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					                                      WEED
                  Weltwirtschaft, Ökologie & Entwicklung e.V.
                   World Economy, Ecology & Development




   Alternatives to the Casino?

A synopsis of intergovernmental, private sector
        and civil society proposals to
   reform the international financial system




                     by
             Matthias Schmelzer




                  April 2009
Alternatives to the Casino?                                 2




The views expressed in the paper are those of the author.


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Alternatives to the Casino?                                                                                                         3

                                                          CONTENT



1. Introduction........................................................................................................... 4

2. Synopsis................................................................................................................ 7
   2. 1. Regulating Banks and other Financial Institutions....................................................... 8
   2. 2. Non-bank financial institutions................................................................................. 12
   2. 3. Business Models....................................................................................................... 12
   2. 4. Regulatory Institutions ............................................................................................. 15
   2. 5. Regulatory Instruments............................................................................................. 17
   2. 6. Governance .............................................................................................................. 19
   2. 7. Short-term Crisis Management ................................................................................. 22


3. Civil Society, Non-Governmental Organizations and Unions ......................... 24
   3. 1. ATTAC .................................................................................................................... 25
   3. 2. Beijing Declaration................................................................................................... 28
   3. 3. BankTrack................................................................................................................ 30
   3. 4. New Economics Foundation (NEF) .......................................................................... 33
   3. 5. Friends of the Earth Europe (FoEE).......................................................................... 36
   3. 6. Global Unions .......................................................................................................... 38
   3. 7. WSF 2009 ................................................................................................................ 40


4. Private Financial Industry .................................................................................. 43

5. Epilogue............................................................................................................... 46

List of reports on financial market reforms.......................................................... 48
Alternatives to the Casino?                                                          4


1. Introduction

The financial and economic crisis that       and actors at the World Social Forum
is sweeping the entire planet has initi-     (WSF). And finally, the private financial
ated a broad debate on reforming in-         sectors’ take on financial market re-
ternational financial markets – nothing      form will be discussed shortly by ana-
less than a new global financial archi-      lysing a statement of the International
tecture is being discussed in a whole        Institute of Finance (IIF), the global
variety of arenas, involving powerful        association and lobby organisation of
existing and newly emerging interna-         financial institutions.
tional actors. This paper presents in
                                             Thirdly, the synopsis is limited to finan-
the form of a synopsis some of the
                                             cial market reforms, leaving aside re-
most important views in a systematic
                                             lated issues such as stimulus pro-
way.
                                             grammes, banking bailouts and emer-
This is, of course, a snapshot of the        gency packages, and, most impor-
situation in early April 2009 – a snap-      tantly, the issues of poverty and cli-
shot in a highly dynamic process both        mate change, which are aggravated by
in terms of the actual crisis itself as in   the financial crisis.
terms of the positions and discourses
                                             Chapter 2 gives a synopsis that pro-
in the ongoing reform debate. What
                                             ceeds through a detailed systematic
only very recently seemed unthinkable
                                             analysis of statements on financial
has already become real policy as the
                                             market reforms, which are classified
example of the nationalization of many
                                             and systematized in terms of dimen-
banks or even the expropriation of
                                             sions and categories laid out in table 1.
shareholders as in the case of the
                                             This synopsis is followed by more de-
German Bank Hypo Real Estate. Tak-
                                             tailed analysis of specific reform pro-
ing stock of reform proposals in such a
                                             posals of civil society groups (chapter
dynamic process is necessarily limited,
                                             3) and the private sector (chapter 4).
selective and has to proceed through
examples.
First of all, the analysis concentrates      Shifting global governance struc-
on the international level, leaving aside    tures
national reform initiatives and agendas.
                                             The real influence of international or-
Secondly, the documents analyzed             ganizations and fora in the global gov-
come from three main areas of the in-        ernance structure is currently negoti-
ternational political arena: international   ated anew – who will play what role
organizations, civil society and the pri-    and have influence to what extend on
vate financial sector. The synopsis will     what level will depend on the relations
look into the reform proposals of the        of economic, political and discursive
following institutions: the G20, the Fi-     power the different institutions and
nancial Stability Forum (FSF), the In-       countries have.1 Many international
ternational Monetary Fund (IMF) and          actors have become involved in the
the United Nations (UN). On civil soci-      debates on reforming the international
ety level, the synopsis will discuss the     financial system – reports by the most
reform agendas of: Attac, the Beijing        important of these will be discussed in
Declaration, BankTrack, New Econom-          this chapter. Since all civil society re-
ics Foundation (NEF), Friends of the         form proposals and the private sector
Earth Europe (FoEE), Global Unions           contributions of the IIF will be analyzed
Alternatives to the Casino?                                                          5

in detail in the following chapters, only    lion, the actual results were less im-
the intergovernmental reports that form      pressive. Not only were the numbers
a central part of this synopsis will be      mostly summing up what had already
shortly introduced here.                     been promised, but also in terms of
                                             financial market reforms the negotia-
                                             tions achieved little.
G20
One of the most decisive international
                                             IMF
actors, whose power has been greatly
extended by the ongoing crisis, is the       The IMF is a well-established formal
G20. In contrast to existing formal or-      international organization with a set
ganizations such as the IMF and the          structure, mandate and legal power.
United Nations, the G20 is one of            Founded in 1944 at the Bretton Woods
those informal governance bodies like        conference, it has played since a lead-
the G7 and G8 that neither have a            ing role in overseeing the international
clearly defined structure, nor a man-        financial system and the macroeco-
date or a legally binding status in inter-   nomic policies of its member countries.
national relations. After the crisis had     Through its institutionalized and for-
reached a critical level following the       malized structure, the IMF has – con-
collapse of the investment bank Leh-         trary to informal fora like the G20 and
man brothers, the G20 held a special         the FSF – direct power, influence and
meeting at heads of state level, which       somewhat autonomous scope for ac-
had raised high expectations as provid-      tion. Although having almost universal
ing the foundation for a new interna-        membership, the IMF has been vocif-
tional financial architecture: the G-20      erously criticized both for its undemo-
Leaders Summit on Financial Markets          cratic and biased decision making pro-
and the World Economy, which took            cedures (rich countries having all the
place on November 15, 2008 in Wash-          voting power) and for its neoliberal
ington, D.C.                                 policies.2
Although publicly celebrated as a ma-        The IMFs opinion on reforming the
jor success, the concrete achieve-           global financial system is best and
ments of the summit were vague. The          most comprehensively captured in its
final “Washington Declaration” is a          October 2008 „Global Financial Stabil-
deeply contradictory statement that          ity Report“ (GFSR). Entitled “Financial
testifies to the cleavages internal to the   Stress and Deleveraging: Macrofinan-
global power elite. While on the one         cial Implications and Policy”, the whole
hand very much impacted by the spirit        analysis is embedded in a framework
and politics of the outgoing Bush ad-        of interpreting the financial crisis as an
ministration – neoliberal free-market        accelerated and disorderly process of
ideology playing a crucial role in the       deleveraging - the IMF thus focuses on
text – the G20 initiative also contains      the collective failure to appreciate the
important improvements on regulating         risks associated with the massive ex-
financial markets.                           tent of “leverage taken on by a wide
                                             range of institutions – banks, monoline
The second important G20 summit,
                                             insurers, government-sponsored enti-
which took place in London on April 1
                                             ties, hedge funds”, and accordingly
and 2, 2009, was similarly celebrated
                                             neglects other important factors. Addi-
as a major step towards resolving the
                                             tionally, at the end of January 2009 the
world economic and financial crisis.
                                             IMF published a short update to its Oc-
Although rich in large number, pledging
                                             tober 2008 Global Financial Stability
additional ressources of USD 1.1 tril-
Alternatives to the Casino?                                                       6

Report. Although reiterating many ar-       later, can be seen as the principle
guments, this update gives – due to         sources of the G20s Washington Dec-
the further unfolding of the crisis – a     laration and thus warrant a close read-
more dramatic account of the crisis         ing.
tendencies in the global capitalist
economy and promotes somewhat
more radical measures to counter            UN
these.3 In general, the IMF is probably
the international organization that most    In the context of the current reform
adequately interprets the magnitude of      processes the UN has been trying to
the crisis and whose understanding of       defend and strengthen its own position
the processes, prospects and neces-         in the global governance structure. In
sary reforms better reflect reality than    October 2008 the UN President of the
those of the G20, the FSF and many          General Assembly called in a high-
national governments.4                      level interactive panel on the “Global
                                            Financial Crisis”, chaired by Nobel
                                            Prize Laureate Joseph Stiglitz and
                                            composed of leading economic spe-
FSF
                                            cialists from developed and developing
Another important actor in the debates      countries, whose mandate is to “reflect
on reform of the international financial    on the causes of the crisis, assess its
archi-tecture is the Financial Stability    impacts on all countries and suggest
Forum (FSF), which was founded in           adequate responses to avoid its recur-
1999 by the G7 and consists of na-          rence and restore global economic
tional financial authorities like finance   stability.”5
ministers and central bank-ers from
                                            But the UN was not to have a key role
major industrial countries and mem-
                                            in financial market reforms – in No-
bers from international financial organi-
                                            vember the G20 discussed the issue
zations such as the BIS, World Bank,
                                            and the absence of all rich countries’
IMF, ECB, OECD and others. The
                                            heads of state and the leaders of IMF
FSF, similar to the G20, is an informal
                                            and World Bank at the UN Financing
forum without any legally formalized
                                            for Development Conference in De-
structure, mandate or legal basis in
                                            cember 2008 in Doha clearly testified
international relations, a forum that is
                                            to the G20s interest in bypassing and
exclusively from the rich G7 countries
                                            thus making irrelevant the UN’s efforts.
and has formally only consultative
                                            The Doha conference accordingly fo-
power. But it is well integrated into the
                                            cused mostly on issues not directly
financial system of industrialized coun-
                                            related to financial market reforms –
tries and should be seen as a powerful
                                            the related proposals in the final
inter-pretative and analytical authority.
                                            document, the Doha Declaration, do
In late 2007 the FSF had been in-
                                            not differ much from statements by the
structed by the G7 finance ministers to
                                            IMF or the G20.6 In this context the
report on the causes of the crisis and
                                            most notable aspects of the Doha Dec-
propose reforms that should also deal
                                            laration is its call on UN Member
with such controversial issues as off-
                                            States to hold a UN Conference at the
balance sheet vehicles, credit rating
                                            highest level to discuss the impacts of
agencies and financial derivatives. The
                                            the global financial crisis on develop-
corresponding report “Enhancing Mar-
                                            ment, which will take place 1 to 3
ket and Institutional Resilience”, which
                                            June.7
the FSF released in April 2008, and a
follow-up report published six months
Alternatives to the Casino?                                7




    Table 1: Analytical Grid for Financial Market Reform
    1. Regulating banks and other financial institutions
        1.1. Reserve requirements
        1.2. Transparency
        1.3. Regulation and supervision
        1.4. Competition and cartels
        1.5. Investment banking
        1.6. Accounting
        1.7. Local, public and cooperative banks
    2. Non-bank financial institutions
        2.1. Hedge funds and other HLI
        2.2. Private equity funds
    3. Business Models
        3.1. Short selling
        3.2. Securities
        3.3. Off-balance sheet transactions
        3.4. Over-the-counter (OTC)
        3.5. Commodity trading
        3.6. Derivatives
        3.7. Leverage
    4. Regulatory institutions
        4.1. Rating agencies
        4.2. Central Banks
        4.3. International regulatory institutions
    5. Regulatory instruments
        5.1. Financial Transactions Tax (FTT)
        5.2. Capital Controls
        5.3. Offshore Financial Centres (OFCs)
        5.4. Counter-cyclicality
        5.5. Financial lobbyists
        5.6. Compensation and liability of management
    6. International financial governance
        6.1. IMF
        6.2. G20
        6.3. UNO
        6.4. FSF and others
    7. Short-term crisis management
        7.1. Bailing out financial institutions
        7.2. Economic recovery programmes
Alternatives to the Casino?                                                         8



2. Synopsis

This chapter gives a systematic over-       also analyzes, if these documents
view of specific financial markets re-      have said anything on the specific is-
forms proposed by all the different re-     sue: If an international organization or
ports of these intergovernmental orga-      civil society group is not mentioned in a
nizations as well as of the civil society   particular section, this is because it did
groups and the IIF. Along the lines set     not discuss this particular topic. This
out in the analytic grid in table 1, this   synopsis is necessarily very cursory
synopsis comprehensively analyzes,          and brief – some of the specific pro-
what the different institutions have said   posals and arguments will, however,
on different reform measures, instru-       be discussed in more detail in the fol-
ments, and institutions. Implicitly, it     lowing chapters.



2. 1. Regulating Banks and other Financial Institutions
2. 1. 1. Reserve Requirements                      implement a durble deleverag-
                                                   ing and calls for forward looking
It is generally agreed, that reserve re-
                                                   capital buffers – a mechanism to
quirements should be strengthened.
                                                   counter the procyclicality of the
The main problems discussed are lack
                                                   Basle II capital requirements re-
of or too little capital requirements,
                                                   gime.
bank’s self-regulatory risk assess-
ments of the Basle II regime and the           3. NGOs, if they comment on capi-
pro-cyclicality of existing capital re-           tal requirements, agree with the
quirement legislations. The main                  IMF that they should generally
cleavages lie in scale – raising capital          be raised (Beijing, NEF, Unions
requirements for which products, how              and WSF don’t address this is-
much and by what mechanisms.                      sue). Attac calls for upgrading
                                                  and creating a Basle III, Bank-
    1. G20 as well as FSF call for rais-
                                                  Track and FoEE call for the in-
       ing capital requirements only for
                                                  clusion of environmental and
       certain products – according to
                                                  social issues into the risk
       the G20 Washington Declara-
                                                  assessment process in the
       tion for structured credit and se-
                                                  Basle Capital Accord’s capital
       curitization activities, according
                                                  ratios, and the global unions de-
       to FSF for structured credit and
                                                  mand proper counter-cyclical
       off-balance sheet vehicles. The
                                                  asset requirements. In general,
       G20 London summit only un-
                                                  the most decisive effects of
       concretely demanded, „regula-
                                                  changing the rules for capital
       tion must prevent excessive
                                                  requirements would certainly be
       leverage“, and called for the im-
                                                  to broaden the scope of the
       plementation of capital buffers,
                                                  capital requirements regime to
       which should be included in the
                                                  all      financial    institutions,
       Basle II capital adequacy re-
                                                  including hedge funds and other
       gime by the Basle Committee
                                                  HLIs – a proposal shared by
       on Banking Supervision.
                                                  most civil society groups
    2. The IMF demands generally                  (although      sometimes       only
       raising capital requirements to            implicitly).
Alternatives to the Casino?                                                         9

2. 1. 2. Transparency                            reveal that transparency should
                                                 mainly be increased for other
Probably the greatest consensus on
                                                 market participants rather than
the causes of and possible remedies
                                                 for supervisors, let alone the
for the crisis is the lack and respec-
                                                 general public. In stark contrast,
tively the strengthening of transpar-
                                                 the Beijing Declaration demands
ency. Transparency is so widely
                                                 opening of the books to the pub-
shared as a demand not only because
                                                 lic, to be facilitated by citizens
it does not conflict with neoliberal or-
                                                 and worker organisations.
thodoxy – according to which lack of
transparency causes malfunctioning of
markets –, but also because it is ex-
                                           2. 1. 3. Regulation and supervision
tremely unspecific and related reforms
are hard to nail down. Important ques-     Regulation and supervision are at the
tions are, however, the following:         heart of most reform proposals and
                                           their specifics are very important. The
    1. Transparency for what products
                                           most crucial cleavages are:
       and markets? While the G20
       calls for increasing transparency      1. What should be regulated and
       only for complex financial in-            supervised? While only recently
       struments, risks and all losses,          it was generally regarded as
       most NGOs call for full trans-            self-evident, that financial mar-
       parency (Beijing, BankTrack,              kets work perfectly without regu-
       FoEE). In particular, FoEE and            lation, the crisis has drastically
       NEF propose full transparency             changed this situation – even
       of banks' risk assessment proc-           the G20 Washington summit
       esses, decision-making proce-             had to admit that all financial
       dures, clients, and transactions          markets, products and institu-
       and FoEE furthermore proposes             tions need to be regulated (or
       to require the disclosure of a            supervised) in order to prevent
       fund’s ethical investment poli-           financial chaos and pledged to
       cies, proxy voting policies and           do so. This pledge – going be-
       practices, and even portfolio             yond the statements by IMF,
       holdings.                                 FSF and even the UN Doha
                                                 Declaration – is, however, not
    2. Transparency proposed and im-
                                                 going to be fulfilled. Already the
       plemented by whom? While IMF
                                                 G20 London summit restricted
       and FSF call for the implemen-
                                                 its scope by promising to extend
       tation of the improved FSF dis-
                                                 regulation and oversight only
       closure guidelines, G20 and the
                                                 “systemically important financial
       IIF call on the private sector to
                                                 institutions, instruments and
       put forth proposals for increas-
                                                 markets.” While FSF and the
       ing transparency. NGOs have
                                                 UN Doha Declaration only
       not addressed this point, but the
                                                 called vaguely for “strengthen-
       contexts make it unambiguous,
                                                 ing” regulation and supervision,
       that democratically controlled
                                                 the European G20 propose
       regulators should set guidelines
                                                 regulating or supervising the en-
       for transparency rules (FoEE).
                                                 tire financial sector, explicitly in-
    3. Transparency towards whom?                cluding hedge funds. All NGOs
       This question is in statements            have called for regulating and
       by official organizations mostly          supervising the entire financial
       left open, although the contexts          industry. This apparent near
Alternatives to the Casino?                                                           10

