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Financial stability is an international concern with so many countries joining the global economy. It is a public good because everyone benefits yet no one is responsible for maintaining it. How stable are global financial systems? Do they support social and environmental sustainability? How do they affect developing countries? What initiatives would ensure global financial security in the long term?
Short term financial volatility and long term insecurity are a threat to many countries that have embraced globalisation. During the Asian crisis in 1997 to 1998 the standard of living in Thailand fell by 14 percent, in Korea by 22 percent, and Indonesia by 25 percent. In the event of economic collapse, governments can tighten public spending and raise interest rates, but developing countries also need time to renegotiate their debts and secure new lines of credit to pay off existing borrowing. International back-up for developing countries has been based on a model of ‘borrow, invest, export, repay’, but has failed to bring many countries out of debt and insolvency. There have been several initiatives to improve long-term financial insecurity, but structural adjustment plans, bilateral assistance and long-term development programmes are failing to help many countries.
The briefing argues that global financial security is not about stability and wealth generation for their own sake, but creating structures that enhance the livelihoods of people and the natural environment. It points to the following disturbing trends:
Without constructive proposals for reform and open dialogue whole-sale change remains a remote prospect. The briefing urges policymakers to consider the following initiatives:
‘Sustainable finance: Seeking global financial security - towards Earth Summit 2002', Economics briefing #2 by Rosalie Gardiner Full document.
Funded by: RICS Foundation, European Commission, Heinrich Boell Foundation, UN Foundation, BP, Government of Canada, Finland, Germany, Netherlands, United Kingdom
id21 Research Highlight: 18 April 2002
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