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Ian Johnson’s introductory speech: “Uneconomic Growth: The Limits of

Let me first thank Sheila Murray for those kind words of introduction and to say how
delighted I am to be here in Canada and with CACOR, one of the most active groups,
and active because you believe and care in the issues that affect our common
humanity. It was also wonderful to meet Jim McNeill again, as a former colleague and
someone I've admired for many years. Jim, it's great to see you again.

I hope to also see Dennis Meadows, whom I have never met; when he arrives from
Boston. I mention Dennis of course because of the book. “Limits to Growth” that
inspired so many people including myself.

Today I am going to focus on one of the relevant issues of our time; the myth of
economics, and its relationship to the key discussions of economic and social change
that is in front of us. This is not to dismiss all of economics but to say that it needs an

I'm going to start with 2 stories of 2 individuals, one in England and one in India. These
seem to be normal people I guess; one’s got 2 children, and one has 3 children. And
they, like many people, wanted to buy a home. And build a home for the family.

First is a UK individual. He decided to build a house in Surrey, just south of London,
famous for its greenbelt and really rather well known for its environmental commitment.
He applied to the local County Council for permission to build a single family home, and
it was granted. The application obviously made sense to the Council. And like many of
us he needed a mortgage and he applied to a bank who also felt that it was a
reasonable proposition and approved his loan application. The single-family home he
built has 103 rooms, 24 bedrooms, 27 bathrooms, 24 carat gold on its mosaic flooring, 5
swimming pools, and just to really crown it, it has under floor heating in the driveway!
He took a mortgage out of about $90 million, which was granted by Irish bank. He was
later unable to pay the mortgage. The bank has had to foreclose on him and take over
the asset which is now not worth a fraction of the $120 million that was spent on
purchasing the house. The bank itself has been bailed out by the taxpayer and is now
majority owned by the government. So I think you will imagine there are a few stories in
there that relate to how divorced our economics have got - not just from financial
markets and housing markets - but almost from reality.
The second story is about a couple in India who recently moved into a new home in
Mumbai. Their new home has wonderful views going one way to the west on to the
Indian Ocean and to the east over the city of Mumbai. At 27 stories high, 3 helipads,
numerous rooms, this house cost $1 billion to build. To be sure of my facts I looked the
other day on the web. The one fact I had gotten wrong is that this house is not the most
expensive in the world. That's seems to have been beaten by a house that is being built
in Zug, south of Zürich. It is now listed as the most expensive home. It was built for a
family and has been constructed at the staggering and hard to believe cost of $12
billion. It includes drapes and carpets you'd be pleased to know. The serious point is
that we seem to be bordering on a new world order which is based on ostentatious
consumption, no regard for reasonableness, and in a world where we care less for
modesty. And we can now see in extremis ” the tail ends” of wealth and poverty. Issues
I will come to later in my talk.

So what does this tell us? Well it tells me that somewhere something is going wrong
with our global society. It tells me that we have lost a moral compass. We have become
greedy in the extreme. And it tells me that our economics is moving in the wrong
direction or has already moved in the wrong direction: it is providing the space for
excess consumption and greed that we have not seen for a long time.

Economics matters because it is the backbone of public policy-making, it helps us
establish prices for goods and services, it is a cornerstone of our market economies and
of our banking and financial systems. It steers investment decisions and it steers
economic growth. Economic policy is geared to the society’s desires for fairness,
distribution, minimum standards of wealth and income and so on. And it’s the metric by
which we measure the wealth of nations and the change in such wealth determines
status in international negotiations and in international relations.

Economics is also a relatively young discipline. Economics can be traced back to the
last 200 years or so. Adam Smith, who is often seen as the founder of modern
economics, was at heart a moral philosopher in the age of Enlightenment, and he
believed that economics and the markets they relied upon were a means to an
important end, that of a societal gain or welfare improvement.

And in one sense modern economics has been remarkably static. There have been
remarkably few changes and yet the foundations of modern economics were built in a
world that was dramatically different from today. Shifting lifestyles, communications, and
production-consumption patterns are vastly different from when economies were largely
agricultural-based, when natural resources were perceived to be limitless, and when
global public goods were unheard of.