        consensus, however, covers                  and supervisory institutions bear
        crucial disagreements in the de-            this responsibility), some NGOs
        tails.                                      have proposed more fundamen-
                                                    tal changes: Attac recommends
    2. Regulate according to which
                                                    that the European Parliament
       aim? While official organizations
                                                    becomes the prime regulator in
       leave this point entirely open
                                                    the European Union and that
       (implying that the only purpose
                                                    EU regulation should set the cri-
       of regulation is stability and the
                                                    teria for financial activities within
       prevention of future crisis),
                                                    the EU; and the Beijing Declara-
       many NGOs propose to include
                                                    tion and WSF call for the intro-
       social and ecological criteria into
                                                    duction of parliamentary and
       regulation. Attac proposes to
                                                    citizens’ oversight of the existing
       use regulation to direct all finan-
                                                    banking system (leaving open,
       cial means and services to sus-
                                                    how this is to be done con-
       tainable activities and poverty
                                                    cretely).
       eradication; the Beijing Declara-
       tion proposes to apply social
       (including conditions of labour)
                                             2. 1. 4. Competition and Cartels
       and environmental criteria to all
       lending; and BankTrack and            The financial industry is heavily con-
       FoEE recommend requiring              centrated and few financial institutions,
       banks to seek a social licence,       banks and institutional investors con-
       include    sustainability-oriented    trol most of the financial sector. This
       standards in banking supervi-         has increased the instability of the fi-
       sion.8                                nancial system, both because large
                                             institutions can significantly influence
    3. Regulate by which mechanism?
                                             the movements of prices and thus are
       Besides those points discussed
                                             able to manipulate and disturb market
       throughout this essay (which
                                             mechanisms and, more importantly,
       also official organizations have
                                             because some financial institutions are
       discussed, see below), some
                                             systemically important: if systemically
       NGOs propose further specific
                                             important large banks or funds go
       mechanisms: Attac proposes
                                             bankrupt, they threaten to destroy en-
       that all new financial products
                                             tire sectors of the financial industry (as
       need to be tested by supervi-
                                             vividly demonstrated after the collapse
       sors; BankTrack and FoEE pro-
                                             of Lehman Brothers).
       pose Green Know Your Cus-
       tomer Guidelines that prohibit        While official organizations entirely ne-
       lending to corporations that do       glect changing this situation in which
       not comply with social and envi-      the destiny of individual financial insti-
       ronmental law; and FoEE rec-          tutions literally threatens entire econo-
       ommends that stock exchanges          mies and thus millions of people, Attac
       and securities regulators should      and NEF both propose to decentralize
       require corporate compliance          the financial industry: Attac proposes
       with environmental and social         the prohibition of financial industry
       standards as a condition of list-     conglomerates which are too big to fail,
       ing on public exchanges.              or too interconnected to fail, and too
                                             complex to manage all potential risks;
    4. Who should regulate and super-
                                             and NEF calls for demerging those
       vise? Again left open by official
                                             banks that are too big to fail. Further-
       organizations (implying that es-
                                             more, Attac recommends a mechanism
       tablished national regulatory
Alternatives to the Casino?                                                        11

to achieve this decentralization: the         in the long run), the UN Doha Declara-
bigger the financial conglomerate, the        tion recommends addressing the rep-
lesser speculative products it can sell       resentation of developing countries in
or trade in.                                  these institutions. Unfortunately, the
                                              governance question regarding ac-
                                              counting standards is not even ad-
2. 1. 5. Investment Banking                   dressed by most NGOs or unions. Only
                                              Attac has called for accountant rule
Not addressed specifically by official        setting “to become again a(n in-
organizations, Attac, NEF and FoEE            ter)governmental matter”. Furthermore,
call for separating investment banking        NEF criticizes the private accountancy
from other financial activities like retail   firms involvement in the crisis and pro-
and merchant banking.9 Furthermore,           poses to hold accountancy firms ac-
Attac demands to drastically shrink the       countable and to ultimately make them
investment-banking sector, to fully           not-for-profits.
regulate and supervise the rest and to
create criteria that ensure that all in-      On the substance of what enhancing
vestment banking promotes the sus-            accounting standards means, however,
tainable development of societies.10          official organizations are silent. NEF
                                              proposes to require corporations to
                                              report on a country-by-country basis in
2. 1. 6. Accounting                           order to prevent or eliminate transfer
                                              mispricing and FoEE recommends dis-
Regarding the issue of accounting             closure laws and accounting standards
standards, the most important ques-           for securities should require reporting
tions are, who is to set these standards      of material environmental, social and
and what information these standards          other corporate responsibility data.
require financial corporations to dis-
close in their accounting.
G20, FSF and the UN Doha Declara-             2. 1. 7. Local, Public and Coopera-
tion agree on the need to improve in-         tive Banking
ternational    accounting    standards.       While entirely neglected by all official
While the UN Declaration is silent on         institutions, most NGOs (all but Bank-
details and the FSF only vaguely calls        Track, FoEE and WSF) promote the
on international accounting standard          strengthening of existing public and
setters to enhance their standards, the       not-for-profit banks and the creation of
G20 calls for close cooperation be-           new ones, although with varying em-
tween the private sector and the estab-       phasis. NEF focuses most intensely on
lished standard setters to ensure con-        strengthening this sector, especially
sistent application and enforcement of        highlighting the need to support local,
high-quality accounting standards and,        accessible banking services and
in the long-term, to create a single          economies (for details see above). At-
high-quality global accounting stan-          tac additionally proposes to exempt
dard.                                         public and cooperative banks from EU
While G20, FSF and IMF agree on               competition laws; and the global un-
tasking the established private sector        ions focus particularly on cooperative
bodies IASB and FASB with setting the         and mutual banks and targeted micro-
standards (the governance of which            finance schemes.11
the G20 vaguely promises to enhance
2. 2. Non-bank financial institutions

2. 2. 1. Hedge funds and other                funds“.
highly leveraged institutions (HLI)
                                              BankTrack, FoEE and the global un-
Hedge funds and other institutional           ions demand that hedge funds be
investors have been fiercely critiqued        regulated, BankTrack and FoEE fur-
as one of the main drivers of the de-         thermore call for the introduction of
stabilizing processes leading to the          significant new transparency, reporting,
financial crisis, since their speculative     and financial requirements for hedge
and highly leveraged activities consid-       funds. Only Attac and the WSF groups
erably contributed to the price peaks         have called for prohibiting hedge
and the instability of the entire financial   funds, since, so the argument, there is
system. However, in the official state-       “no benefit for the economy stemming
ments on the crisis, hedge funds are          from these operations” (Attac). Fur-
only mentioned in passing. The policy         thermore, Attac proposes that all funds
responses regarding hedge funds can           must publish their investment strate-
be ranked on a scale between the two          gies and management fees and that
extremes of leaving HLIs unregulated          the all profits of funds must be taxed
to simply prohibiting hedge funds.            more than labour income.
While absent in the FSFs and UNs
statements and only discussed in the
                                              2. 2. 2. Private Equity Funds
IMFs causal analysis, not in its policy
reform proposals, the G20 Washington          Even more so than hedge funds, pri-
Declaration proposed to harmonize             vate equity funds – in Germany fa-
private sector best practices for hedge       mously labelled „locusts“ by the social
funds. Going somewhat further, the            democrat’s chair Franz Müntefering –
European G20 preparatory meeting              are not discussed in official institutions’
called for regulating (or supervising)        statements. The NGO response is
the entire financial sector, explicitly       similar to the one towards hedge
including hedge funds. Somewhat less          funds: BankTrack, FoEE and the global
demanding the G20 London summit               unions call for strict regulation, while
states that only systemically important       Attac demands that this „untransparent
institutions should be regulated and          business model has to be stopped“
subject to oversight, but explicitly          since it serves „as a conveyor belt of
promised that “this will include, for the     shareholder capitalism to real econ-
first time, systemically important hedge      omy“.



2. 3. Business Models
2. 3. 1. Short Selling                        a later point in time, when the financial
                                              instrument has a lower price. Since the
Short selling is a practice by which the
                                              effects of short selling are highly de-
investor, often hedge funds, sells a
                                              stabilizing and have often accelerated
financial instrument that he does not
                                              the price fall of certain assets, they
own at the time of the sale. The aim is
                                              were banned in many countries follow-
to profit from an expected decline in
                                              ing the collapse of the US investment
the price of a financial instrument,
                                              bank Lehman Brothers in the autumn
which the seller intents to purchase at
Alternatives to the Casino?                                                           13

of 2008. These bans, however, have            lows firms to keep large capital expen-
since been lifted in most countries.          ditures off of a company’s balance
                                              sheet through various classification
Restricting short selling is not dis-
                                              methods (thus for example decreasing
cussed as a policy option by the official
                                              the leverage ratios and circumventing
institutions (although the IMF seems
                                              Basle II capital requirement restric-
somewhat sceptical in this regard12),
                                              tions). Off-balance sheet vehicles often
as well as by most NGOs and the
                                              involve futures, forwards, other deriva-
global unions. Only Attac and the Bei-
                                              tives or joint ventures as well as hold-
jing Declaration discuss this issue and
                                              ing these assets in so called Special
demand entirely banning short selling.
                                              Purpose Vehicles (SPVs) or Special
                                              Purpose Entities (SPEs). They have
                                              been deeply involved in the financial
2. 3. 2. Securities                           crisis and are therefore at the centre of
Since securitized credit in the US-           many critical analyses.
subprime market had triggered the cur-        IMF and UN do not discuss off-balance
rent financial crisis and securitization is   sheet vehicles. The proposals by G20
thus at the centre of international dis-      and FSF on dealing with off-balance
courses about the crisis, it should be of     sheet vehicles reveal their understand-
no surprise that pertinent reform pro-        ing of the destabilizing effects of not
posals are extremely controversial.           enforcing reporting and thus not being
While the IIF demands, that „securitiza-      able to supervise all financial activities,
tion has been and should remain a             while at the same time trying to not ban
highly useful capital management tool“        the practise of off-balance sheet trans-
which is generally „beneficial“ for the       actions. G20 and FSF call on private
financial sector13, even official interna-    accounting standard setters to address
tional organizations like the G20 and         weaknesses in accounting and disclo-
the FSF call for improving the regula-        sure standards for off-balance sheet
tion and accounting of securities and         vehicles and propose that these be
demand that capital requirements for          included in the financial statements of
highly risky securities be raised.            banks and financial institutions. The
                                              FSF      furthermore      proposes       to
Unfortunately, many civil society             strengthen capital treatment for off-
groups have not discussed this ex-            balance sheet transfers.
tremely important topic in their reform
agendas – those that have done so,            While all NGO statements imply, that
however, propose strictly regulating          all financial activities should be regu-
securitization activities (global unions)     lated and supervised, only Attac and
or demanding their disclosure of mate-        the global unions explicitly demand the
rial environmental, social and other          prohibition of all off-balance sheet
corporate responsibility data (FoEE).         transactions. NEF supports a ban of
Attac proposes to restrict securitization     OBS for ‘exotic’ financial instruments;
to institutions under the strict control of   BankTrack and FoEE propose prohibit-
governments and to entirely prohibit          ing SPVs and Structured Investment
risky securities such as CDOs.                Vehicles (SIVs).


2. 3. 3. Off-balance Sheet Vehicles           2. 3. 4. Over-the-Counter (OTC)
One way of circumventing existing             Another way to circumvent supervision
regulation are off-balance sheet vehi-        is to trade not on regulated stock ex-
cles (OBS). This form of financing al-        changes or future exchanges, but di-
Alternatives to the Casino?                                                            14

rectly between two parties, „over-the-           related   commodities    (BankTrack,
counter“. Often, extremely risky finan-          FoEE, global unions, WSF).
cial products, especially derivatives,
have been traded OTC.
                                                 2. 3. 6. Derivatives
The reform proposals of the official
international institutions concerning            Derivatives are financial instruments,
this obscure business model are only             whose values are derived from the
slightly critical and first of all try to pre-   value of the underlying, which can be
serve the status quo. IMF and FSF                assets like equities, residential mort-
merely recommend that authorities                gages, real estate, loans and bonds or
encourage market participants in the             indexes like interest rates or exchange
private sector to develop better clear-          rates or pretty much anything else. The
ing and settlement mechanisms for                main types are forwards, futures, op-
over-the-counter products. And the               tions, and swaps. Although they can
G20, which vaguely calls for expanding           theoretically be used to mitigate risks,
OTC derivatives market transparency              their use has been heavily speculative
and for speeding efforts to reduce the           and no account of the causes and un-
systemic risks of OTC derivatives                folding of the financial crisis can deal
transactions, at the same time pledges           without putting derivatives – and par-
to ensure that the infrastructure for            ticularly those derivatives traded OTC
OTC derivatives can support growing              – centre stage.
(!) volumes.
                                                 Nevertheless, official financial institu-
In the civil society spectrum, only Attac        tions have not put forth proposals to
and the WSF groups demand a ban on               effectively regulate or even supervise
OTCs, while BankTrack and FoEE call              these speculative financial instruments.
for derivatives to be only traded in             As has been discussed in the section
regulated exchanges.                             on OTCs, G20, FSF and IMF merely
                                                 propose lukewarm reforms and the
                                                 G20 even pledges to ensure that the
2. 3. 5. Commodity Trading                       infrastructure for OTC derivatives can
                                                 support growing volumes.
Speculation on food prices has played
a decisive role in the price bubble in           In contrast, all civil society organiza-
food commodity prices in 2007/2008,              tions demand far reaching reforms of
which, so the United Nations, has                derivatives trade, ranging from regulat-
pushed some 120 million additional               ing derivatives (global unions) to pro-
people into poverty.14 This problem,             hibiting trade in derivatives altogether
however, is not addressed in most of             (Beijing). In between, BankTrack and
the official organizations’ statements.          FoEE demand prohibiting what they
The UN Doha Declaration only vaguely             understand of as „unlegitimate deriva-
recommends acknowledging the „spe-               tives“ and Attac calls for a ban on
cial challenges emerging from volatility         purely speculative derivatives and on
in international commodity markets,              stock options. Furthermore, according
particularly the volatility of food and          to BankTrack, FoEE and Attac, the
energy prices“.15 In contrast, all civil         remaining derivatives should be stan-
society groups including the global un-          dardized, authorized and only traded in
ions have called for banning or drasti-          regulated exchanges. Similarly, NEF
cally curbing speculation in food com-           demands bringing onto the balance
modities (NEF being the only excep-              sheet, rigorously checking and officially
tion). Some have expanded this call to           licensing all ‘exotic’ financial instru-
radically limit speculation to all energy-       ments.
Alternatives to the Casino?                                                         15

2. 3. 7. Leverage                            „regulation must prevent excessive
                                             leverage“, however not giving any de-
In addition to all these specific busi-
                                             tails on how this could be achieved.
ness models characteristic of neolib-
                                             The FSF promotes the strengthening
eral finance capitalism, the most basic
                                             of supervisors’ existing guidance on
and wide-ranging way of increasing
                                             the management of exposures to lev-
profits in the financial industry has
                                             eraged counterparties. Contrary to this
been to increase the so called leverage
                                             vague statement, the IMFs outlook on
of a financial institution, instrument or
                                             the financial crisis focuses excessively
product. This means, borrowing money
                                             on leverage – the crisis is described as
to supplement existing funds (often ten
                                             disorderly deleveraging and the reform
to fifty times the amount of the original
                                             proposals are supposed to lead to an
funds) for investment with the aim of
                                             orderly unwinding of leverage. Most
potentially magnifying and enhancing
                                             interestingly, in its 2009 update to the
the profits, but – in the case of a nega-
                                             GFSR, the IMF has argued more gen-
tive outcome – also magnifying the
                                             erally, that a viable financial system of
loss. This has been done exponentially
                                             the future will need to be less lever-
before in recent years and due to the
                                             aged.
highly complex and obscure nature of
this leveraging processes it is still not    Not explicitly mentioned by other civil
clear, how much further financial insti-     society, only Attac and BankTrack call
tutions will have to delevarage, i.e. re-    for limiting the leverage in the financial
duce borrowings.                             system. Attac proposes to put a ceiling
                                             on assets under control of financial
While being a part in the causal analy-
                                             institutions and BankTrack demands
sis of the G20s Washington Declara-
                                             the introduction of stricter leverage ra-
tion, excessive leverage is not ad-
                                             tio requirements for banks and non-
dressed directly in the G20s reform
                                             bank financial institutions.
proposals. This has changed in the six
months leading to the London Summit,
whose final Communique stresses that



