September 1998, Vol. 2, No 3
 
 
      The global financial crisis which emerged first in Asia last year is causing massive increases in poverty, hardship and insecurity in many parts of the world. The crisis was entirely predictable, and indeed was predicted as much as four years ago by ICSW, amongst others. It is the result of years of greed and foolishness by the leading economic powers, international financiers and currency speculators. 
  
     It is clear that the international money markets are inherently prone to irrational and dangerous behaviour. This applies especially to its herd-like and destructive stampedes in and out of vulnerable economies. Recent technological developments have enabled the size and speed of their operations to become greater and more potentially catastrophic. Even a single operator can deliberately or negligently cause massive harm. 
  
     In several submissions to governments before the World Summit for Social Development in Copenhagen in 1995, ICSW urged that vigorous and coordinated international action should be taken to reduce the grossly excessive volume and volatility of speculation in financial and property marets. 
  
     An ICSW draft was the basis of the passage in the final Copenhagen agreements which calls for 
  • “coordination of macro-economic policies at the national, sub-regional, regional and international levels in order to promote an international financial system that is more conducive to stable and sustained economic growth and sustainable development”. 
It was agreed that this required
  • “a higher degree of stability in financial markets, reducing the risk of financial crisis, improving the stability of exchange rates, stabilising and striving for low interest rates in the long run, and reducing the uncertainty of financial flows”. (Programme of Action, para 9g) 
     Other passages in the Copenhagen agreements called for reform of the international structures and processes for financial regulation, greater financial assistance for countries in economic difficulties, and increased emphasis on transparency and ethical behaviour in governments and international business activities. 
 
     But the Summit did not attract close attention and involvement on the part of leading economic players, and these timely warnings were ignored. Indeed, even most NGOs involved in the Summit gave very little attention to reforming the operations of international financial markets, despite their crucial impact on the circumstances of disadvantaged people and on the resources which are available to assist them.
 
     Even now, when the gravity of the situation has finally been appreciated by the major economic powers, they are failing to focus adequately on the major causes and remedies. It is certainly important to ensure that many of the countries in greatest difficulty improve their regulation of domestic banks and the integrity of their governments. It is also important to ensure that more money is available quickly from sources such as the IMF to help stave off emerging crises in particular countries.
 
     But it is far more important to recognise and remedy deep-seated failings in the framework and operations of the international markets themselves, and for the major powers to recognise the grossly inadequate performance of their own regulators and their own private sector.
 
     The Asian crisis would not have occurred if Northern banks had acted with due diligence rather than engaging in rampant competition to pour excess and ill-directed funds into economies and enterprises which could not sufficiently utilise them. This excessive enthusiasm was followed by an extravagant exodus when the markets very belatedly realised that the economies were over-valued. The IMF’s extraordinarily ill-considered responses then compounded the problems.
 
     As yet, however, the major powers have done much too little to reduce the risk of similar behaviour when, as always happens, the markets forget the lessons which they now claim to have learnt. They should support, or at least accept, the need for some countries in crisis to impose restrictions on short-term currency fluctuations and investment flows. They should insist that the international money markets themselves introduce regulations and deterrents which adequately reflect the dangers and human costs of the massive volume of short-term speculation.
 
     It is crucial that governments from the second-level economic powers, and some key developing countries, form an effective counter to the myopia and self-interest of the major powers and their captive organisations such as the IMF. This should include closer cooperation on a regional level. NGOs, too, will need to cooperate more effectively at regional and global levels in order to develop and advocate detailed and hard-headed reforms.
 
     The Copenhagen Summit rightly emphasised that social development cannot be pursued effectively around the world without creating an enabling economic environment. ICSW will continue to give very high priority to that goal, and to the many necessary measures for that purpose which were identified in the Copenhagen agreements and elsewhere. They will be a special focus of the regional NGO Forums on Summit implementation which ICSW is convening throughout the world during the next 12 months. 
 
 
 
JULIAN DISNEY 
President 
International Council on Social Welfare