The world is changed yet we've been firmly wed to concepts relevant then but no
longer. And yet the greatest insight that Adam Smith had was that of economics being a
means to an end: of poverty alleviation and of economic and social justice. And this
seems to be the one thing that we have consigned to the bin.
The orthodoxy of the past 30 years, (which I think you can trace it to the free market
views of Reagan and Thatcher), has taken economics to new lows - or highs -
depending on how you think about these issues.

The Washington consensus has left a deep and profound legacy, the fault lines of which
are the justification, it seems to me, for new economics.

What I'd like to do now is turn and map out some of these fault lines. There are many.
I'll choose a few to give you a flavour of why I think that economics must change.

The first is the economics of wealth and growth. The limitations of the classical
measurements of national wealth have been well documented, ever since the creation
of national accounts and their use in determining relative wealth. GDP has long been
the most quoted and the least understood metric of economics. It's a flow measure most
often quoted as a stock. It excludes a great many factors that are of vital importance for
the full functioning of society. In many cases it manages to include as a positive
contribution, factors that most of us would deem highly undesirable: crime, social
unrest, war. And it excludes factors that are perceived as highly desirable; for example,
the protection of natural habitats and forests. In particular national wealth calculations
ignore the effects of the depletion of natural capital, such as the destruction of forests
and other natural capital that are often counted as a net asset contribution to wealth.
The more you chop down the better off you are! And finally, it ignores economic
externalities, such as the social costs of unemployment and the positive benefits of
unpaid work and the distributional effects of income.

Yet for all its flaws, it remains stubbornly the most quoted metric of economic
achievement and of measuring relative economic performance.

The use of national income accounting metrics to assess wealth and social progress is
more outdated today than ever before. And as we look towards the next 20 or 30 years
that will just intensify. I was describing, when I was talking to Jim McNeil yesterday, an
interesting phenomenon in Ireland, a country where I lived until recently. Five years ago
Ireland built up a massive surplus of housing on the edge of towns and cities. Most of
them remain empty, unfinished and unsold. Now they must be torn down for they have
absolutely no use. Yet this has probably caused a mini boom to GDP. Building them in
the first place and then having to tear them down in the second place. Did we add
wealth? I would leave it to your judgement.

Bill Bryson, whose great wit always reminds me of a modern Mark Twain, described in
an article, an economic hero of America, someone who really adds massively to GDP
and to economic growth. And it was the CEO of a forest corporation. He was battling
cancer and in the midst of a messy divorce; all of which added positively to the
economic wealth of America. Bryson added that “no wonder we call it the dismal
The other thing about the growth and wealth is that increased consumption becomes a
major source of growth, and this consumption requires people to borrow and borrowing
produces debt. It is interesting to note that the media even today records the really good
news that the recession may be coming to an end. Why? Because growth has begun,
because more goods are being purchased on the High Street by people who don't really
need them, with money they don't have. Now isn’t that how we got into the problem in
the first place? Just listen to the media talk about how we’re getting out of the recession.
It sounds like déjà vu all over again.

Today's growth perpetuates over consumption. As growth weakens, governments
promote consumption, to get companies back on their feet, to provide governments with
more revenue. The fact that more consumption is part of the problem and not part of the
solution escapes all but the clear-minded.

It may also lead us to a point where we experience on a large-scale, the phenomenon
that Herman Daly - I think one of the finest proponents of new economics - has called
“uneconomic growth”. It is very powerful concept, where the extra costs of the unit of
GDP growth are more than the benefits.

In many respects, the one thing macroeconomics has not done is borrow some of the
good things from microeconomics. Surely it makes sense to stop at the point where the
marginal costs exceed the marginal benefits. We actually don't do that in the macro; we
forget about the cost side. So the question is then, “Are we approaching uneconomic
growth?” Is any evidence out there? There was a study that has been done by a group
called TEEB, led by Sukhdev Pavan. And in their book they claim that we add about 1.5
trillion dollars to GDP each year but we are doing so at a global real cost of about 4.5

Let me turn to another example. In China and India, indoor and outdoor air pollution has
been estimated variously at between 3 to 4% of GDP. If you add perhaps another 1 to
3% of the land loss, forest cover loss, destruction and the effects of other forms of
pollution, one may suddenly find that this 8 to 9% growth is uneconomic, or at least at
the margin. So “uneconomic growth” is not a trivial or theoretical construct. It is a very
real construct in my view, and I think it would be incumbent on many economists at the
national level to try to pick out where and in what way do the costs need to be deducted
from GDP growth, and try to get a better handle on what real growth looks like.