2. 4. Regulatory Institutions

2. 4. 1. Credit Rating Agencies              dressing investors’ over-reliance on
                                             CRAs (FSF).
Credit Raging Agencies (CRAs) were
one of those institutions heavily criti-     In contrast, some NGOs have been
cized for their involvement in the crisis.   promoting more fundamental changes
While not discussed by IMF, UN and           of the rating process: Attac proposes
most of the civil society groups, the        publicly controlling all rating agencies;
related reform proposals considerably        obliging CRAs to be financed through a
diverge from each other. Both G20            fund to which all the users of the rat-
summits and the FSF recommend the            ings and the issuers of financial prod-
implementation of strengthened IO-           ucts contribute; and making CRAs rate
SCO standards for CRAs (G20, FSF             social and environmental risks. Going
and UN Doha), registering the most           even further, the global unions have
important CRAs (G20), clearly differen-      called for establishing public rating
tiating ratings for complex structured       agencies, while at the same time ad-
products from other ratings and ad-          dressing the oligopolistic structure of
                                             the credit rating agency industry – simi-
Alternatives to the Casino?                                                              16

lar to Attac, they also proposed non-           central banks in line with democrati-
financial sustainability ratings.               cally determined social, environmental
                                                and expansionary objectives, and the
                                                global unions finally propose expand-
2. 4. 2. Central Banks                          ing central banks’ mandate to include
                                                deterring and detecting speculative
It is not clear, if official institutions de-   financial bubbles. Furthermore, Bank-
mand a changing role, mandate or                Track recommends that sustainability-
structure for central banks. The G20            oriented standards be incorporated into
has only called on supervisors and              the extension of central bank-provided
central banks to develop internationally        credit and insurance.
consistent approaches for “liquidity
supervision of, and central bank liquid-
ity operations for, cross-border banks.”
                                                2. 4. 3. International Regulatory In-
Somewhat more to the point, the IMF
                                                stitutions
has detailed a variety of areas, in
which central bank work should be en-           The crisis has clearly demonstrated the
hanced, particularly oversight of banks         need for international regulation and
liquidity management, safeguarding              thus for international regulatory institu-
the liquidity and functioning of threat-        tions. This is, however, probably the
ened financial sectors, increased co-           area in the reform debates, on which
operation and communication between             official institutions as well as civil soci-
central banks, and – so the IMF                 ety groups have done least work – re-
stresses – the additional costs central         lated proposals are rare and difficult to
banks face due to their liquidity opera-        assess. National regulatory and super-
tions in the crisis should be paid for by       visory institutions evidently still have to
governments, in order to “reinforce its         take the bulk of responsibility for regu-
independence”.16 Similarly, the FSF             lating and supervising the increasingly
has called on central banks to enhance          international financial system. Besides
their operational frameworks and de-            limited regional advances in the Euro-
mands that authorities strengthen their         pean Union, international regulatory
cooperation for dealing with stress.            institutions are widely regarded as en-
                                                tirely unrealistic for the near future.17
In contrast to these statements, which
                                                But the crisis has initiated a variety of
mainly reinforce the role central banks
                                                efforts to increase international regula-
have been playing so far only adapted
                                                tory and supervisory cooperation.
to crisis circumstances, civil society
groups have demanded both democ-                G20, IMF, FSF and UN call for enhanc-
ratic control over central banks and a          ing and strengthening international
change in the operations of central             regulatory cooperation. The G20 and
banks. Attac specifically demands in-           the FSF furthermore have promoted
stalling democratic control over the            setting up international colleges of su-
European Central Bank (ECB) via na-             pervisors for the largest financial insti-
tional parliaments and the European             tutions to compensate for the lack of a
Parliament and both the Beijing Decla-          global supervisor.
ration and the global unions demand
                                                Interestingly, although all civil society
that central banks become publicly ac-
                                                groups call for a global and democratic
countable institutions. On the work of
                                                control of the financial system, tasking
central banks, Attac proposes that their
                                                the UN with leading the reform proc-
monetary policy should focus on em-
                                                ess, most of them are silent on the
ployment and just distribution, the Bei-
                                                question of setting up a global regula-
jing Declaration demands overhauling
                                                tor or supervisor. Only Attac proposes
Alternatives to the Casino?                                                          17

that the UN be tasked with strictly            specifically emphasises strengthening
regulating and re-orienting the financial      the regulatory powers of the European
system towards poverty reduction and           Union.



2. 5. Regulatory Instruments

2. 5. 1. Financial Transaction Tax             2. 5. 2. Capital Controls
The introduction of financial transaction      Somewhat more radical measures than
taxes both as a tax on every stock,            merely slowing down the speed of in-
swap, derivative, or other trade on ex-        ternational financial capital flows by a
changes or – more importantly – as a           small Tobin-style tax are direct controls
small tax on all foreign exchange deal-        on capital movements. This measure,
ings, would be a simple tool to decel-         particularly important for small econo-
erate international capital flows and          mies to protect themselves from finan-
thereby effectively discourage specula-        cial turmoil (as has been demonstrated
tion. No official international institution,   by the Asian Crisis 1997) is not pro-
not even the UNs Stiglitz commission,          moted by international organizations
has endorsed FTTs.                             and only demanded by few civil society
                                               groups. NEF calls for improving checks
In contrast, all civil society groups in-
                                               and balances by introducing capital
cluding the global unions collectively
                                               control, Attac demands placing limits
demand the introduction of financial
                                               on unrestricted free trade and free
transaction taxes. Attac – a network
                                               capital mobility worldwide, and the
established around the call for the in-
                                               WSF groups (which include Attac and
troduction of the so called Tobin tax on
                                               BankTrack) demand the establishment
currency transactions –, the Beijing
                                               of international permanent and binding
Declaration, NEF, FoEE, the global
                                               mechanisms of control over capital
unions and the WSF groups collec-
                                               flows.
tively recommend a tax on foreign ex-
change trade. Some civil society actors
also call for taxes on dealings at na-
                                               2. 5. 3. Offshore Financial Centres
tional stock exchanges (Attac, FoEE,
                                               (OFCs)
only implicitly NEF and Beijing).18 Civil
society groups only diverge on the             The most prominent demand on finan-
question what to do with the proceeds          cial market reforms in the civil society
of FTTs. While left open by some               spectrum is the call to close all off-
groups (Attac, Beijing), others propose        shore financial centres and tax havens.
using the proceeds to finance the bail-        On the other hand, official international
out, to address critical social and envi-      organizations have been conspicu-
ronmental needs (FoEE), to support             ously silent on OFCs (IMF, FSF, UN).
financial institutions that bear social        The G20 Washington Declaration only
objectives, such as pension funds              promised lukewarm reforms that de-
(global unions) or to finance global           flect from the main issue. In contrast,
public goods (WSF).                            the European G20 preparation meeting
                                               in February 2009 has promised to
                                               promote at the G20 summit in London
                                               definitive actions against tax havens,
                                               including sanctions. The outcome of
                                               the London summit was the publication
Alternatives to the Casino?                                                         18

of OECD lists of countries not adhering     This rather technical issue is entirely
to the international standards estab-       neglected by all NGOs and civil society
lished by the OECD – standards, which       networks – only the global unions have
are very lax and neglect legal forms of     promoted ensuring proper counter-
tax evasion.                                cyclical asset requirements. Even
                                            though several regulatory proposals
All civil society groups analyzed in this
                                            put forth by civil society groups will ef-
paper call on states to take effective
                                            fectively decrease the pro-cyclicality of
measures to end the practice of cir-
                                            the financial system – probably more
cumventing regulation and tax obliga-
                                            so than the recommendations by IMF,
tions by funnelling money through
                                            FSF and G20 –, NGOs should never-
OFCs. While some simply call for clos-
                                            theless focus on the problem of includ-
ing tax havens (Beijing, global unions),
                                            ing counter-cyclicality into regulatory
others propose specific measures such
                                            reforms.
as prohibiting banks’ transactions with
entities based in OFCs (Attac, Bank-
Track, FoEE), closing tax havens
                                            2. 5. 5. Financial Lobbyists
through international information ex-
changes (Attac) or deducting at source      Another regulatory measure, which is
all income paid to financial institutions   structurally disregarded by official insti-
in tax havens (NEF).                        tutions but nonetheless important and
                                            possibly highly influential, is restraining
                                            the power of financial lobbyists. Making
2. 5. 4. Counter-cyclicality                the rules of global finance and over-
                                            seeing the financial system are both
One of the issues that increasingly
                                            highly complex processes prone to be
pervades mainstream analyses of the
                                            influenced by financial lobbyists.
causes of and remedies for the finan-
                                            Therefore, BankTrack and FoEE call
cial crisis is the problem of the pro-
                                            for decreasing the political power of
cyclicality of some of the rules and
                                            financial institutions and Attac de-
practices governing financial markets.
                                            mands restricting and making account-
Most comprehensively, the G20 Wash-
                                            able all lobbyists and consultants of the
ington summit recommended that
                                            financial industry and other large cor-
global governance institutions propose
                                            porations.
mechanism to mitigate „pro-cyclicality,
including the review of how valuation
and leverage, bank capital, executive
                                            2. 5. 6. Compensation and Liability
compensation, and provisioning prac-
                                            of Management
tices may exacerbate cyclical trends.“
This has been taken up at the London        What has been stirring up the strong-
summit, where the G20 leaders pro-          est discontent with the financial indus-
moted setting up capital buffers to         try in the general public were extrava-
counter the cyclical effects of capital     gantly large salaries and bonuses for
adequacy ratios. IMF as well as FSF         the managers of large banks and
have specifically focused on the Basle      funds. Particularly, the short-term ori-
II capital requirements regime and its      entation of bonuses and its pro-cyclical
pro-cyclicality. Furthermore, the IMF       effects have been criticized for setting
has proposed building up a capital          incentives for managers to still take
cushion of some 30 to 40 percent            higher short-term risks and increase
above normal levels in good times to        leverage to boost quarterly reports.
absorb shocks.                              Reform proposals on this topic are
                                            therefore not missing in most state-
Alternatives to the Casino?                                                        19

ments on financial market reforms. The       recommendations to be implemented
main question is, if regulations govern-     mainly by the private sector.
ing compensation should be set by
                                             Almost all civil society groups call for
public regulators or if the issue is to be
                                             drastically limiting management com-
left to the private industry itself.
                                             pensation (except for Beijing and
In accord with the private industry’s        WSF), either by introducing a ceiling
demands, IMF and FSF have been               (Attac, NEF), by introducing a maxi-
promoting a self-regulatory approach,        mum pay differential (NEF), or by
which recommends the private sector          changing the role of compensation and
to align its compensation schemes with       bonus systems so as to reward long-
a risk-adjusted and long-term orienta-       term financial success and the imple-
tion. Similarly, the G20 Washington          mentation of environmental and social
summit demands taking “voluntary or          policies and programs (BankTrack,
regulatory action”, leaving open the         FoEE) or general welfare (Attac). The
question of who should set the stan-         global unions simply call for curbing
dards. While the European G20                short-termism in compensation re-
preparatory meeting agreed on tasking        gimes. Additionally, FoEE have raised
the FSF with establishing standards for      the issue of managers’ liability and call
sustainable and long-term oriented           for holding executives fully account-
compensation, the G20 London sum-            able, persecuting them to extend of the
mit endorsed the then published FSF          laws and increasing fines and penalties
Principles for Sound Compensation            in the financial sector.
Practices, a document full of lukewarm



2. 6. Governance

Most likely the crucial question in these    2. 6. 1. International Monetary Fund
debates is the question of governance:
                                             Due to the intense criticism levelled
Who should govern the reform process
                                             against the IMFs failures to adequately
itself, and who should govern a future
                                             deal with the financial crisis in emerg-
financial system. These are also the
                                             ing and developing countries in the
questions where official organizations
                                             1990s and early 2000s, the IMF has a
and civil society groups disagree most
                                             strong interest in becoming a central
clearly with each other. On the one
                                             part of a future financial architecture
hand, G20, IMF and FSF propose a
                                             and thus reestablish its tarnished iden-
reform process and a future financial
                                             tity and global power.
system lead by the established Bretton
Woods Institutions complemented by           Democratizing the IFIs: It seems to be
the G20 and implemented by the es-           consensual that international financial
tablished institutions of financial gov-     institutions have to be democratized to
ernance. In contrast, the United Na-         some degree, particularly the IMF and
tions together with a variety of civil so-   the FSF (but also the World Bank). The
ciety groups demand that the reform          statements on financial market reforms
process be led by the United Nations         only diverge on the question of the de-
(Attac, Beijing, FoEE). In terms of the      gree of this process – while the G20
future financial system, the discussion      only demands the strengthening of the
is still more complex.                       power of emerging countries within the
                                             IMF, the UN commission calls for mak-
                                             ing developing countries “adequately
Alternatives to the Casino?                                                         20

represented in the multilateral institu-     absent at the Washington summit,
tions” and the global unions demand          Gordon Brown has invited the New
generally democratizing IFIs.                Partnership for Africa's Development
                                             (NEPAD), the Association of South
The role of the IMF in a future financial
                                             East Asian Nations and the African
architecture is strengthened by the
                                             Union Commission to send delegates
G20, the FSF, the IIF and the global
                                             to the G20 London summit, thereby
unions: The G20 has been demanding
                                             increasing the G20s global representa-
that the IMF be tasked with the surveil-
                                             tion considerably. The G20s role in the
lance of the interconnections between
                                             financial sector is not discussed in the
the financial sector and the real econ-
                                             documents analyzed and will depend
omy, with preventing future crisis and,
                                             on the future negotiations and devel-
most importantly, the G20 London
                                             opments.
summit strengthened the power and
especially the ressources of the IMF by      Particularly the success of the London
providing additional funds and by issu-      summit – at least the publicly per-
ing $250 billion in Special Drawing          ceived success – is very likely to fur-
Rights (SDR). The FSF has called for         ther increase the power of the G20 in
intensifying the cooperation between         crisis and financial market manage-
FSF and IMF, “with each complement-          ment and, simultaneously, to contribute
ing the other’s role.” And the G20 has       to the decline in legitimacy and rele-
reproduced this in its Washington Dec-       vance of traditional informal fora like
laration, stating “the IMF, with its focus   the G7/8. Other international govern-
on surveillance, and the expanded            ance bodies like the IMF, the World
FSF, with its focus on standard setting,     Bank, the FSF, IOSCO or the BIS are
should strengthen their collaboration”.      under increasing pressure to either
Also the global unions propose to fur-       extend their membership at least to the
ther strengthen the role of the IMF in       G20 countries or to reform their inter-
immediate crisis response – the funds        nal decision making procedures to give
of the IMF should be increased for           more weight to G20 countries.
countries facing immediate crises that
                                             In the civil society sector the G20 is
are beyond their means to resolve.
                                             severely criticized for circumventing
Importantly, however, the unions de-
                                             other more democratic institutions like
mand that this support be given without
                                             the UN. Only the global unions accept
austerity conditionalities. In contrast,
                                             the G20 as a legitimate forum by ask-
other civil society groups promote radi-
                                             ing it to increase the IMFs lending fa-
cally curbing the power of the Bretton
                                             cilities. The other civil society groups
Woods Institutions (Attac, FoEE) or
                                             simply neglect it and call for enhancing
even propose to phase out the World
                                             the UNs role in the financial sector –
Bank, IMF and WTO (Beijing).
                                             but the WSF-Declaration on financial
                                             reforms summarizes the implicit con-
                                             sensus succinctly: “the G20 is not the
2. 6. 2. G20
                                             legitimate forum to resolve this sys-
The role of the G20 in a future global       temic crisis.“
financial architecture is still open –
even who actually is part of the G20 is
still being negotiated. World Bank           2. 6. 3. United Nations
Chief Robert Zoellick for example has
                                             The United Nations is the only interna-
argued for amending the G20 group
                                             tional institution, which has at least the
with developing countries.19 And while
                                             potential to serve as a democratic
developing countries where blatantly
                                             global governance body – and accord-
Alternatives to the Casino?                                                        21

ingly, both the UN itself as some civil     form process. The FSFs specific focus
society groups like Attac, the Beijing      will be on establishing and setting
Declaration, FoEE and the WSF               standards for the global financial sys-
groups call for a UN-led process. But       tem and, as the London summit de-
the UN is not even mentioned in state-      clared, to „collaborate with the IMF to
ments and reports by the G20, the IMF       provide early warning of macroecono-
and the FSF.20                              mic and financial risks and the actions
                                            needed to address them.“ Unfortu-
The only statement, which has in some
                                            nately, all civil society reports do not
detail envisioned a role for the UN in
                                            discuss the role of this newly emerging
global finance, is that by Attac. Attac
                                            global governance body.
demands that an appropriate institu-
tional setting under the auspices of the
UN be set up to strictly regulate and re-
                                            Beyond these institutions, there are
orient the financial system towards eq-
                                            some other proposals that will only be
uity and sustainability. This institution
                                            mentioned in passing. The IIF pro-
should not only prevent financial crisis.
                                            poses a “Global Financial Regulatory
Rather, so the Attac declaration, it
                                            Coordinating Council”, organized under
should also prevent the build up of
                                            the umbrella of the expanded FSF, and
huge trade surpluses and current ac-
                                            encompassing the Basel Committee,
count surpluses and corresponding
                                            IOSCO, IAIS and leading central
deficits and debts through international
                                            banks. While this would probably be
interventions and should serve as the
                                            one of the least democratically ac-
global decision-making forum for finan-
                                            countable governing bodies, at the
cial liberalization.
                                            other extreme, the Beijing Declaration
                                            proposes establishing a “people’s in-
                                            quiry into the mechanisms necessary
2. 6. 4. FSF and others
                                            for a just international monetary sys-
Even more so than the IMF, the mem-         tem”. In general, all civil society groups
bership and power of developing and         promote increasing the democratic
emerging countries in the FSF needs         control and accountability of the finan-
to be strengthened. At the G20 summit       cial system. For example, the global
in Washington it was agreed that the        unions demand that working people
membership of the FSF will be ex-           have a seat at the table in the meet-
panded to include emerging econo-           ings and institution which will decide on
mies and March 2009 the FSF mem-            the future financial architecture, Bank-
bership was extended to all G20 coun-       Track promotes democratic participa-
tries, Spain and the European Com-          tion in designing a new global financial
mission. The FSF – which was re-            order, and FoEE recommend that all
named Financial Stability Board (FSB)       people have full and meaningful par-
– is likely to play an increasing role in   ticipation in national and international
the future financial governance struc-      economic decision-making.
ture and particularly in the ongoing re-
Alternatives to the Casino?                                                       22


