Abstract 
of the speech at the conference on "Gender Budgets, Financial Markets, Financing for Development", February 19th and 20th 2002 at the Heinrich-Boell Foundation in Berlin.

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The Global Financial Architecture
"The function of our global financial architecture is primarily to ensure that the global capital is employed to the best opportunity, transferring it from people/institutions who have it to people /institutions who need it. However has this architecture succeeded in generating and moving wealth in an equitable manner to promote sustained economic development? The answer to this poser remains mixed. Terms like the, ‘crash of the Asian economy’, ‘the theory of the economic bubble’, ‘the concept of risk markets’, ‘the risk of cycles’ all portray this mixed response.

Various kinds of underlying causes are associated with these terms – These could include a shift from a meritocratic process to political cronism, legalized corruption and opaque practices, a blind wave of ill advised people moving into dot com equities, but the biggest driver of the financial and capital markets is essentially policy. The term commonly used here is ‘regulation’ of the financial markets. It is this regulation that keeps the integrity of the process unless the regulators themselves become ‘pawns’ of the financial powers that be. This risk however is inherent in the existing financial architecture. It lies embedded in the reality that accountability of the financial powers that be rests with their shareholders rather than with the common man or common woman of Asia. Thus negotiation in the financial markets are pinned on a need to maximize financial gains rather than any philanthropy. It is here that a close complimentarily between the state and the financial market emerges. Whereas the utilisation of capital for maximum wealth creation is the function of the financial market the equitable distribution of this mass of resource remains a state function. More than $1.5 trillion is now exchanged in the world’s currency markets each day and nearly a fifth of the goods and services produced each year are traded.

What do the new financial markets look like?
Foreign exchange and capital markets are linked globally, operating 24 hours a day with new tools that include internet links and media networks. These markets have new actors like the World Trade Organisation (WTO) which has authority over national governments. Another set of actors in these markets are the multinational corporations who have more economic power than many states. A third set of actors are global networks of the civil society that are watching these financial markets. These networks of NGOs can now transcend national boundaries because of access to new technologies. The financial markets also have new rules. These include multilateral agreements on trade, services, intellectual property, backed by strong enforcement mechanisms that are reducing the scope of national governments and national policies.

The financial markets are also very competitive. This competition may have guaranteed efficiency but not necessarily equity. The assets of the top three billionaires are more than the combined GNP of all the least developed countries and their 600 million people. In 1998 the top 10 companies in telecommunications controlled 86% of the $262 billion market.

Another aspect of the financial architecture is the financial volatility and economic insecurities. Far from being isolated incidents, financial crises have become increasingly common with the spread and growth of global capital flows. These crises normally result from rapid build-ups and reversals of short-term capital flows and are likely to recur. Speculative capital related to “hedge funds” or “hot money” provide a case in point. This becomes more likely when national institutions regulating financial markets are not well developed. The financial turmoil in East Asia in 1997-99 demonstrates the risks of global financial markets. Net capital flows to Indonesia, Korea, Malaysia, the Philippines and Thailand rocketed in the 1990s reaching $93 billion in 1996. As turmoil hit market after market these flows reversed overnight with an outflow of $12 billion in 1997."

What does this mean for sustainable economic development? The human impact of such vagaries of the market are severe and likely to persist long after economic recovery."

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Aktualisiert: 13.02.2005