My next point relates to what I would call the public good and public interest in
economics. There is an increasing blurring it seems to me, between public and private
goods. There is almost no such thing as a pure private good. When companies take
what appear private decisions, they may also have an important spill over effect: an
externality. For example, when a company decides to lay off 100 people because it has
found some cheaper technology to replace people, that company rarely will bear the full
social costs of unemployment. It may well bear the full financial cost of the technology
through low-cost credit but not the full social costs of the decisions it takes. There are
very few cases we can begin to think of where there are not these spill over effects.
And I think it's a profound issue because it really means that the public sector is going to
have to start acting as a guarantor, a lender of last resort, a player into private space.
Not because it's trying to control but because it has a stake in the business of private
goods provision because private goods provision have very powerful public good spill
over effects. These examples, in looking at an unregulated free market to flourish, have
resulted in the sort of "too big to fail and too small to save" philosophy. Lehman Bros,
the Royal Bank of Scotland are such examples. The privatized electric and water
utilities which, although they may be private will never be allowed to fail: just how private
are they?. There are always public good dimensions and we will need to determine how
best to bring private and the public good dimensions of actions and activities and
investments together.

 The next point I would make on economics is the rather convoluted link between free
markets and democracy. In fact, the term free market democracy is often used. And as
economic thinking promoted the freedom of markets, their advocates also conflated this
with the freedom of choice and democracy. Free markets and democracy were seen to
go hand-in-hand, one would feed the other, to make the case that free markets meant
democracy and democracy was a promoter of free markets.

But of course free markets in the sense of uncontrolled and largely unregulated has
often produced results that seem to me to be a far cry away from the the broad-based
political freedoms we associate with democracy. And I think it's time to unbundle these
concepts and be crystal clear in our minds.

The economics of natural capital and the economics of social capital are possibly well
known issues to this audience. There are many forms of capital that can be managed in
economics and one that has been largely mismanaged has been natural capital and
one of the largely ignored has been social capital.

Yet both are profoundly important to our common future. If we do not manage our
natural capital as if it matters and it has value, we will begin to see us moving in to what
the Limits to Growth team called “overshoot”. Maybe we have moved into overshoot in
fisheries and oceans management and perhaps also in one or two other areas.

If we do not understand social capital and its importance to the way in which we operate
as societies, and link it with jobs and meaningful employment, we will destroy both
economic capital and social capital. At heart, social capital is every bit as important to
our future as natural capital. The main challenge it seems to me has been to try to
incorporate the values of natural capital, the very real value, both to the economy and to
society. But we have been miserable at doing so. I will come back to these issues later
in my talk.
One example of natural resource management is water. The under pricing of water has
perhaps provided for the largest single economic subsidy in the world today. It
represents an interesting case of massively rising costs and increasing scarcity of
capital. And we're beginning to see the costs of water rising in a discontinuous manner.
Marginal cost curves, which were always drawn as a rather smooth gentle upward
sloping curve are now discontinuous and moving very fast upwards.

Climate change as we all know has been described as the largest market failure in our
history. The Stern Review did a very good job at documenting the economic issues
raised by our concerns with climate change, which I think provided new dimensions to
the tasks of applying economics to an environmental bad that is intergenerational,
requires long-term investment and is a global public good.

And it also raises - it seems to me - questions about generational and spatial equity.
Much of the literature is focused incidentally on the costs of addressing climate change.
Sometimes I think the counterfactual case could be made more, that is what benefits to
economic welfare does long-term action, long-term and early action bring.

The pioneers of economics largely considered a single form of capital: man-made.
Labour capital ratios would find the correct optimum between the cost of physical capital
and the price of labour.