2. 7. Short-term Crisis Management

2. 7. 1. Bailing out Financial Institu-     demands a levy on nationalised bank
tions                                       profits with which to establish citizen
                                            investment funds to support poor
Bailing out financial institutions has
                                            communities.
become one of the most controversial
aspects of the financial crisis. The G20
have promised to take „whatever fur-
                                            2. 7. 2. Economic Recovery Pro-
ther actions are necessary to stabilize
                                            grammes
the financial system“ – these meas-
ures, almost all of which demand            Implementing economic recovery pro-
strong state involvement in the finan-      grammes – classical Keynesian de-
cial sector, should, however, only be       mand side policies to stimulate the
temporary, should have minimal distor-      global economy threatened by a deep
tions, and should be unwound in a           recession – is another controversial
timely, well-sequenced and coordi-          and highly complex issue. The official
nated manner. While not focusing on         institutions take on recovery pro-
this issue, IMF and FSF have also ad-       grammes generally favours calling for
vocated the course taken so far by          internationally coordinated stimulus
most economies – using tax payers’          programmes at a scale probably not
money to bail out the financial industry    sufficiently large to halt the recession.
without making this a long-term state       Even the $5 trillion of already dis-
involvement in the financial sector.        bursed or promised funds of all G20
                                            countries or the additional $1.1 trillion
In contrast, most civil society groups
                                            negotiated in London (most of which is
have promoted a different kind of bail-
                                            only added up out of already promised
out: Attac, the Beijing Declaration and
                                            payments), are not enough.
FoEE have strongly demanded full-
scale socializations or nationalization     Interestingly, several civil society
of those banks, whose shareholders          groups have been promoting innova-
are unable to repay debts and interests     tive ways to counter the downward spi-
(instead of simply nationalizing losses).   ral of economic developments – meas-
Those banks which have been nation-         ures that would at the same time at-
alized or have received state funding       tempt to solve another problem: cli-
should also change their business           mate change. Civil society groups have
practices. BankTrack demands that           called for launching a “Green New
bailed-out banks play a crucial part in     Deal” – a global spending and invest-
transforming the economy to a socially      ment programme, aimed at stimulating
and environmentally sustainable path        the crisis-affected economies threat-
(as part of the Green New Deal), and        ened with recession while at the same
FoEE highlight their responsibility to      time directing financial resources and
foster an environmentally sound future.     the economy towards achieving social
On the question of who should pay for       justice and sustainable, low carbon
the bailouts, Attac has proposed the        production and consumption systems
introduction of a crisis fund, which is     (BankTrack, NEF, global unions). This
financed through a special tax on fi-       call is also increasingly taken up by
nancial incomes over 50.000 Euro and        official institutions and governments,
a 1 percent extra tax on all corporate      first of all the new Obama administra-
profits in the financial sector. Some-      tion – negotiations on a Green New
what differently, the Beijing Declaration   Deal are likely to have a major effect
Alternatives to the Casino?                                                       23

on the future of the economic crisis. A      strengthening the demand of poor
Green New Deal should however be             people. For example, the WSF groups
critically assessed further, in particular   have demanded a new international
if taken up by governments and inter-        system of wealth sharing by imple-
national organizations, for its real eco-    menting a „progressive tax system at
logical and social impacts.                  the national level and by creating
                                             global taxes (on financial transactions,
While a few civil society groups have
                                             polluting activities and high income) to
not discussed economic recovery pro-
                                             finance global public goods“ (similar
grammes (FoEE), others done so indi-
                                             statements in the Attac and Beijing
rectly. Global redistribution systems,
                                             declarations).
although not framed in terms of eco-
nomic recovery programmes, might
achieve huge stimulus effects by
Alternatives to the Casino?                                                      24


3. Civil Society, Non-Governmental Organizations and Un-
ions

Similar to the official international or-   within other crises, and their specific
ganizations’ surprise at the speed and      financial market proposals. The next
depth of the crisis, most civil society     important document that appeared,
actors were unprepared in their analy-      after Attac published its reform agenda
sis and reform proposals as the finan-      in September, is the Beijing declara-
cial crisis swept the globe and increas-    tion, which came out of the Asia-
ingly affected the real economy. Con-       Europe People’s Forum in October
trary to vibrant, long-lasting and di-      2008. Other civil society groups like
verse debates among social move-            Friends of the Earth Europe (FoEE),
ments, nongovernmental organizations        the New Economics Foundation (NEF)
(NGOs) and unions on topics such as         and the NGO-network BankTrack have
environmental degradation, human            released their proposals shortly before
rights or free trade, the debate on re-     the G20 meeting in Washington in the
forming the international financial ar-     first half of November. Additionally, a
chitecture was comparatively undevel-       statement by an association of global
oped before the crisis and involved few     unions will be discussed, and a short
actors. Before the dramatic end of          call to action on financial market re-
Lehman Brothers had made it blatantly       forms by social movements gathered
evident to everybody that the crisis will   at the WSF in Brazil at the beginning of
not fade away and will affect all other     February 2009.
aspects of the global economy, the
                                            These civil society groups can be
only comprehensive statement is a
                                            broadly classified according to their
declaration published in early Septem-
                                            general focus:
ber 2008 by a network of Attac groups
from different European countries. Af-         -   Financial markets: Some of the
ter the collapse of Lehman Brothers                organizations and networks
had deepened the crisis, however, a                have for long worked on finan-
broad process of discussion within civil           cial markets, especially Attac,
society circles took off, accelerated by           which was founded around de-
the G20s Washington summit in No-                  mands for a Tobin tax but has
vember 2008. Since then, the financial             since taken up many more is-
crisis increasingly pervades all other             sues, and BankTrack, which has
discourses and contexts of discussion              particular expertise on commer-
– the financial crisis is addressed cu-            cial banks.
mulatively in documents, reform agen-
das and calls for action on pretty much        -   Environment: The rules govern-
every topic around which social                    ing financial markets have so far
movements and unions organize and                  almost entirely ignored envi-
work.                                              ronmental issues. Although it is
                                                   clear, that financial markets
This chapter gives a broad overview                powerfully affect the environ-
over some of the most important civil              ment and that the neoliberal re-
society publications on financial market           gime of liberalized financial
reforms. These will be presented in                markets has had disastrous
chronological order, discussing their              consequences for the well-being
respective analytical framework, their             of the planet, this issue has
contextualization of the financial crisis          been neglected in environ-
Alternatives to the Casino?                                                        25

        mental debates. Only recently,         -   Civil society networks and the
        environmental NGOs have be-                South: Other statements come
        gun to address the interconnec-            from broad networks of civil so-
        tions between financial markets            ciety actors. Accordingly, the
        and the environment. Two                   Beijing Declaration and the
        statements by FoEE and NEF                 document of the WSF groups
        are discussed in this report.              have the least specific focus
                                                   and involve the broadest range
    -   Unions: The financial crisis has
                                                   of signatories. They are also the
        initiated a whole range of work
                                                   only statements analyzed in this
        on financial markets by unions –
                                                   paper with significant involve-
        this paper focuses on one of the
                                                   ment of groups from the
        best reports, a Declaration by a
                                                   South.22
        network of global unions.21



3. 1. ATTAC
The first civil society organization to     globally, to “decreasing labor, social
release a comprehensive report on the       and environmental standards as well
financial crisis and necessary financial    as to the privatization of public goods
market reforms was Attac. Already in        and services.”
September 2008, before the collapse
                                            However, there is hope. This crisis, so
of Lehman brothers, ATTAC members
                                            the Attac statement, opens an “historic
from different European countries pub-
                                            window of opportunity“, which has to
lished a statement called “The time has
                                            be used by “pressure from public opin-
come: Let's shut down the financial
                                            ion”. It marks the “end of a historical
casino”, which sets out in great detail
                                            period: the system of financial capital-
an agenda for financial market re-
                                            ism, a system driven by the only
form.23
                                            search for maximum profit”. Although
                                            critics have since long criticized finan-
                                            cial capitalism and predicted its col-
Analytical framework:
                                            lapse, this system, so Attac’s analysis
The title of the statement already re-      “destroyed itself as a result of its own
veals its specific focus: prohibiting the   inherent contradictions.”
speculative elements of financial mar-
kets. Attac presents a detailed analysis
of the roots and quality of the crisis.     The financial crisis in the context of
The document emphasizes that this           other crises
heaviest crisis since the Great Depres-
                                            After having characterized the crisis as
sion in 1929 is systemic in a double
                                            systemic and predictable, Attac argues
sense: It is a systemic crisis both of a
                                            that official reform discourses do not
certain kind of capitalism, in which in-
                                            go far enough in that, by focusing ex-
ternational finance plays a dominant
                                            clusively on the financial industry and
role, and of a certain mode of thinking,
                                            stability, they neglect financial capital-
the neoliberal paradigm of economic
                                            ism’s “disastrous consequences on
theory. This system of financial capital-
                                            distribution and democracy”. Both is-
ism, which was dominated by financial
                                            sues and the problem of environmental
interests and logics like short-term
                                            destruction are addressed in Attac’s
profit maximization, has led to increas-
                                            report and remedies are proposed.
ing inequality within countries and
Alternatives to the Casino?                                                       26

Financial market reform proposals                  tion of capital incomes, an
                                                   obligation to make wages grow
Under the heading “Another finance
                                                   not slower than the economy
system is possible: Stability and soli-
                                                   and ending the privatization of
darity before profits”, the statement
                                                   social systems and important in-
proceeds to set out five general princi-
                                                   frastructure.
ples, that all specific measures of re-
form should comply with, “in order for         4. Mitigating the effect of the crisis
single proposals to be acceptable as              on the real economy and
emancipatory reforms”.                            “speculator pays principle”: In
                                                  order to pay for the necessary
                                                  emergency measures to bail out
General principles for emancipatory               the financial industry, Attac pro-
financial market reforms                          poses to set up a special fund,
                                                  which is financed by a “one-off
    1. Systemic changes instead of                extra duty on all capital income
       piecemeal repair: The major                above 50.000 Euro and a 1%
       goal here is “to break down the            extra tax on all corporate profits
       pillars of neoliberalism, in par-          in the financial sector.”
       ticular the worldwide mobility of
       capital.”                               5. Reforming the EU and democ-
                                                  ratic control over the European
    2. A new Bretton Woods instead of             Central Bank: Attac proposes to
       “self-regulating market forces”:           set up a common system of
       Attac calls for “democratic con-           European financial regulation
       trol” of the financial sector and          and supervision that is regularly
       for “international cooperation in-         assessed by parliaments, to
       stead of destructive competition           democratically control the Euro-
       between national economies.”               pean Central Bank which is in-
       To achieve this, the financial             terpreted as the centre of neo-
       system should be internationally           liberalism in Europe, and to in-
       governed by a body in the                  troduce transparency regula-
       broader United Nations frame-              tions in lobbying and consulta-
       work. Nationally and regionally,           tion.
       supervision     and     regulation
       should be strengthened and
       democratized through the “par-
                                            Specific reform proposals for central
       ticipation of trade unions, con-
                                            parts of the financial system
       sumers and other stakeholders
       in regulation.”                      In addition to these general principles
                                            and lines of reform, Attac details a va-
    3. Breaking the dominance of fi-
                                            riety of more specific proposals – since
       nancial markets over real econ-
                                            the list is long and clearly the most
       omy: Attac proposes a variety of
                                            comprehensive of all civil society
       instruments to reach this over-
                                            groups, only some very important
       arching goal, among them fi-
                                            measures are mentioned here (see
       nancial transaction taxes (also
                                            also the synopsis in the last chapter).
       on currency trade), banning of
       “financial industry conglomer-          •   Increase capital requirements,
       ates which are too big to fail, or          create Basle III.
       too interconnected to fail, and
                                               •   Ban off-balance deals.
       too complex to manage all po-
       tential risks”, progressive taxa-
Alternatives to the Casino?                                                         27

    •   Restrict and control securitiza-            ting a high levy on transactions
        tion.                                       with OFCs.”
    •   Supervisors should test and li-         •   Limit the power of short term
        cence all new financial products            oriented shareholders “by cou-
        on their impact on financial sta-           pling the share voting rights to a
        bility and on society.                      minimum period of share hold-
                                                    ing (5 – 10 years) and by the
    •   Shrink drastically investment
                                                    prohibition of stock option”.
        banking, separate and strictly
        regulate the rest; regulation           •   Regulate the indebtedness of
        should include criteria that pro-           households by imposing “ceil-
        mote sustainable development                ings on the ratio of repayments
        of societies.                               and interests to income in every
                                                    country.”
    •   Prohibit the high-bonus system;
        management fees should be
        ceiled and partly coupled to an
                                             General assessment
        indicator of general welfare.
                                             The reform agenda put forth by Euro-
    •   Strengthen the public and not-
                                             pean Attac networks is not only the
        for-profit banking sector.
                                             earliest civil society publication that
    •   Publicly control rating agencies;    specifically addresses financial market
        they should be financed by all       reforms in the context of the current
        users of the ratings and issuers     crisis. It is also a far-reaching and sys-
        of financial products; they          tematically structured statement that
        should rate social and environ-      encompasses an analysis of the
        mental risks.                        causes and characteristics of the crisis
                                             and lays out a whole range of impor-
    •   Regulate funds; prohibit hedge
                                             tant reform proposals, which have
        funds and private equity funds.
                                             been extensively discussed since in
    •   Strictly regulate derivatives and    civil society circles and still influence
        prohibit purely speculative de-      the ongoing reform debates. Both the
        rivatives; derivatives should only   general principles for emancipatory
        be traded at stock exchanges,        financial market reforms and the spe-
        they should be standardized          cific proposals set out a comprehen-
        and authorized by a supervisory      sive reform agenda. There are only few
        body for their (long term) nega-     issues not addressed in the statement,
        tive impacts.                        for example the pro-cyclicality of finan-
                                             cial regulation.
    •   Ban over-the counter (OTC)
        trade.                               Furthermore, the proposed reform
                                             agenda not only deals with the issue of
    •   Restrict free trade and free capi-   shutting down the financial casino – as
        tal mobility worldwide.              implied by the title –, but also speaks
    •   Close Offshore Financial Cen-        to a broader range of related problems.
        tres – additionally countries        In particular, it proposes provocative
        should take unilateral measures,     changes in the global governance
        “ranging from lifting the bank       structure, radically strengthening the
        secrecy of the banks under their     United Nations, and gives proposals on
        sovereignty, via obliging banks      how to tackle global inequalities, a just
        which maintain branches in tax       redistribution of wealth and the prob-
        heavens to close them, to put-
Alternatives to the Casino?                                                           28

lem of environmental degradation and          climate change.



3. 2. Beijing Declaration
Another document circulated widely in         sible alternatives many of us have
civil society circles is the so-called Bei-   been working on for decades”, it is little
jing Declaration. It was drafted during       wonder, that the Beijing Declaration
the Asia-Europe People’s Forum in             resembles a register and omnium-
October 2008 by the NGOs Transna-             gatherum of progressive demands.
tional Institute and Focus on the Global
                                              The Beijing document puts democratic
South, then published on a special
                                              control at the centre – not just of the
website (http://www.casinocrash.org),
                                              financial system, but “democratic con-
translated into nine languages and
                                              trol over financial and economic institu-
signed by hundreds of organizations
                                              tions”. The bulk of the paper consists
and individuals.24
                                              of “proposals for debate, elaboration
                                              and action”, a list of more than fifty bul-
                                              let points organized somewhat uns-
Analytical framework
                                              ystematically under six headings. Al-
The title reads “The global economic          though characterized as “practical,
crisis: An historic opportunity for trans-    common sense proposals”, this list of
formation”. The Beijing Declaration is        suggestions and calls reveal a strongly
characteristic in three respects: First,      anti-capitalist attitude.
its focus is very broad on more general
issues of the global economy – the
crisis is already in the title character-     The financial crisis in the context of
ized as a global economic crisis. Sec-        other crises
ondly, the declaration focuses particu-
                                              Interpreting the crisis as a crisis of
larly on problems of so-called develop-
                                              capitalism itself, it makes sense to in-
ing countries and sets out a variety of
                                              clude the financial crisis in the context
reforms specifically aimed at improving
                                              of a variety of other processes – par-
the conditions of the Global South.25
                                              ticularly global inequalities and the en-
And thirdly, the Beijing Declaration is a
                                              vironmental crisis are addressed in
conglomeration of a large number of
                                              detail. The broad focus of the Beijing
proposals that have been discussed in
                                              Declaration appears already in the or-
other contexts before the financial cri-
                                              ganization of the proposals, which are
sis.
                                              grouped in the following sections:
The crisis is characterized as a crisis of
                                                 1. Finance
capitalism as such: “Not only is the
legitimacy of the neo-liberal paradigm           2. Taxation
in question, but the very future of capi-
talism itself.” This situation of capital-       3. Public Spending and Investment
ism’s future itself threatened is inter-         4. International Trade and Finance
preted as both a great danger (increas-
ing poverty and reactionary move-                5. Environment and
ments) and at the same time as a pos-            6. Agriculture and Industry.
sibility – there is “new openness to al-
ternatives”. Since the crisis is seen as
an opportunity “to put into the public
domain some of the inspiring and fea-
Alternatives to the Casino?                                                         29

Financial market reform proposals             Other reform proposals
Proposals on reforming the financial          To get a sense of the suggestions only
system are unsystematically presented         indirectly linked to financial market re-
and spread under different headings.          forms, some will be presented below:
Regarding emergency measures and
                                              Reforms aimed at redistribution:
bailouts, the Declaration puts its em-
phasis very succinctly in calling for the        •   Apply stringent progressive tax
introduction of “full-scale socialisation            systems.
of banks, not just nationalisation of bad
assets”. Some of the most important              •   Secure jobs through outlawing
points on financial market reform are                precarious low paid work.
the following demands:                           •   Introduce a levy on nationalised
    •   Full transparency in the financial           bank profits with which to estab-
        system and “opening of the                   lish citizen investment funds –
        books to the public, to be facili-           use these to support very poor
        tated by citizen and worker or-              communities.
        ganisations.”                         Reforms aimed at improving the situa-
    •   Parliamentary     and     citizens’   tion of the Global South:
        oversight of the existing banking        •   Safeguard migrant remittances
        system.                                      to their families and introduce
    •   Strengthen and create people-                legislation to restrict charges
        based banking institutions.                  and taxes on transfers;

    •   Apply social and environmental           •   Cancel the debt of all develop-
        criteria to all lending.                     ing countries.

