New York City, October 20 2008. The City University of New York (CUNY) organized and provided the setting for a debate that involved Economics Nobel Prize laureate Joseph Stiglitz, ILD President Hernando de Soto and journalist and anti-globalization activist, Naomi Klein.
During the debate, which revolved around analyzing the causes of the world financial crisis, De Soto stated that Western countries have yet again forgotten the fundamental principles of property, and given way to the uncertain rules of the stock market.
De Soto in addition remarked that there are currently no registries or clear rules governing the transfer of stock market assets. The result is that unlike other intangible and tangible property assets, which are duly registered in the United States and Europe, there is no record of how much of this non-payable stock market property has ended up in each bank’s hands. It is here that we find the origin of the credit collapse: clear and transparent rules, of the kind provided by a robust property system which protects security of ownership and transactions, are absent from stock exchange regulations. The result is that banks have lost trust in one another, and credit has suffered accordingly.
On the other hand, Stiglitz pointed out that the US government has failed as a regulator of the stock market and in the conduction of the monetary policy, which allowed banks to loan money at low interest rates. He also mentioned that the President of the US Federal Reserve, Alan Greenspan, did not believe in regulation and allowed licentiousness in the stock market.
Naomi Klein charged against the so-called neoliberals, stating that it would be a great mistake to use the Wall Street crisis – created according to her, by deregulation and privatization – as an opportunity to demand the privatization of social security, reduction of corporation taxes and the cut of social expenses for the poor.
While Stiglitz and De Soto have exchanged views in more than one occasion, this is the first time they do so in such critical circumstances. According to observers, the present financial crisis will be at least as harmful as that of 1929, if not worse. It is important to mention that De Soto was the only foreigner to address the issue of the then impending financial crisis during the past Democratic Convention in Denver, which launched the candidature of Barack Obama.
Great Issues Forum (The Graduate Center, City University of New York)
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