Our world is now significantly more complex, and other forms of capital are beginning to
be recognized. Social capital as I have already mentioned, has been largely untreated
by economists and yet it may provide a better understanding, both of the purpose of
economics as well as a more practical understanding of how economies work.

Social capital may be described as the range of social interactions that can add value to
our contentment, our happiness, our sense of self-worth. It has to do with how secure
we feel within our families, our communities and our cities. How safe we feel for our
children and their future.

The depletion of social capital can extract a very high economic cost. The social
disruption, violence and destruction of physical assets, from increasing crime and
vandalism, are something I think we will see in Europe in the next few years…

Economics that leads to incorrect market signals, increased unemployment, dramatic
shifts in inequitable distributional outcomes, displacement through poor decisions on the
value of natural capital and massive wealth gains among the very few, can lead to high
social capital costs which in turn will lead to high and negative economic impacts. So I
think we need to start reflecting on how to deal with social capital as a form of capital in
its own right.

There are many other “blind spots” in economics; equity, justice, and distribution issues.
Inequity exists in many forms within and between peoples. We know that we have 1.7
to 2 billion people in absolute poverty.
Standard measurements of distributions such as the Genie coefficient are not quite
capturing in my view the “tail-ending effects” of large ostentatious wealth at one end of
the tail and crippling poverty at the other. And not just in the developing world; I think
this is not just a developing world issue.

And the cracks are now visible. The poorest 40% account for 5% of global income. The
richest 1% own 40% of global assets. Distribution of wealth and distribution of income
are rather different issues. And there is more inequity on wealth as you might imagine
than there is on income.

A recent study concluded that the richest 10% own 85% of the global assets of the
world. The poorest 50% own 1% of the global assets in the world. And I think that
wealth has become much more skewed than income and it may well be that wealth will
be the litmus, the thing that will drive I think social tensions, even more than income in a
way. We know about the 80/20 split between the developing countries; 80% of the
developed world earns about 20% of the income and vice versa. The total income of
the richest 25 million Americans is equal to the total income of around 2 billion people in
the world.

These figures suggest that we are moving into this” tail end” of inequity which is going to
cause enormous social tension. The visible manifestations of this that I talked about at
the beginning of my speech can only cause resentment.

The three richest people in the world possess more than the poorest 10%. Staggering!
Such gross inequities are not economically sound, socially sustainable, nor politically
viable in the long term.

In terms of time we know that high and positive discounts tend to favour speculators
and politicians but rarely anyone else. This has been a very big issue when you're trying
to look at long-term investments in natural resources, natural capital or climate change.

Another issue that I think that is going to be one of the defining issues in economics
over the next number of years is the issue of work and of economics. I used to use the
words employment and economics but in some quarters, employment is too narrowly
conceived as being in the formal sector, jobs in the formal sector. What I’m talking about
here more broadly is work. I won't spend a lot of time on this but it is an area that is
deserving of attention and if I have one criticism of the ecological economics
community, I don't think they ever really tried to look at the ecological economics as
they relate to the challenges we have in employment and on the work front.

With grossly mispriced technological capital, we are witnessing a steady substitution of
labour, even in the poorest parts of rural Africa. We are beginning to see labour being
displaced by technology.
Where could this take us? Well, I've seen some studies suggest that 20% of the
potential workforce globally could produce 100% of the goods and services we all would
need. That’s maybe a future we want to contemplate. I'm not sure, but it may be one.

A study in the UK found ,in broad orders, that in the future half the population can work
all the time or all the population can work half the time but they can't quite “square the
circle” of all the people working all the time. Again, I think the issue of finding meaningful
work and having as a social, economic - and I would submit ecological - goal of global
full employment is really something we should take rather seriously.

Unemployment is the major ingredient to poverty. We currently have about 200-300
million people unemployed in the world, (and who knows how many underemployed)
and these unemployed figures are typically statistics from governments who manage to
lie constantly about the level of unemployment.

In England unemployment of the under 25s is 22%; in Spain closer to 27%. And that's
official statistics: we can add another few percentage points to that.