    •   Close all tax havens and intro-          •   Ensure aid transfers do not fall
        duce a global taxation system to             as a result of the crisis, abolish
        prevent transfer pricing and tax             neoliberal conditionalities and
        evasion.                                     tied aid.

    •   Adopt controls, such as Tobin         Reforms aimed at fighting climate
        taxes, on the movements of            change:
        speculative capital.                     •   End tax breaks for fossil fuel
    •   Globally ban the following finan-            and nuclear energy companies.
        cial instruments: short-selling of       •   Impose stringent progressive
        stock and shares, trade in de-               carbon taxes on those with the
        rivatives, speculation on staple             biggest carbon footprints.
        food commodities.
    •   Phase out the US dollar as the
        international reserve currency.       General assessment

    •   The reform process should be          The Beijing Declaration presents a
        governed by the United Nations        widely distributed analysis and reform
        – the other institutions normally     agenda on the financial and economic
        assigned this task like the World     crisis. The specific focus is broader
        Bank, IMF and WTO should be           than in most other statements, includ-
        phased out                            ing a variety of issues seemingly unre-
                                              lated to the financial crisis. On the one
                                              hand this has the advantage of broad-
Alternatives to the Casino?                                                        30

ening the perspective towards other          As stated at the beginning, where the
important topics that are indirectly         document is described as an “initial
linked to the financial and economic         response”, the Beijing Declaration re-
crisis. But on the downside it makes         sembles the start of an ongoing work-
the Beijing Declaration a conglomera-        in-progress and is very much oriented
tion of progressive demands (most of         towards social movement campaigns:26
which have been put forth years before       Many proposals that have been in-
the financial crisis), rather than setting   cluded in the statement have to be fur-
out a reform agenda that specifically        ther specified and elaborated, the en-
addresses the current financial crisis       tire reform agenda has to be organized
with all its new characteristics.            more systematically, and – most impor-
                                             tantly – social movements have to take
Although a variety of demands that
                                             up the proposed initiatives and press
have been pointed at by other NGOs
                                             for their implementation. Particularly
are missing, the list of proposals for
                                             interesting is the analysis of the crisis
financial market reforms highlights
                                             as threatening capitalist modes of pro-
many necessary changes. Among the
                                             duction – a point worthy of further
topics not discussed in the Declaration
                                             study and debates, which has been
are securitization, off-balance sheet
                                             taken up by the civil society groups
vehicles, over-the-counter transac-
                                             gathered at the WSF 2009 (see chap-
tions, rating agencies, specific national
                                             ter 3. 7.).
or international regulatory or supervi-
sory institutions and counter-cyclicality.



3. 3. BankTrack
BankTrack is an international network        is not interpreted as a systemic crisis
of NGOs working on issues of financial       of either a certain variety of capitalism
regulation and monitoring of commer-         or of capitalism itself, but rather as a
cial banks. At the networks annual           banking crisis with various deleterious
strategy meeting in November 2008,           effects on other parts of society and
BankTrack drafted the so-called “El          economy.
Escorial Statement on Banks and the
Financial Crisis”.27
                                             The financial crisis in the context of
                                             other crises
Analytical framework
                                             The financial crisis of the banking sys-
Entitled “Bank to the Future”, the           tem is interpreted as being at the root
statement calls for “fundamental re-         of three other intersecting global cri-
forms in the global financial system,        ses: a financial and economic, a social
particularly in relation to the role and     and environmental, and a governance
regulation of banks.” The focus is           crisis.
somewhat narrower than in the other
                                                1. The financial and economic cri-
civil society statements. For example,
                                                   sis was caused by “a collapse of
on the causes of the crisis BankTrack
                                                   trust among banks, bank insol-
argues, that “irresponsible and unsus-
                                                   vency, and deleveraging” which
tainable behaviour of banks, driven by
                                                   spread to the entire banking
greed and kept unchecked by a failing
                                                   sector and is now affecting the
regulatory system, has been at the
                                                   real economy.
core of the crisis.” The financial turmoil
Alternatives to the Casino?                                                        31

    2. The social and environmental                 regulating all unregulated finan-
       crisis is characterized as “a                ciers and financial products.”
       staggering disconnect between
                                                •   Prohibit off-balance sheet vehi-
       the amount of capital at play in
                                                    cles, SIVs and SPEs.
       the ‘casino’ economy (where
       money is solely made off                 •   Abolish tax havens.
       money) and the real economy”.
       This crisis was caused by “reck-      2. Strictly regulating the financial sec-
       less, speculation-driven expan-       tor:
       sion of the financial markets”           •   Regulate hedge funds and pri-
       and did not only have adverse                vate equity funds, introduce sig-
       effects on people and the                    nificant new transparency and
       planet, but furthermore, the re-             reporting requirements;
       cent efforts at bailing out the fi-
       nancial system divert resources          •   Limit leverage: “banks should
       from more important areas such               have a leverage ratio in addition
       as fighting hunger.                          to stricter capital adequacy
                                                    standards, and non-bank institu-
    3. The governance crisis is inter-              tions should also have capital
       preted as the crisis resulting               and leverage requirements”.
       from banks effectively taking
       control of political regulatory ef-      •   Curb derivatives: Prohibit all de-
       forts through their lobbying ac-             rivatives that do not actually
       tivities.                                    hedge prices, the rest should be
                                                    standardized and traded in
These three dimensions of the crisis,               regulated exchanges.
BankTrack argues, have to be ad-
dressed simultaneously and it pro-              •   Reduce incentives for excessive
poses specific reforms to deal with                 risk taking: Limit executive com-
each of them. The entire paper is or-               pensation and change the bo-
ganized around these three crises.                  nus systems “so as to reward
                                                    long-term financial success and
                                                    the implementation of environ-
Financial market reform proposals                   mental and social policies and
                                                    programs.”
First, BankTrack demands “clear pro-
hibitions on certain financial practices     3. Reforms dealing with the environ-
and structures”. Secondly, BankTrack         mental and governance crises:
demands that the regulation of other         Green New Deal: In terms of dealing
financial instruments and institutions       with the environmental crisis, Bank-
be “dramatically strengthened”. And          Track promotes the implementation of
thirdly, in the sections dealing with the    a Green New Deal, which aims at
social and environmental as well as the      “achieving social justice, the promotion
governance crisis, BankTrack has pro-        of sustainable production and con-
posed a variety of reforms that also         sumption systems, and the transition of
directly affect the financial system.        the world’s economies onto a low car-
1. Prohibiting certain financial practices   bon path.” Policy makers should sup-
and structures:                              port this economic transition by a “new
                                             bank     regulatory    regime”,    which
    •   Most importantly, BankTrack          changes incentives so as to discour-
        demands:    “Eliminate  the          age environmentally destructive prac-
        shadow banking system by             tices. This includes the following ele-
                                             ments:
Alternatives to the Casino?                                                         32

    •   Supervision: BankTrack calls for        •   Governance: BankTrack de-
        the incorporation of sustainabil-           mands ensuring democratic par-
        ity-oriented standards into all             ticipation in designing a new
        bank supervision, “including the            global financial order – this
        granting of licenses, and the ex-           should involve a “participatory
        tension of central bank-provided            and democratic” process and
        credit and insurance.”                      “strong participation and support
                                                    from developing and emerging
    •   Capital requirements: Environ-
                                                    countries.”
        mental and social issues should
        be incorporated into risk as-
        sessment processes of the
                                             General assessment
        Basel II capital adequacy ratios.
                                             Although somewhat limited in its
    •   Green screening of customers:
                                             analysis of the causes and the charac-
        introduce green “Know Your
                                             terization of the crisis, BankTrack’s
        Costumer” guidelines, requiring
                                             specific focus on the banking crisis and
        banks to “conduct environ-
                                             its interrelations with the three dimen-
        mental and social due diligence
                                             sions of this crisis (financial, environ-
        for both commercial depositors
                                             mental and governance crisis) provides
        and borrowers, with the aim of
                                             the background for some interesting
        prohibiting lending to corpora-
                                             reform proposals. Banning some finan-
        tions that do not comply with
                                             cial products and institutions and
        environmental and social laws.”
                                             strictly regulating others combined with
    •   Transparency: “Banks should be       BankTrack’s proposals how a reformed
        completely transparent about         financial sector might promote the
        their risk assessment proc-          transformation to a green economy
        esses, decision-making proce-        and its take on the governance ques-
        dures, clients, and transactions.”   tion provide a broad reform agenda for
        A reform aimed at discouraging       financial markets.
        environmentally destructive in-
                                             Particularly interesting is the section on
        vestments due to public pres-
                                             how a new banking system with re-
        sure and changing consumer
                                             formed rules might complement a
        behaviour.
                                             Green New Deal and support the eco-
Governance: Regarding the govern-            nomic transition to sustainable produc-
ance crisis, BankTrack puts the dictum       tion and consumption practices. While
centre stage that “self-regulation is no     some reform proposals are certainly to
regulation”. Accordingly, the statement      be welcomed such as the introduction
promotes several reforms of who is to        of sustainability criteria in Basle II and
control the financial sector:                banking supervision, others seem
                                             more disputable. In particular, the reli-
    •   Lobbying: Decreasing the politi-
                                             ance on Green KYC guidelines needs
        cal influence of banks.
                                             to be further assessed. Since the intro-
    •   Licensing banks: BankTrack           duction of similar anti-money launder-
        proposes to require banks to         ing guidelines (AML) has proven ex-
        seek a social license to operate     tremely complex and conspicuously
        that only those banks get, which     unsuccessful, it is not clear in how far
        are primarily “investing in the      self-evaluation of their customers’ so-
        real economy” and furthermore        cial and environmental records by
        advance           “environmental     banks is not doomed to be just another
        sustainability”.                     neoliberal effort at green-washing
Alternatives to the Casino?                                                        33

through Corporate Social Responsibil-       Characteristically, those civil society
ity (CSR) strategies. The experience of     groups that have most prominently
the last 10 years has shown that self-      been calling for a Green New Deal
regulation has almost never worked.         (besides BankTrack primarily the New
                                            Economics Foundation) have least fo-
BankTrack has not discussed, in how
                                            cused on social and economic equity,
far a Green New Deal actually has the
                                            redistribution and North-South justice.
effects envisioned by its proponents.
                                            The accompanying financial market
There are a variety of problems with
                                            reforms, however, can be recom-
any Green New Deal project that need
                                            mended independently of a Green New
to be further addressed, most impor-
                                            Deal.
tantly its real environmental impacts
and its social and distributive effects.    Furthermore, there are a variety of re-
Since such a massive investment pro-        form proposals that are not discussed
gramme, even if it is “green”, is predi-    at all: short-selling, securitization, OTC
cated upon further growth, and since        markets, CRAs, FTTs, capital controls,
growth is inherently linked to further      competition, investment banking and
enlarging the economy’s impact on the       the strengthening public, local and co-
planet, the overall environmental ef-       operative banks. Most disturbing is the
fects need to be carefully explored.        fact, that although governance ques-
And in terms of the social and distribu-    tions are prominently discussed in the
tive outcome a Green New Deal needs         paper, the United Nations is not men-
at least to be accompanied by other         tioned.
measures, to have positive effects.



3. 4. New Economics Foundation (NEF)
The new economics foundation (NEF)          Analytical framework
is a self-described British “think-and-
                                            The 20 steps NEF sets out deal both
do-tank”, founded in 1986 by the lead-
                                            with short-term solutions to the current
ers of The Other Economic Summit,
                                            crisis and with long-term reforms of the
which is promoting a progressive view
                                            financial and economic systems.
of welfare economics and environmen-
                                            Though most of the proposals are ap-
talism with a special focus on local
                                            plicable around the world, the focus is
economies. Their October 2008 report
                                            clearly on Britain.
“From the ashes of the crash – 20 first
steps from new economics to rebuild a       The financial crisis is interpreted as the
better economy” argues that in “the         consequence of a long process in
ashes of the predictable crisis in the      which the financial system has “failed
global system lie important signs that a    to do the basic job required of it – to
new economics is emerging”. This new        underpin the productive economy and
economics needs a financial system          the fundamental operating systems
that serves society instead of acting as    upon which we all depend.” This pro-
its master, “a new, diverse and resilient   ductive economy, so NEFs analysis, is
local financial system” that has already    “the core economy of family, neigh-
been built beneath the surface.             bourhood, community, and society,
                                            and the natural economy of the bio-
                                            sphere, our oceans, forests, and
                                            fields”. The financial crisis was caused
                                            by this productive economy being “ne-
Alternatives to the Casino?                                                         34

glected, taken for granted or cannibal-      strengthening and building an alterna-
ised by finance.”                            tive financial system that is local,
                                             based in and serving the real produc-
NEFs general philosophy might be
                                             tive economy and focused on human
summarized in the saying “small is
                                             well-being and environmental sustain-
beautiful”. The financial market reforms
                                             ability. Most importantly, NEF calls for
attest to this dictum. On the one hand,
                                             a Green New Deal. Using a range of
NEFs report emphasizes the need to
                                             fiscal tools and new reforms in the tax
demerge, decentralize, and, control
                                             system, such as a windfall tax on oil
large international banks, ultimately
                                             companies, NEF urges Britain to mas-
downsizing the financial sector in rela-
                                             sively invest in an “environmental
tion to the rest of the economy. At the
                                             transformation programme.” Already in
same time, the financial crisis is seen
                                             2007, NEF had published a report on
as     an    opportunity     to    secure,
                                             behalf of the Green New Deal Group
strengthen, and support local and sus-
                                             that sets out in detail the specific re-
tainable financial and economic sys-
                                             form agenda of such a Green New
tems, which are able to “fill the gaps
                                             Deal.28 Other proposals should ac-
left by the collapse of the old order.“
                                             company these measures.

