances of that happening look increasingly iffy. It would be quite difficult for the President to cancel his trip to Indonesia, the political ramifications of that are significant.
But telling an understanding ally like Australia that issues with health-care reforms back in Washington require that a planned visit is rescheduled is an easier matter. Such news should be received with considerable understanding by a Prime Minister just beginning his slog to sell health care reforms prior to an election campaign.
Dr Russell is the Menzies Foundation Fellow at the Menzies Centre for Health Policy, University of Sydney/Australian National University, and a Research Associate at the US Studies Centre, University of Sydney. She is currently a Visiting Fellow at the Center for American Progress, Washington DC.
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