1.7 billion people on earth today are under the age of 15. It is either going to be the
most extraordinary opportunity to use that human capital to deliver what the world
needs. Or, if we don't do that, it's going to be a source of extraordinary social tension.
And I do think that economic thinking has to place employment, job creation, and the
future of work right at the heart and not see it as it often does, really as an add-on, an
exogenous factor.

Uncertainty, nonlinearity and the role of systems presents challenges to our economics
thinking. In this area the Club of Rome has, I believe, a distinguished role. Economics
is largely deterministic in nature, although insurance companies wouldn't agree. We
now understand that nonlinearity is something we are going to have live with. It can
strike quickly with devastating impact. Regarding climate change, we know out there at
some point is a nonlinear event. Pandemics in the health sector; globally we know that
out there at some point in the future is a pandemic event. And in the financial sector, we
are living through one chapter now. I think there is the potential for a non-linear event of
such a scale that we will find it very difficult to get back on track.

So we have these potentials for non-linear effects. How do we treat them in
economics? We don't typically do them very effectively.
I think, similarly, we will see a growth thankfully in systems thinking. When I started my
career at the World Bank, I worked in the electric energy sector on investments as a
financial analyst and an economist, and I did a lot of work on systems planning,
optimized planning of electricity systems and I began to see the great worth in thinking
in systems terms. I think when the free marketeers rolled in - and I saw this in the World
Bank - they ditched anything and everything to do with systems thinking and systems
planning. We were informed that “The market would take care of all electricity needs”;
well, the market did take care of electricity needs. But one of the pieces of work I would
love to do, but I suspect I won't get funding ever do it, would be to re-optimise some of
the systems and see how much did that free-market principle cost? And I suspect it has
cost an awful lot and that many systems are now inefficient.

And what I see today is on the renewable energy front ,for example, where because
systems effects are not taken into account, implausible costs are being calculated. What
are the real costs of solar based renewable energy, for example, when the sun doesn’t
shine? You don't get electricity: unless reserve margins and stand-by generation is
included. Without systems costs included wrong economics wins once more.

There are many other areas where you have both systems costs and feedback loops
that I think we're missing and we will do so to our chagrin. But I'm delighted that in
CACOR you do have people who take systems thinking and systems planning very,
very seriously and that's to your great credit.

I'm nearly finished my attack on my own profession. The one that I think is the biggest of
all relates to economics and financial markets. It is the way in which real values and
economics have become totally and absolutely divorced from the financial marketplace.
And I think this is going to cause us all kinds of problems. We were led to believe that
markets that could operate under a philosophy of “hands off”, of “more is always better”,
of “private gains will always produce public gains”, and “trust us”. “Trust us, markets do
it for you”. The global financial crisis now offers us a lot of insights of just how wrong we
were to accept the Washington consensus. The free-market-democracy model is really

We are all familiar with the drivers of this crisis from the sub-prime crisis driven by
excess liquidity, and by inadequate “rules to play by”. Yet at the root of this crisis it is
driven by a great divide between finance and economy which is a subset of a widening
precipice between economy and human welfare. And between money value and the
value of human beings. And I think we need a financial sector that gets back to its basic
roots. These are the Adam Smith roots of a prudent way of maximizing welfare, of
moving a banking system from one that, for example in the housing market, replaces
encouraging property speculation to one that is an efficient means of helping people to
have a the home. Not one that fuels consumption that has left personal debt at all-time
It seems to me that the financial sector has become an end in itself. Rather than a
servant of the economy it has become its master. The traders and the speculators and
those who built the algorithms now apply a hands-off approach as they look at trades
and currencies for example, including the $4 trillion that’s traded daily on currencies. It
seems to me we have to get a handle on this and reduce the speculation to do a much
more prudent and manageable level.

And I think that is going to be, in a way, one of the very, very big issues. How do we get
a handle on the financial sector, move it into the real sector of the economy on the one
hand and, at the same time, dampen the kind of speculation that we have observed with
really quite deleterious results.