The crisis in the context of other crises
                                             Shrinking and regulating financial mar-
Whereas the focus is mostly on down-         kets
sizing and regulating the financial sec-
                                                •   Derivatives: Bring onto the bal-
tor while at the same time supporting a
                                                    ance sheet, rigorously check
„diverse, localised, sustainable econ-
                                                    and officially license all ‘exotic’
omy, which puts finance in its place as
                                                    financial instruments such as
a servant of society“, particularly the
                                                    derivatives.
environmental crisis and the energy
crisis are addressed in some detail. To         •   Capital     controls:    Improve
address these three crises, NEF calls               checks and balances and politi-
for launching a Green New Deal to                   cal control of financial markets
„fight the recession whilst tackling en-            by introducing capital controls.
ergy insecurity and climate change.“
                                                •   OFCs: Make taxation work by
Although global poverty is not ad-
                                                    closing tax havens, specifically
dressed, the report highlights a variety
                                                    deducting taxes directly at the
of reform proposals possibly very
                                                    country from which payment is
beneficial to developing countries
                                                    made for all income paid to fi-
(capital controls, closing tax havens,
                                                    nancial institutions in tax ha-
introduction of a bancor). Even so,
                                                    vens.
proposals to directly address issues of
social and economic justice and redis-          •   FTTs: Increase stability and
tribution are clearly not the focus of              raise resources with currency
NEFs statement.                                     and financial transaction taxes.
                                                •   Competition: Demerge banks
                                                    that are “too big to fail” (espe-
Financial market reform proposals
                                                    cially nationalized banks).
While not going into detail, NEF pro-
                                                •   Investment banks: Segregate fi-
poses a variety of reforms in the first
                                                    nancial markets according to
category, aimed at shrinking and regu-
                                                    their functions, for example in
lating the existing financial system.
                                                    trading and retail banking.
Most of the other proposals aim at the
Alternatives to the Casino?                                                          35

    •   Accounting: Hold accountancy                jects, such as schools and uni-
        firms accountable to increase               versities, health facilities, trans-
        transparency, prudence and re-              port system; and “local bonds”
        sponsibility in the global econ-            to “finance essential investment
        omy, ultimately making them                 and new infrastructure for a
        not-for-profits.                            more environmentally sustain-
                                                    able Britain”.
    •   Distribution and compensation:
        Introduce a maximum pay dif-
        ferential, or maximum wage.
                                             General assessment
                                             The analysis and recommendations
Building alternative and sustainable         NEF provides in its report considerably
financial and economic systems               diverge from the perspectives taken by
                                             other civil society groups. NEFs pro-
    •   Create a secure, accessible lo-
                                             posals are particularly interesting re-
        cal banking system for people
                                             garding the strengthening of alterna-
        by increasing the role of post of-
                                             tive, local and sustainable financial and
        fices.
                                             economic institutions and structures.
    •   Enhance economic support for         Although many of its proposals have
        the local economy by expanding       only been tried on a small scale, they
        the range of smaller-scale           certainly demand consideration by
        ‘friendly’ sources of finance.       other actors in the civil society spec-
                                             trum – especially, since the question of
    •   Promote time banking in local        alternatives will become more press-
        communities as an alternative        ing, when the immediate effects of the
        currency exchange to promote         financial crisis will have ebbed down.
        local public services.
                                             In terms of effectively regulating the
    •   Encourage the introduction of        existing financial system, however,
        complementary, multilevel cur-       NEFs outlines important steps in the
        rencies, specifically local cur-     right direction, but to achieve its set
        rencies and a new global refer-      goal of downsizing and strictly regulat-
        ence currency along the lines of     ing the financial sector, other reforms
        the bancor proposed by Keynes        have to be added. There are a variety
        and backed by a basket of            of important proposals, which demon-
        commodities.                         strate NEFs willingness to take bold
    •   Launch a Green New Deal.             actions (capital controls, closing OFC,
                                             FTTs), but many important reform ar-
    •   Create new public money, free        eas are not discussed in the report.
        of interest, where necessary to      These are, among others, reserve re-
        cope with unprecedented finan-       quirements, hedge funds and private
        cial emergencies, and as the         equity funds, short selling, securitiza-
        basis for loans to rebuild the in-   tion, off-balance sheet vehicles, OTCs,
        frastructure of productive local     commodity trading, leverage, counter-
        economies.                           cyclicality and CRAs. NEF has omitted
    •   And finally, NEF proposes inno-      addressing the question of global gov-
        vative and new financial instru-     ernance – which regulatory institutions
        ments for productive and secure      should be tasked with regulating the
        savings: a “People’s Pension”        financial system, and who is to lead the
        that invests in the building of      reform process. In general, NEFs focus
        new public infrastructure pro-       is on countering environmental prob-
Alternatives to the Casino?                                                       36

lems, and social issues are somewhat        Deal have been touched at in chapter
neglected. The problems that have to        4. 3.
be addressed regarding a Green New



3. 5. Friends of the Earth Europe (FoEE)
Friends of the Earth Europe, the Euro-      The financial crisis in the context of
pean branch of a world-wide network         other crises
of environmental research and advo-
                                            FoEE focuses on the crisis of climate
cacy organizations, has published a list
                                            change. Distribution and global poverty
of reform proposals dealing with finan-
                                            are not addressed.30
cial market reforms specifically from
the environmental advocacy perspec-
tive. In “Towards A Just and Sustain-
able Financial System” FoEE have col-       Financial market reform proposals
lected the proposals the network has        FoEEs proposals can be sorted into
set forth in previous reports in recent     two broad categories: First, they call
years.29 Although much is directly          for banning some of the ecologically
taken from the BankTrack El Escorial        most destructive financial activities and
Statement, of which FoEE was a sig-         demand setting up strict standards for
natory, there are some interesting pro-     the rest. And secondly, FoEE proposes
posals in this document. The report         a variety of mechanisms aimed at in-
focuses on the link between environ-        ternalizing the real costs into financial
ment and finance – “on integrating en-      activities, thus making environmental
vironmental and social matters into         destruction too costly.
financial regulation”. Other important
topics are however also discussed,          1. Setting standards for sustainable
such as democratic processes in a           finance
new financial architecture, regulation      Specific reform proposals in the first
and supervision, the reorientation of       category of setting standards for sus-
“finance from the speculative to the        tainable finance include:
real economy” and questions on na-
tionalizations of financial institutions       •   FoEE demands the incorpora-
and bailout packages.                              tion of “sustainability-oriented
                                                   standards (…) into all bank su-
                                                   pervision, including the granting
Analytical framework                               of licenses, and the extension of
                                                   central bank provided credit and
FoEE does not give a causal account                insurance.”
of or a characterization of the crisis.
                                               •   Another suggestion is that stock
FoEEs main focus is on the intercon-               exchanges and securities regu-
nections between financial markets                 lators set up standards that „re-
and the environment. The networks                  quire corporate compliance with
particular approach is to include certain          environmental and social stan-
incentive structures and rules into                dards as a condition of listing on
banking, lending, investment and secu-             public exchanges.“
rities markets to counter-balance or
even out some of the destructive ef-        Other proposals, not specifically aiming
fects of financial capitalism on the        at environmental issues, are:
planet.
Alternatives to the Casino?                                                         37

    •   FoEE calls for a reform process               vironmental risks.
        that is UN-led (curbing the
                                                  •   States should also set incen-
        power of IMF, World Bank and
                                                      tives for ethical investments.
        WTO) and includes widespread
        and meaningful public participa-          •   Also ranking high on the prefer-
        tion.                                         ence list of FoEE is the power of
                                                      consumers: shareholders’ rights
    •   FoEE demand the restoration of
                                                      should be expanded to better
        regulation    by      eliminating
                                                      enable them to raise environ-
        shadow banking, banning struc-
                                                      mental and social issues, and
        tured investment vehicles and
                                                      consumers of financial products
        special purpose entities, closing
                                                      of funds should be discouraged
        tax havens, strictly regulating
                                                      to support these by raising
        hedge funds and private equity
                                                      standards for “disclosure in and
        funds and derivates, and intro-
                                                      of investment products”.
        ducing financial transaction
        taxes.                                    •   FoEE also replicated the Bank-
                                                      Track proposals to including en-
                                                      vironmental and social issues
2. Changing incentives to discourage                  into the Basle capital accords
unsustainable finance                                 and to introduce green “Know
                                                      Your Costumer” guidelines.
FoEE proposes a variety of reforms
that aim at drastically increasing trans-
parency in the financial sector with the
                                               General assessment
aim of thus making unattractive unsus-
tainable financial activities.                 While many proposals are obviously
                                               similar to those put forth by other
    •   For example, FoEE argue, that
                                               NGOs, most interesting are the consis-
        increasing transparency re-
                                               tent efforts to think through the links
        quirements for banks to include
                                               between the rules and practices gov-
        all information regarding their fi-
                                               erning financial markets and the crises
        nancing activities will discour-
                                               of environmental degradation and cli-
        age banking activities in envi-
                                               mate change. Including social and eco-
        ronmentally destructive indus-
                                               logical standards into all banking regu-
        tries.
                                               lation and the regulation of exchanges
    •   Similar effects are expected           are potentially powerful tools to regu-
        from increasing the liability of       late not only the financial sector, but
        lenders for the effects of their fi-   also the entire economy. They would
        nancing activities, for example        empower states to regulate or even
        by making them “financially li-        ban environmentally destructive in-
        able for the environmental and         vestments and – depending on the
        social impacts caused by client        depth of the regulation – could direct
        misconduct“.                           the real economy onto a sustainable
                                               path. The other proposals on regulat-
    •   Similarly, FoEE call on the In-
                                               ing financial markets overlap with
        ternational Accounting Stan-
                                               those of civil society groups working
        dards Board (IASB) and the In-
                                               more closely on financial reform agen-
        ternational Organization of Se-
                                               das and are thus not discussed here.
        curities Commissions (IOSCO)
        to issue strict international dis-     The possible effects of changing the
        closure standards that enforce         incentives for the financial sector are
        the disclosure of social and en-       hard to assess. All proposals in the
Alternatives to the Casino?                                                            38

second category are mechanisms that            circumvent public regulations. The
aim at discouraging socially or envi-          problems with green KYC guidelines
ronmentally undesirable investment or          have been discussed above.
lending by making them more expen-
                                               FoEE does not discuss a variety of
sive and financially more risky for fi-
                                               reform areas: competition, public
nancial institutions. Their success
                                               banks, short selling, securitization, off-
however, depends on the ability of
                                               balance sheet vehicles, OTC, CRAs
states to enforce transparency and
                                               and counter-cyclicality.
liability of powerful financial institutions
that have so far always found ways to



3. 6. Global Unions
The response of trade unions to the            will set an end to „an ideology of unfet-
global financial crisis is best captured       tered financial markets“, that it has ex-
in a report published by global trade          posed „self-regulation (...) as a fraud“
unions for the G20 summit in Washing-          and that it will end a system in which
ton in November 2008. The “Global              „greed has overridden rational judge-
Unions ‘Washington Declaration’” was           ment to the detriment of the real econ-
drafted collectively by the International      omy.“
Trade Union Confederation (ITUC-CSI-
IGB), the Trade Union Advisory Com-
mittee (TUAC), and Global Unions               The crisis in the context of other crises
(henceforward simply called global un-
ions).31                                       The global unions locate the economic
                                               crisis in the context of several other
                                               crises, „the unprecedented rise in food
                                               and commodity prices earlier in the
Analytical framework
                                               year and the resulting food crisis in
The crisis is characterized as an eco-         developing countries“ and the „accel-
nomic crisis, in scale the „most serious       erating climate change which, without
economic crisis since the Great De-            rapid action, will affect the poorest
pression of the 1930s“. This crisis has        across the globe most severely, and
been caused by two decades, in which           especially vulnerable groups including
„most governments, together with the           women.“ Most characteristically, the
IFIs, have promoted the lightly regu-          global unions put the “crisis of distribu-
lated ‘new financial architecture“ – this      tive justice” centre stage, interpreting it
included „irresponsible deregulation           as one of the underlying causes of the
that favours excessive leverage of fi-         financial upheavals and emphasizing
nancial institutions – including invest-       respective reforms.
ment banks, hedge funds and private
equity – and the ‘financial innovation’
of securitised credit risk transfers that      Financial market reform proposals
exported bad debt under the guise of
structured products.“ The crisis was           The report calls for more inclusive re-
then triggered, so the report, by the          form process, urging the G20 that “un-
„conjunction of a housing crisis, a            ions must have a seat at the table and
credit market crisis and, increasingly,        be part of the crucial negotiations that
an employment crisis.“ While not talk-         will be held in the different institutions,
ing of „neoliberalism“, let alone „capi-       during the months ahead.” To counter
talism“, the unions argue that this crisis     the most dramatic economic crisis
Alternatives to the Casino?                                                        39

since the 1930s, the document argues,           •   Regulate hedge funds and pri-
a new national and global regulatory                vate equity funds.
architecture has to be built “so that fi-
                                                •   Address the oligopolistic struc-
nancial markets return to their primary
                                                    ture of the CRA industry and es-
function: to ensure stable and cost-
                                                    tablish public agencies and de-
effective financing of productive in-
                                                    velop non-financial sustainability
vestment in the real economy. In the
                                                    rating.
long term, the global unions emphasize
the need for “a new economic order              •   Reform and control executive
that is economically efficient and so-              compensation and corporate
cially just – a task as ambitious as that           profit distributions.
confronted by the meeting in Bretton
Woods in 1944.” To this end, the                •   Close offshore tax havens.
document, while urging the inclusion of         •   Regulate derivatives.
more countries beyond the G20, calls
on the G20 leaders to take action in            •   Prohibit all off-balance sheet
four areas.                                         transactions.
                                                •   Introduce Financial Transaction
                                                    Taxes.
1. Recovery Plan and Green New Deal
                                                •   Make central banks publicly ac-
First, under the heading “A Coordi-                 countable.
nated Recovery Plan for the Real
Economy”, the document formulates               •   Promote community-based fi-
several proposals to stimulate growth               nancial services such as coop-
in the real economy: interest rate cuts,            erative and mutual systems and
infrastructure investment programmes,               targeted          micro-finance
tax cuts for middle and low income                  schemes.
earners, high investments in people             •   Adopt controls to limit specula-
and increasing development aid. Most                tive behaviours in trade ex-
interestingly, however, the unions call             changes including commodities
for a “Green New Deal”: “This is the                and energy markets.
time to aid economic recovery through
environmentally responsible invest-             •   Introduce proper consumer pro-
ment designed to create jobs in the                 tection against predatory lend-
short-term, including for youth and                 ing and aggressive banking
women, and to reduce greenhouse gas                 sales policy.
emissions in the medium term.“                  •   Ensure proper counter-cyclical
                                                    asset requirements and ac-
                                                    counting rules for banks and
2. Regulating Global Financial Markets              large financial conglomerates.
Secondly, “Reregulating Global Finan-
cial Markets” sets out measures to en-
sure, that such a crisis will not repeat     3. Governance
itself. Identifying the liberalization and   Thirdly, the global unions call for the
deregulation policies of the last two        creation of “A New International Sys-
decades as the major cause of the cri-       tem of Economic Governance” through
sis, the global unions call for regulatory   another set of Bretton Woods negotia-
efforts very similar to those proposed       tion – in this regard going well beyond
by other civil society organizations:        some NGO-statements. Starting from
                                             the observation that “none of the exist-
Alternatives to the Casino?                                                       40

ing institutions has the scope or the
credibility to put in place such a struc-
                                            General assessment
ture”, the document demands unions’
participation in these debates and a        The global unions’ Washington Decla-
“fairer and more democratic govern-         ration lays out a clearly structured and
ance structure at the IFIs.” More spe-      comprehensive reform agenda that not
cifically, the unions demand that in the    only provides an extensive blueprint for
WTO there should be at least a “parity      reforming financial markets, but also
of voting power between developing          addresses other crucial issues in the
and industrialised countries”, that neo-    areas of economic recovery pro-
liberal conditionalities be stopped and     grammes, governance and distribution.
that the normative standards of the ILO     The unions’ statement gives an exten-
underpin the new system.                    sive account of financial market re-
                                            forms that includes most of the impor-
                                            tant regulatory instruments. In addition,
4. Distribution                             the unions have called for measures
                                            not discussed by other civil society
And lastly, under the heading “Combat-
                                            groups, particularly addressing the pro-
ing the Crisis of Distributive Justice”
                                            cyclicality of the financial system and
the global unions address what in their
                                            financial consumer protection. Only
opinion lies behind the current financial
                                            few financial market reform proposals
crisis: the explosion of inequality in
                                            are not discussed: competition, in-
income distribution. To counter these,
                                            vestment banking, short selling and
the unions call for balanced growth
                                            OTC.
“between regions, as well as within
countries, between capital an labour,       Furthermore, the global unions’ call for
between high and low income earners,        a Green New aimed both at stimulating
between rich and poor, and between          the global economy and at facilitating
men and women.” In particular, they         the necessary transformation into a
have proposed “a new growth regime”         green economy – a proposal that has
similar to the embedded liberalism of       to be carefully assessed. Although not
the post-war period, a regime that “en-     calling for an UN-led reform process,
sures balanced real wage growth in          the global unions’ discussions on
line with productivity increases.” This     global governance make clear their
includes not only fair taxation in OECD     commitment to democratizing institu-
countries to counter falling wage           tions on the global level. Particularly
shares and growing inequality within        interesting is the global unions’ focus
the OECD, but also strengthening IMF        on distribution, which interprets the
emergency support for developing            effects of increasing unequal distribu-
countries, meeting all commitments on       tion nationally and globally as an un-
ODA and the MDGs, and generally             derlying cause of the crisis and pro-
strengthening the social dimension of       motes the inclusion of redistributive
globalization.                              measures in reforms dealing with the
                                            crisis.



3. 7. WSF 2009
The most recent call for financial mar-     Forum in Belem at the end of January
ket reform by civil society networks        2009. The final Declaration of the As-
comes from social movements and             sembly of Social Movements placed
NGOs gathered at the World Social           the financial and economic crisis at its
Alternatives to the Casino?                                                         41

centre by declaring in its title “We won’t   and accumulation of irresponsible, eco-
pay for the crisis - The rich have to pay    logical and illegitimate debt, natural
for it!” The concrete proposals in this      resource plunder and the privatization
document, however, deal with the cri-        of public services.”
sis only on a very general level. Ana-
lysing the crisis as the “direct conse-
quence of the capitalist system”, the        The crisis in the context of other crises
declaration reasons, it “cannot find a
solution within the system” and social       The discussions at Belem were domi-
movements call for “anti-imperialist,        nated by a specific theory of a “crisis of
anti-capitalist, feminist, environmental-    civilization”, which crosscut almost all
ist and socialist alternatives” as the       debates at this most recent WSF. This
only way out.32                              framework of thought, powerfully pro-
                                             moted particularly by indigenous
More interesting regarding the specif-       groups, highlights a profound crisis of
ics of financial market reform is an-        our model of civilization and the capi-
other declaration drafted in Belem. At       talist system, which is based on un-
the WSF there were dozens of work-           precedented crises in many areas like
shops and meetings about a response          the global economy, environment,
to the financial crisis from a variety of    governance, militarization and immi-
actors involved in these debates,            gration.34 Attesting to this framework of
among them Attac and BankTrack and           thought, the statement on the financial
a variety of groups from the Global          crisis starts by declaring, “The financial
South. These groups gathered at the          crisis is a systemic crisis that emerges
WSF to author a short call to action,        in the context of global crises (climate,
saying “Let’s put finance in its place!”.    food, energy, social…) and of a new
This document, which will be submitted       balance of power.” The WSF thus even
to the G20 finance ministers ahead of        further broadened the perspective by
their meetings in March, is interesting,     including into the analysis of the cur-
because it demonstrates the radicaliza-      rent financial crisis the interrelations
tion of reform debates within civil soci-    with other crises, some of which are
ety.33                                       not even mentioned. While this leaves
                                             room for many groups and issues to be
                                             involved in the debates on financial
Analytical framework                         crisis, it also makes the analysis
                                             somewhat superficial and blurry.
Carrying further the analysis of the Bei-
jing Declaration, the financial crisis is
interpreted as the “consequence of a
                                             Financial market reform proposals
capitalist system of production”. Not
just the deregulated financial and           The WSF groups call for an entirely
banking system (as argued by some            different system that goes beyond
NGOs) or financial capitalism (as ar-        regulation and “puts the financial sys-
gued by Attac Europe), but capitalism        tem at the service of a new interna-
in general, has led to this crisis. Capi-    tional democratic system based on the
talism is further characterized as hav-      satisfaction of human rights, decent
ing transferred “income from labour          work, food sovereignty, respect for the
towards capital” and being “based on         environment, cultural diversity, the so-
laissez-faire and fed by short term ac-      cial and solidarity economy and a new
cumulation of profits by a minority,         concept of wealth.” To achieve this, the
unequal redistribution of wealth, an         groups have set out nine broad de-
unfair trade system, the perpetration        mands and a comment on bailouts. On
Alternatives to the Casino?                                                         42

the issue of banking bailouts, the                   serves sustainable and equita-
document makes a provocative state-                  ble development.”
ment, which implies that simply letting
go bankrupt the entire financial system
would be better than burdening the            General assessment
public with these bailouts.35
                                              The call for action produced at the
Some of the more specific proposals           WSF presents a short summary of
restate, what has been called for by          global civil society’s discussions and
other groups, such as closing tax ha-         demands regarding financial market
vens, FTTs, capital controls, prohibition     reforms.36 The attitude of the document
of hedge funds, OTC markets, debt             is more anti-capitalist and radical than
cancellation, and putting the “United         the other civil society statements (ex-
Nations at the heart of the financial         cept for the Beijing Declaration) and
system reform”.                               the inclusion of other crises is more
                                              explicit. This might point to an increas-
Other interesting proposals, some of
                                              ing radicalization within some sectors
which go further than most civil society
                                              of civil society, as the crisis deepens
statements, are the following:
                                              and official reforms lag more and more
    •   Implement     an    international     behind the historic crises processes.
        monetary system based on a
                                              While iterating some of the most popu-
        new system of reserves, includ-
                                              lar financial market reform proposals,
        ing the creation of regional re-
                                              there are also suggestions that diverge
        serve currencies.
                                              from earlier statements. For example,
    •   Implement a global mechanism          the call for global mechanism of state
        of state and citizen control of       and citizen control of banks and finan-
        banks and financial institutions.     cial institutions, while very unspecific
                                              and general, opens room for interest-
    •   Implement public mechanisms
                                              ing further discussion about mecha-
        of price stabilisation for food and
                                              nism that empower people around the
        energy.
                                              world to actively control the financial
    •   Establish a “system of democ-         system that is supposed to serve their
        ratic, accountable, fair sovereign    needs.
        borrowing and lending that
Alternatives to the Casino?                                                           43




4. Private Financial Industry

The IIFs cure all: Code of Conducts          conducts. And hopefully, regulators will
and Self-regulation                          not rely on voluntary standards – on
                                             standards similar to those that have
Since the private financial sector will
                                             been in place before the crisis, such as
possibly be seriously affected by re-
                                             the IOSCO Code of Conduct (2004) for
forms in the global financial architec-
                                             Credit Rating Agencies or the Hedge
ture, it has been heavily involved in
                                             Fund Code of Conducts (2007).
influencing the debate. Especially the
Institute of International Finance (IIF),
which is essentially the main political
                                             Lobbying the G20 summit in Wash-
lobby organisation of the large, multi-
                                             ington
national commercial banks, has been
vocal in putting its constituency’s inter-   Four months later, after the bankruptcy
ests and proposals on the agenda. The        of the investment bank Lehman Broth-
IIFs Board of Directors, chaired by the      ers had severely fuelled the crisis and
CEO of the Deutsche Bank Joseph              many financial institutions had been
Ackermann who famously promised 25           bailed out by states, the IIF was still
percent returns, had established a           singing the same gospel of free and
Committee on Market Best Practices,          unfettered markets. Right before the
aimed at coordinating and activating         G20 summit, the IIF had organized its
the banking industry’s efforts to de-        Economic Advisory Committee meet-
velop practical ways to address market       ing in Washington D.C., at which it lob-
weaknesses, rebuild confidence and           bied for its market-liberal and business
influence public reform debates. In July     friendly approaches before world eco-
2008 this committee released its final       nomic leaders and managers of IMF
report – a document that testifies to the    and World Bank.38 The opinion of the
uninhibited neoliberal doctrine of the       private financial sector on financial
banking community and which can be           market reforms is explicitly formulated
seen as the response of the banks to         in a letter sent by the IIF to President
the regulatory efforts of the G7 Finance     George Bush before the G20 summit in
Ministers and the FSF.37 In summary,         November 2008.39
this report suggests a code of conduct
for the major financial institution as a     After having commended Bush and his
cure-all for the crisis. The motivation is   colleagues for the bailing out the finan-
twofold: firstly, these self-regulatory      cial sector, the IIF states bluntly, that in
efforts should signal to the regulators      terms of architectural reform the “over-
that the financial industry does not         riding objective ought to be to pre-
need new regulation. And secondly, a         serve, reinforce and strengthen the
code of conduct is intended to signal to     open, market-based framework for
the markets that certain risks and prob-     trade, investment and capital flows that
lems are being addressed. Both tar-          has contributed so much to the world’s
gets seem questionable: So far at            prosperity in the past 60 years.” With-
least, markets have not responded suf-       out batting an eye, the IIF argues, we
                                             should belief in the benefits of free
ficiently to these signals and trust in
the financial sector has not been re-        markets and not let ourselves be dis-
stored by mere non-binding code of           tracted by reality. “The weaknesses in
                                             the system demonstrated powerfully in
Alternatives to the Casino?                                                       44

recent months should not deflect us             tion, regulatory reform should be
from the realization that the benefits of       guided by the principles of
an international system based on open           greater coordination, consis-
market principles and close multilateral        tency and efficiency.” In particu-
cooperation have been crucial to both           lar, the IIF proposes to set up a
the continued revitalization of the de-         global governance structure
veloped world and to the lifting of hun-        called “Global Financial Regula-
dreds of millions out of poverty in re-         tory Coordinating Council”. This
cent decades.” The IIF thus proposes            Council should represent the
six principles that should guide the            G20 countries and should be
G20’s reform initiatives – six principles       organized under the umbrella of
reflecting general attitudes towards            the FSF, and encompass the
financial market reforms in the private         Basel Committee, IOSCO, IAIS
sector.                                         (International Association of In-
                                                surance Supervisors) and lead-
    1. The IIF insists, in agreement
                                                ing central banks.
       with the recommendations set
       out in its report, on private sec-    4. Interestingly, the IIF also calls
       tor initiatives to “strengthen           for changes in the global gov-
       business practices and restore           ernance bodies and the democ-
       sound and responsible bank-              ratization of its institutional
       ing”, initiatives that are consid-       frameworks. Recognizing “the
       ered necessary, but should be            substantial shifts in the global
       taken in self-regulatory frame-          balance of economic power”,
       work (strengthen risk manage-            emerging markets should “no
       ment, align compensation with            longer be underrepresented in
       long-term shareholder inter-             key global financial policy-
       ests).                                   making fora.“ Accordingly, the
                                                IIF calls for an expansion of the
    2. While the state is pleaded to bail
                                                G7 and recommends the
       out banks, since these “extraor-
                                                „greater use of the G20 on key
       dinary measures were neces-
                                                issues of global economic pol-
       sary to avoid systemic failure”,
                                                icy.“ Also regarding international
       the IIF calls for restoring the fi-
                                                organizations such as the IMF
       nancial system “to a private sec-
                                                and the World Bank, the IIF ar-
       tor footing, to operate on a
                                                gues it is „imperative (...) to en-
       competitive market basis, as
                                                sure meaningful voice and pro-
       soon as circumstances allow.”
                                                portional     representation     of
       In plain language, the private fi-
                                                member countries.“
       nancial community asks the
       state to bail out all the accumu-     5. The IIF clearly favours a
       lated toxic assets and bankrupt          strengthening of a reformed IMF
       institutions, but as soon as the         in governing the global financial
       system functions smoothly,               architecture – it calls for redefin-
       states should retreat from the           ing the IMFs mission and states,
       banking sector following “well-          “all multilateral institutions re-
       defined exit strategies”.                quire reform and reinvigoration.”
                                                The IMF should take on respon-
    3. Similar to international organiza-
                                                sibility for financial stability, co-
       tions, NGOs or governments,
                                                ordination of economic policies
       the IIF demands the globaliza-
                                                in systemically important coun-
       tion of regulation: “Recognizing
                                                tries (one could think of trade
       the new realities of globaliza-
Alternatives to the Casino?                                                        45

        imbalances between China and        But the problems are in the proposed
        the U.S.), and increase its re-     details: instead of it being a democrati-
        sources and lending facilities.     cally controlled and transparent institu-
                                            tion, it is exclusive to the G20 countries
    6. Lastly, the IIF argues that “new
                                            and composed of undemocratic or only
       forms of dialogue and coopera-
                                            marginally democratically controlled
       tion are essential between the
                                            institutions. A global regulatory institu-
       public and private sectors if the
                                            tion that is not legitimized by democ-
       reinforced global financial sys-
                                            ratic decision-making processes and
       tem is to work.”
                                            excludes most countries is not only
                                            prone to be influenced by financial lob-
                                            byists, but does not give society the
General assessment                          control it needs to make finance work
These statements well summarize the         for the people and the planet. Interest-
private industries views on financial       ingly, on the question of democratic
market reform.40 The private sector         representation at international organi-
puts forth a totally inadequate analysis    zations, the IIF is more progressive
of the causes of the crisis and its rec-    than some of the international organi-
ommendations are trapped in neolib-         zations themselves: the democratiza-
eral frameworks of thought and first of     tion of international organizations as
all reveal the profit interests of its      well as increasing the power of the
authors. They still promote self-           G20 are seen by private global finan-
regulation for most of the problems –       cial actors as necessary because of
even though the last decade has             „the increased role emerging markets
proven beyond any doubt, that self-         have to play in the maintenance of
regulation does not work and leads to       open global economic systems.“ And
crisis. In terms of immediate crisis        lastly, the institutionalization of dia-
management the private sector de-           logues between the public and private
mands socialization of all losses and,      sectors should be observed with suspi-
once stability is restored, business as     cion: In plain language, the IIF tries to
usual and thus privatization of profits.    recommend the institutionalization of
The global regulatory governance            high-level lobbying activities, which
structure proposed by the IIF to over-      could be used by the private sector to
see and coordinate the national efforts     influence major regulatory bodies such
at regulating financial markets is in it-   as the IMFs International Monetary and
self an good, although unrealistic, idea.   Financial Committee (IMFC).
Alternatives to the Casino?                                                           46


5. Epilogue
Reform proposals on the financial ar-                 cial sector with spillovers to the
chitecture have historically always be-               real economy, resulting from
come prominent in times of crisis. The                excessive risks, intransparent
last time these debates erupted after                 financial markets, regulatory
the Asian crisis 1997 when the Finan-                 gaps and an unorderly delever-
cial Stability Forum was established                  aging process.
and a variety of reforms were initiated
                                                  •   Crisis of financial capitalism:
and implemented. These reform dis-
                                                      Some civil society groups have
cussions were, however, never on a
                                                      interpreted the financial turmoil
fundamental and elementary level. Nei-
                                                      as a crisis of financial capital-
ther was financial liberalization ques-
                                                      ism, a specific regime of capital-
tioned, nor the extreme reduction of
                                                      ist regulation, which governed
political rooms for manoeuvre through
                                                      the global economy since the
the disciplinary power of financial mar-
                                                      1970s.
kets. Rather, these reform agendas
aimed at stability, the prevention of             •   Crisis of capitalism: More fun-
future crisis and at shaping this finan-              damentally, other civil society
cial pressure to become more constant                 networks see it as a crisis of
and effective.41 These reform debates                 capitalism itself. Each interpre-
constricted the discussions to highly                 tation demands its respective
complex expert questions like the dis-                remedies, which thus partly ac-
pute on the Basle II accord and to in-                counts for the diverging aims
formal exclusive committees. Today,                   and reform agendas.
after the finanial crisis hit the centres of
the global economic systems and is             Secondly, there is the question of the
increasingly reaching more dramatic            objectives of such reforms.
levels of severity, the debates emerged           •   Stability: Official international
anew – this time, however, touching on                organizations primarily aim at
more fundamental issues.                              restoring stability in financial
The documents analyzed in this paper                  markets and at preventing future
highlight that the realization, that the              crisis. While also being a em-
rules and practices governing financial               phasized by the private financial
markets cannot stay the same as they                  industry, their prime objective is
were is spreading rapidly. This does                  clearly the restoration of the lib-
not, however, generate a homogenous                   eralized and deregulated finan-
and unconflictual discursive field.                   cial markets that made high
Rather, different actors with differing               profits possible. Civil society
interests are proposing increasingly                  groups, at last, will also aim at
diverging reform agendas.                             stability in financial markets,
                                                      since stability is a global public
First of all, underlying the diverging                good that potentially benefits all.
positions, are different analysis of the              It is, however, not enough. Even
causes and character of the crisis:                   though, merely establishing fi-
                                                      nancial stability would demand
    •   Financial and banking crisis: Of-
                                                      far-reaching reforms – the ones
        ficial organizations, in particular,
                                                      proposed by G20, IMF, FSF and
        have analyzed the crisis as a
                                                      UN will scarcely suffice. It also
        crisis of the banking and finan-
                                                      demands intermediary goals,
Alternatives to the Casino?                                                          47

        one of which is the concession              mental advocacy. This has to
        by the IMF that a viable future             further explored and it should
        financial system has to be less             rank high on all future reform
        leveraged and smaller in rela-              agendas.
        tion to the real economy.
                                                •   Redistribution and poverty re-
    •   Democratic control: Another im-             duction: Since the increased
        portant question is who should              bottom-up redistribution of in-
        control and participate in (a) re-          comes in the last decades both
        forming the financial system and            nationally and globally was one
        (b) regulating and supervising              of the important underlying con-
        its functioning. While G20, FSF,            ditions for the crisis, and since
        IMF and the private industry                insufficient demand is currently
        have endorsed an exclusive                  threatening the further deepen-
        global governance structure (al-            ing of the economic crisis, dis-
        though enhanced to include                  tributive questions are crucial.
        some emerging markets), most                Official organizations have not
        civil society groups have de-               even included distributive issues
        manded more democratic proc-                in their analysis or reform agen-
        esses, most of them favouring               das – they only passingly men-
        the United Nations. More fun-               tion that fighting global poverty
        damentally, civil society actors            and reaching the MDGs are still
        have argued for putting the en-             to be pursued. Only the UN
        tire financial sector under the             gives more room to proposing
        control of democratic institutions          remedies for north-south ine-
        and for making finance serve                qualities. Also in the civil society
        society rather than the other               spectrum, disributive questions
        way round.                                  are only partially adequately
                                                    discussed – particularly envi-
    •   Ecological sustainability: The
                                                    ronmental groups have not en-
        question of the ecological
                                                    dorsed measures directly aiming
        sustainability of a future finan-
                                                    at redistributing wealth globally
        cial system is crucially important
                                                    and within societies.
        in the face of the precarious
        situation of the planet. This        And thirdly, there is the question of the
        question has been entirely ne-       means to reach the goals. The discus-
        glected by official organizations    sions in this paper and particularly the
        and the private industry (given      systematic analysis in the synopsis
        some unconcrete passing men-         have laid out the different positions put
        tions), but is discussed in vary-    forth in some of the most important
        ing degrees by civil society         statements on financial market re-
        groups, especially those with a      forms.
        particular focus on environ-
Alternatives to the Casino?                                                                   48