My final comment is really to go back to natural capital and to the centrality of ecological
economics. We have one planet and it is the only one that we know of at this point. At
this point we have a single stock of natural capital. What we use we deplete, what we
deplete we can sometimes substitute with something else; oil with coal, coal with
uranium, uranium perhaps with renewables. But not always; biodiversity might be a
case in point.

When Limits to Growth came out, it was right then, and it's right today. Herman Daly has
shown by his work on a steady state that recognizes these limits, and recognizes the
desire and the wish to understand that there are limits. These biophysical limits are
there. They are very important!

I do think though, that we will begin to see social limits, cost limits, and other forms of
limits, long before we get to the biophysical limits. Water will be a good example. Water
is not a scare commodity but we may well run into situations where we have to produce
water at such high costs that it becomes uneconomic.

I think we need a rethink, a clear understanding that we are an integral part of nature,
and that our economic and social systems must be in sync with the natural systems of
the world that we are really part of. And the externality of nature must now become the
internality of rational economic thinking.

Having talked about all of the woes of economics, I think in this day and age that’s not
good enough. We’ve got to look at where we can get change. How do we get change?
The Club of Rome has had a proud record in terms of its value proposition on what it
called the “problematique”. And 30-40 years ago, 20 years ago, placing the problem on
the table was enough in one sense. In today's world we can't only analyze the problem;
we've got to be looking at the range of solutions.

I wanted to finish my talk with a few general points. The first is to consider what have
been drivers of significant societal change. I believe that there are two: Ideas and
Technology is obvious. The wheel, and the spinning Jenny that produced the Industrial
Revolution. The combustion engine that produced the oil revolution. The Internet that
changed communications and made our world smaller.

 But I also think we should never forget that ideas change the world as well. What we
ought to look for now, I believe, is a new intellectual revolution that is rooted in a new
and comprehensive theory of change - and I would say - survival for the 21st-century. A
kind of Manifesto for the Millennium.

I think we can look to some of the giants that have served us well so far. I was reading
Schumacher's work “Small is Beautiful”; it is well worth revisiting. He wrote about
Buddhist economics as being "…to obtain the maximum of well-being with the minimum
of consumption". It's not a bad maxim to have. Herman Daly has written eloquently on
the actions needed to get to a steady state economy. An economy and polity that
recognizes our planetary boundaries and also our planetary obligations.

Amartya Sen, and more recently, Joe Stiglitz have worked on economic measurement
and how it relates to real welfare and, in so doing, have articulated the rightful role that
economics should play. Measurement is important yet it is a sufficient but not
necessary condition for taking action. It does help us frame the types of actions.

 And ,of course we have “the Limits to Growth”. If we were planning to pull a publicity
stunt we would try and pretend that it was written last week. And if we didn't change a
word in the book other than perhaps a couple of dates, it would read as fresh today as it
did in 1972. Testimony to Dennis Meadows and his co-authors.

We need a new credo for humanity. One based upon mutual respect, a people-centred,
nature-focused approach.

The time for a new age of Enlightenment, a renaissance in thinking, has never been
more required than it is now. I would not underestimate the receptivity that new thinking
could bring about and the change that could result.

But keeping our heads in the clouds for these philosophical musings is not enough. We
also need action in our institutions, we have to shape and reshape and uplift our
existing institutions, so that they can explicitly recognize the public good component of
the economy. They can chop the tails off the ends of the distributional curves. They can
recognize natural capital as something to treasure, and they can make markets do what
they were always supposed to do. For example on financial sector reform, there are
meetings going on this week which are looking at some of the financial and banking
sector reform and my sense is that it's sort of arranging the deck chairs on the Titanic.
They will no doubt come up with modest and useful things to do; reserve margins on
lending etc. But we’ve got to take much more strident action, that is, much more people-
centred action. Hazel Henderson has suggested that the global casino of banking
should never be more than 10 to 15% of GDP. She claims that it is over 40% in some
We need to close down offshore banking. That could have been done very simply, very
easily. But it was the threat of the bankers in London and in New York who said "if you
don't give in to us, we will go elsewhere". Why Obama and Cameron didn't say fine, and
we will track you down; because if you go to offshore banking we will find you. But they
didn't and they have allowed offshore banking to continue much as much as ever. As
someone who has visited Lichtenstein recently and seen what is happening; it is
business as usual.

We’ve got to limit bonuses to some reasonable multiple of salary and link it to new
metrics. We’ve got to contribute to financial stability and sustainability, not to short-term

We need a new generation of institutions that can guide the economy by setting in a
predictable manner value guidance on key goods and public interest assets. Even if
value does not mean setting prices, it can be used to check the quality and relevance of
investments, to ensure that they reflect the real values.

We have third-party independent judgements on interest-rate policy and financial policy.
Why not have similar systems, similar institutions on real value; for example, a real
value index for houses, for water resources, and for forests? Then we could say to
investors, in a country, “For the next 5 years the value of water to our society is "x" in
such and such quality. And you must use that value, in all of your policy and investment

You may have flexibility in how prices are set because sometimes it's not easy to move
rapidly on prices of natural resources, but at least the policy and investigate decisions
you take, reflect the real societal value. And I think that that is something that could be
done relatively easy if we had some modest political leadership.

I do think we need to invest in new thinking and analysis on how to ensure global full
employment. If we don’t, we don't, we run social risks of a huge nature. And on the
markets, in addition to doing things right which is what I've been talking about in terms
of overseeing markets, I also think we have to get markets to do the right thing. That is,
create markets where the markets don't exist, through a mix of public and private
investment. Carbon markets is one example but there are many other markets of goods
and services that, if carefully and prudently managed and designed, could add an
enormous value and make markets do what they were intended to, provide maximum
welfare at reasonable and prudent costs.

My final comment is on governance. I do believe we will need new governance
arrangements for the new world we face. I don't think a world government is an option at
the moment - certainly with your friends south of here - but I do think it is something to
start a conversation on.
All of us in this room are global citizens. Our children and their children will be global
citizens. What they do will affect the world, what happens outside will affect them. None
of us has any representational space for getting our thoughts put into legislative bodies.

I do believe that over time there will be the case for some form of global governance
that will deal with global problems and it will be part of a new order of democratic

I think we’ve got to set new standards in the ranges of standard regulation, the kind of
stuff we talking about, curb speculation on new and largely untested financial products.
As a parenthesis, Hazel Henderson has noted that the total credit of derivative contracts
estimated by the Bank of International settlements is $683 trillion, while global GDP is
62 trillion. These are big numbers.

We need to curb the 4 trillion of daily currency trading. I do think the case for the Tobin
tax is worth bringing back, perhaps in another form. I think we have to try to curb that.
And we've got to bring banks and banking, back to people. And we've got to make sure
that people can hold the financial systems to account. Not in the way that it happened.

The bailouts have been some of the most inefficient ways of really addressing the
problem. Taxpayers have been heavily taxed, to have money put by governments, with
very little control, into the banking community with lots of promises and yet the bonus
culture hasn't changed. The essence of banking really hasn't changed.

We've got to find a way of getting people and third-party intermediation to be much
more at the forefront. There is a lot that can be done. We’ve got to change the current
asymmetrical relationship to one of real accountability.

So let me stop there. Let me just say that global governance I see as being well beyond
the role of the United Nations or the reform of the United Nations. Having spent time at
Copenhagen at the climate change meeting, I then vowed I would never go over to
another United Nations meeting. And so far I've held onto that. To observe total chaos
there was not unusual. But to observe the definition of emerging consensus on the
United Nations, of the agreement of the least committed to the least interested seems to
me to be a real disaster in the making. We deserve better. And I think piloting, testing
new ways to create global public policy with new ideas, far-reaching ideas of legislative
approaches, of third-party intermediation, of involving civil society more formally, and
testing out new ideas as to how we create global public policy is well worthy of the

 We have a rich agenda. Today I have touched on some of the issues that will ground
us in a new future. Getting our economics right and ensuring that our markets, our
institutions and our concerns of the welfare of all in society are catered for will place us
on a sustainable pathway.
 Commitment, ideas and the power of persuasion, must not be under-estimated. Each
of you in this room is an ambassador for such change. I would like to thank you for
listening to me.

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