List of reports on financial market reforms

G20 (2008), Declaration from the Summit on             Conduct and Best Practice Recommen-
     Financial Markets and the World Econ-             dations – Financial Services Industry
     omy, November 15, 2008,                           Response to the Market Turmoil of 2007-
     www.mofa.go.jp/policy/economy/g20_su              2008, July 2008,
     mmit/2008/declaration.pdf.                        http://www.iif.com/regulatory/.
G20 (2009), The Global Plan for Recovery and     IIF (2008), Letter to President George Bush,
     Reform, 2 April 2009,                              November 7, 2008,
     http://www.londonsummit.gov.uk/en/sum              http://www.iif.com/download.php?id=0Dk
     mit-aims/summit-communique/.                       LOqGnjTw.
European G20 (2009), Federal Chancellery -       ATTAC Europe (2008), The time has come:
     Chair's Summary of the Berlin G 20 Pre-         Let's shut down the financial casino. AT-
     paratory Summit, Press Release No. 86,          TAC’s statement on the financial crisis
     http://www.bundesregierung.de/Content/          and democratic alternatives, September
     EN/Pressemitteilungen/BPA/2009/2009-            2008, www.casinocrash.org/wp-
     02-22-chair-summary.                            content/uploads/2008/10/attac-finance-
                                                     crisis-15_10_2008.pdf.
FSF (2008a), Report of the Financial Stability
     Forum on Enhancing Market and Institu-      Beijing Declaration (2008), The global eco-
     tional Resilience”, 7 April 2008,                  nomic crisis: An historic opportunity for
     http://www.fsforum.org.                            transformation – An initial response from
                                                        individuals, social movements and non-
FSF (2008b), Report of the Financial Stability          governmental organisations in support of
     Forum on Enhancing Market and Institu-             a transitional programme for radical eco-
     tional Resilience Follow-up on Imple-              nomic transformation Beijing, 15 October
     mentation, 10 October 2008,                        2008, http://casinocrash.org/?p=235.
     http://www.fsforum.org.
                                                 BankTrack (2008), El Escorial Statement on
FSF (2009), FSF Principles for Sound Com-             Banks and the Financial Crisis, Novem-
     pensation Practices, 2 April 2009,               ber 6, 2008,
     www.fsforum.org/publications/r_0904b.p           www.banktrack.org/download/bank_to_t
     df.                                              he_future/escorial_declaration_final.pdf.
IMF (2008), Global Financial Stability Report    NEF (2008), From the ashes of the crash: 20
      Financial Stress and Deleveraging               first steps from new economics to rebuild
      Macro-Financial Implications and Policy,        a better economy, November 11, 2008,
      October 2008.                                   http://www.neweconomics.org/gen/z_sys
UN (2008), Doha Declaration on Financing for          _PublicationDetail.aspx?pid=268.
     Development: outcome document of the        FoEE (2008), Towards A Just and Sustainable
     Follow-up International Conference on            Financial System: A Summary of Key
     Financing for Development to Review              Friends of the Earth Recommendations,
     the Implementation of the Monterrey              November 13, 2008,
     Consensus, December 9, 2008,                     http://comhlamh.org/assets/files/pdfs/foe
     http://daccess-                                  _financial_recommendations.pdf.
     ods.un.org/TMP/8306452.html
                                                 ITUC-CSI-IGB, TUAC & Global Unions (2008),
UN (2009), The First Meeting of the Commis-           “Global Unions ‘Washington Declara-
     sion of Experts of the President of the          tion’”, November 2008, www.ituc-
     United Nations General Assembly on               csi.org/IMG/pdf/0811t_gf_G20.pdf.
     Reforms of the International Monetary
     and Financial System – Recommenda-          WSF (2009), Let’s put finance in its place!,
     tions for Immediate Action,                      February 1, 2009,
     http://www.un.org/ga/president/63/commi          http://www.choike.org/campaigns/camp.
     ssion/firstmeeting.pdf.                          php?5#_ftn1.
IIF (2008), Final Report of the Committee on
       Market Best Practices: Principles of
Alternatives to the Casino?                                                                            49

Endnotes

                                                      the 1980s and 1990s, especially with the
1
                                                      Gramm-Leach-Bliley Act in 1999.
  On the issue of changes in global govern-           10
ance see: Bretton Woods Project (2009),                  Similar proposals for the entire banking sec-
„Overhaul of international institutions. Is the       tor are promoted by Beijing, BankTrack and
G20          willing      to          deliver?“,      FoEE, see above.
http://www.brettonwoodsproject.org/art-               11
                                                          Although not specifically addressing this
563610.                                               issue, the groups gathered at the WSF 2009
2
 See for example Morten Boas and Desmond              demanded something related – the implemen-
McNeill (2003), Multilateral Institutions. A Criti-   tation of „a global mechanism of state and
cal Introduction, London: Pluto Press.                citizen control of banks and financial institu-
                                                      tions“ by recognizing financial intermediation
3
  IMF (2008), Global Financial Stability Report       „as a public service that is guaranteed to all
– GFSR Market Update, January 28, 2009,               citizens in the world and should be taken out of
http://www.imf.org/external/pubs/ft/fmu/eng/20        free trade agreements.“
09/01/index.htm.                                      12
                                                        In discussing the U.S. temporary restrictions
4
  See for example Olivier Blanchard, „Cracks in       on short selling after the collapse of Lehman
the System. Repairing the damaged global              Brothers, the IMF GFSR states, these were
economy“, in Finance & Development (De-               „positive, comprehensive, and necessary“
cember 2008) and the IMF Working Paper                measures. The IMF, however, does not dis-
08/262; Strauss-Kahn, „A Systemic Crisis De-          cuss, if short selling should be restricted more
mands            Systemic            Solutions“,      generally.
http://www.imf.org/external/np/vc/2008/092208.        13
htm.                                                       IIF 2008, 64.
                                                      14
5
        Cf.     the      document       under           See Peter Wahl, „Food Speculation – The
http://www.un.org/ga/president/63/statements/         Main Factor of the Price Bubble in 2008“,
gfcopening301008.shtml.                               Weed Briefing Paper, December 2008,
                                                      www.weed-online.org.
6
   UN (2008), Doha Declaration on Financing           15
for Development: outcome document of the                 UN 2008, 22. The UNs commission only
Follow-up International Conference on Financ-         demanded „addressing the challenges posed
ing for Development to Review the Implemen-           by the food and financial crises.“ (UN 2009, 1).
tation of the Monterrey Consensus, December           16
                                                           IMF 2008a, 98f.
9,             2008,              http://daccess-     17
ods.un.org/TMP/8306452.html. For example,                For a detailed study on financial market
the Declaration calls for enhancing transpar-         regulation in the EU see Miriam Vander Stich-
ency and disclosure practices; strengthening          ele (2008), Financial Regulation in the Euro-
the regulatory and supervisory frameworks of          pean        Union      (December       2008),
financial markets; improving key accounting           http://www.eurodad.org/uploadedFiles/Whats_
standards; and exercising strong oversight            New/Reports/EUMapping_Financial_Regulatio
over credit rating agencies, consistent with the      n_FINAL.pdf.
agreed and strengthened international code of         18
                                                         Only FoEE propose specific numbers: intro-
conduct. The document also demands ad-                duce a Tobin-style tax (for example, 0.25 per-
dressing the often expressed concern at the           cent tax on stock trading, and 0.02 percent tax
extent of representation of developing coun-          on options, futures, swaps, and currency trad-
tries in the major standard-setting bodies.           ing).
7
  Cf. the President’s statement from April 7 on       19
                                                         “Last month I called for a reform of the G7
http://www.un.org/ga/president/63/statements/         and for a modernized multilateralism to better
adoptionmodalities70409.shtml.                        reflect the realities of the 21st century. It is a
8
 NEF is silent on this point, the global unions       positive step forward that leaders of developed
only call for ensuring active supervision.            economies are now meeting together with
9
                                                      leaders from the rising economic powers. But
  FoEE calls for the restoration of the Glass-        the poorest developing countries must not be
Steagall Act. This American law was passed in         left out in the cold. We will not solve this crisis,
the context of New Deal reforms in 1933, and          or put in place sustainable long-term solutions
officially introduced the separation of bank          by accepting a two-tier world.” Statement by
types according to their business (commercial         World Bank Group President Robert B. Zoellick
and investment banking) – it was repealed in
Alternatives to the Casino?                                                                       50


on      the   Summit     of  G20     Leaders,      ish, French, Croatian, Italian, Hungarian, Por-
http://go.worldbank.org/8Z543X2A80. See the        tuguese, Russian and Slovenian.
Statement by Justin Lin, Senior Vice President     25
                                                      Countries of the South are prominently dis-
and Chief Economist of the World Bank on the
                                                   cussed in the preamble of ATTACs statement,
Doha                               conference:
                                                   but in the actual text, there is only one refer-
http://go.worldbank.org/C9OJ4QFGM0
                                                   ence to this issue – the proposal to use parts
20
   The only reference in the G20 Washington        of a special fund fed by a tax on capital in-
Declaration is to „reaffirm the development        comes to counter the effects of the financial
principles agreed at the 2002 United Nations       crash on developing countries (ATTAC 2008,
Conference on Financing for Development in         4).
Monterrey, Mexico, which emphasized country        26
                                                      The preamble states that the Declaration is
ownership and mobilizing all sources of financ-
                                                   “a contribution towards efforts to formulate
ing for development.“ The UN is not mentioned
                                                   proposals around which our movements can
in the IMFs GFSR or in the FSFs report or the
                                                   organise as the basis for a radically different
IIFs letter to Bush and the IIFs 2008 report on
                                                   kind of political and economic order.”
financial market reform.
                                                   27
21                                                   Members include, among others, Amigos da
    See also the London Declaration by the
                                                   Terra Amazonia Brasileira (Brazil), Les Amis
European Trade Union Confederation (ETUC)
                                                   de la Terre (France), Rainforest Action Net-
under at http://www.etuc.org/a/5367. TUAC
                                                   work (United States), Netwerk Vlaanderen
has collected other trade union reports on the
                                                   (Belgium), WEED (Germany) and Friends of
financial               crisis              at
                                                   the Earth US. See www.banktrack.org
http://www.tuac.org/en/public/e-
                                                   28
docs/00/00/03/CF/document_doc.phtml.                  Green New Deal Group (2007), A Green
22                                                 New Deal. Joined-up policies to solve the triple
   Another important actor from the South, the
                                                   crunch of the credit crisis, climate change and
Third World Network (TWN), has published a
                                                   high oil prices, July.
variety of papers dealing with special issues of
                                                   29
financial market reform, but no comprehensive          The most important reports are: FoEE
report.             See               especially   (2001), “Sustainability and Accountability in the
http://www.twnside.org.sg/crisis_10.htm     and    Financial Services Sector: Regulatory and
http://www.twnside.org.sg/fnd_f.international.ht   public policy recommendations”; Friends of the
m                                                  Earth, Institute for Policy Studies, International
23                                                 Forum on Globalization (1999), “A Call to Ac-
   Attac (2008), The time has come: Let's shut
                                                   tion: Citizens’ Agenda for Reform of the Global
down the financial casino. ATTAC’s statement
                                                   Economic System”; and the El Escorial Decla-
on the financial crisis and democratic alterna-
                                                   ration published in 2008 with BankTrack.
tives,            September              2008,
                                                   30
www.casinocrash.org/wp-                               FoEE only generally state: „The rules and
content/uploads/2008/10/attac-finance-crisis-      institutions of global finance should discourage
15_10_2008.pdf. The document was sup-              speculation and encourage long-term invest-
ported by Attac Austria, Attac Denmark, Attac      ment in the real economy in a form that sup-
Finland, Attac Flanders, Attac France, Attac       ports local economic activity, sustainability,
Germany, Attac Hungary, Attac Italy, Attac         equity, and reduces poverty“. This is, however,
Morocco, Attac Norway, Attac Poland, Attac         not discussed further.
Spain, Attac Sweden, Attac Switzerland.            31
                                                       ITUC-CSI-IGB, TUAC & Global Unions
24
   Beijing Declaration (2008), The global eco-     (2008), Global Unions ‘Washington Declara-
nomic crisis: An historic opportunity for trans-   tion’,     November        2008,      www.ituc-
formation – An initial response from individu-     csi.org/IMG/pdf/0811t_gf_G20.pdf. ITUC is the
als, social movements and non-governmental         world's largest trade union federation; TUAC is
organisations in support of a transitional pro-    an international trade union organization,
gramme for radical economic transformation,        which has consultative status with the OECD;
Beijing,        15        October         2008,    Global Unions is another international trade
http://casinocrash.org/?p=235. This statement      union organization. See http://www.ituc-
was signed by some groups also discussed in        csi.org/;
this paper: Friends of the Earth Finland and       http://www.tuac.org/en/public/index.phtml;
Philippines, Attac groups from France, Hun-        http://www.global-unions.org/.
gary, Spain, Japan, Morocco, Denmark and           32
                                                     WSF (2009), Declaration of the Assembly of
Belgium. The Declaration has been translated
                                                   Social Movements, We won’t pay for the crisis.
into the following languages: Deutsch, Span-
                                                   The rich have to pay for it!, available in Eng-
Alternatives to the Casino?                                                                        51


lish, Spanish and German at http://www.uni-         the demands of a coalition of progressive so-
kas-                                                cial movements mobilizing to the streets of
sel.de/fb5/frieden/themen/Globalisierung/wsf-       London for the G20 summit in April. The Dis-
2009d.html. The following typical analysis for      sent network demands: “DON'T BAIL OUT
example, though adequate regarding certain          THE BANKS - SINK THEM !!!” See
processes, is far too general and greatly un-       http://bristol.indymedia.org/article/689962 .
derestimates the real shifts in global power,       36
                                                       The Belem Declaration has recently been
wealth and ideological landscapes caused by
                                                    complemented by a more detailed document
the crisis: “All the measures that have been
                                                    drafted by several persons involved in the wri-
taken so far to overcome the crisis merely aim
                                                    ting of the Belem WSF document. See „Back-
at socialising losses so as to ensure the sur-
                                                    ground document to the Belem Declaration.
vival of a system based on privatising strategic
                                                    For a new economic and social model – LET’S
economic sectors, public services, natural and
                                                    PUT       FINANCE      IN    ITS     PLACE!”,
energy resources and on the commoditisation
                                                    www.attac.no/meninger/finanskrisa/123858533
of life and the exploitation of labour and of
                                                    0/background-document--for-distribution--26-3-
nature as well as on the transfer of resources
                                                    09.doc.
from the Periphery to the Centre and from
                                                    37
workers to the capitalist class.” The seven            The “Final Report of the Committee on Mar-
main demands are:                                   ket Best Practices: Principles of Conduct and
                                                    Best Practice Recommendations – Financial
1. “Nationalising the banking sector without
                                                    Services Industry Response to the Market
compensations and with full social monitoring,
                                                    Turmoil of 2007-2008”, published in July 2008,
2. Reducing working time without any wage
                                                    set out Proposed Principles of Conduct, Best
cut,
                                                    Practice Recommendations, and Considera-
3. Taking measures to ensure food and energy
                                                    tions for the Official Sector in the areas of risk
sovereignty
                                                    management, compensation, liquidity risk,
4. Stopping wars, withdraw occupation troops
                                                    valuation, securitization and transparency and
and dismantle military foreign bases
                                                    disclosure issues.
5. Acknowledging the peoples’ sovereignty and
                                                    38
autonomy ensuring their right to self-                 The Institute held its fall EAC meeting in
determination                                       Washington, DC, on November 13 and 14,
6. Guaranteeing rights to land, territory, work,    2008. Graeme Wheeler, Managing Director of
education and health for all.                       Operations at the World Bank and Reza
7. Democratise access to means of communi-          Moghadam, Director of Strategy, Policy and
cation and knowledge.”                              Review Department at the IMF attended the
                                                    meeting and gave presentations. See
33
   Let’s put finance in its place! The discus-      http://www.iif.com/about/article+189.php.
sions out of which this document evolved in-        39
cluded among others: Action Aid, Attac, Bank-          The letter, written on November 7, 2008, is
Track, CADTM, CCFD, CEDLA, CNCD, CRID,              signed by Joseph Ackermann (Deutsche
Eurodad, Global alternatives Forum, IBON,           Bank), Charles Dallara (IIF), William Rhodes
International WG on Trade-Finance Linkages,         (Citicorp), Francisco González (BBVA) and
                                                    Roberto Setúbal       (Baco Itau S. A.), cf.
LATINDADD, Networkers South-North, NIGD,
                                                    http://www.iif.com/download.php?id=0DkLOqG
SOMO, Tax Justice Network, Transform!, OW-
                                                    njTw=.
INFS, War on Want, World Council of
                                                    40
Churches.                                 See          For other business-friendly reports on finan-
http://www.choike.org/campaigns/camp.php?5          cial market reform see Brunnenmeier et al.
#_ftn1                                              (2009), The Fundamental Principles of Finan-
34                                                  cial Regulation, Geneva Reports on the World
   See for example the report “World Social
                                                    Economy                                       11,
Forum 2009: New Pathways and Opportuni-
ties” by Leandro Morais of the Institute of De-     http://www.voxeu.org/index.php?q=node/2796
velopment                              Studies,     (especially interesting, for example, the reform
http://www.ids.ac.uk/go/about-ids/news-and-         proposals on hedge funds, p. 24). See also the
analysis/february-2009-news/world-social-           Larosiere                                 report,
                                                    http://www.londonsummit.gov.uk/en/summit-
forum-2009.
                                                    aims/timeline-events/larosiere-report
35
   “The resources to get out of the crisis merely   41
                                                       See for example Jörg Huffschmid (2004),
burden the public with the losses in order to
                                                    Die Politische Ökonomie der Finanzmärkte,
save, with no real public benefit, a financial
                                                    VSA-Verlag.
system that is at the root of the current cata-
clysm.” Going even further in this direction are

				
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