This is an open letter to world leaders attending the November 15 White House
summit on financial markets and the world economy.
Dear world leaders:
The winter of 2008-2009 will prove to be the winter of global economic
discontent that marks the rejection of the flawed ideology that unregulated
global financial markets promote financial innovation, market efficiency,
unhampered growth and endless prosperity while mitigating risk by spreading it
system wide. For more than three decades, mainstream neo-liberal economists
have preached, and regulators have accepted, the myth of the efficiency of
unregulated markets, ignoring the critical
lesson provided by John Maynard Keynes's analysis of interconnection of
financial markets and the international payments system.
Those who do not learn the lessons of history are bound to repeat its tragedy.
Neo-liberal economists in the last three decades have denied the possibility of
a replay of the worldwide destructiveness of the Great Depression that followed
the collapse of the speculative bubble created by unfettered US financial
markets of the "Roaring Twenties". They fooled themselves into thinking that
false prosperity built on debt could be sustainable with monetary indulgence.
Now history is repeating itself, this time with a new, more lethal virus that
has infested deregulated global financial markets with "innovative" debt
securitization, structured finance and maverick banking operations flooded with
excess liquidity released by accommodative central banks. A massive structure
of phantom wealth was built on the quicksand of debt manipulation. This debt
bubble finally imploded in July 2007 and is now threatening to bring down the
entire global financial system to cause an economic meltdown unless enlightened
political leadership adopts coordinated corrective measures on a global scale.
The US subprime mortgage problem that started in 2007 has developed predictably
to a morass that has caused the abrupt failure of interconnected financial
markets and threatened the viability of financial institutions worldwide as
contagion spread at electronic speed via an antiquated, dysfunctional
international payments system.
To arrest the global financial meltdown, much can be learned from Keynes'
vision of how the international payments system should work to permit each
country to promote a national full employment policy without having to fear
balance of payments problems or to allow financial incidents in other countries
to infect the domestic banking and non-bank financial systems.
Another Great Depression can be avoided if world leaders would reconsider John
Maynard Keynes' analytical system that contributed to the golden age of the
first quarter century after World War II. The undersigned and others have long
advocated a new international financial architecture based on an updated 21st
century version of the Keynes Plan originally proposed at Bretton Woods in
1944.
This new international financial architecture will aim to create (1) a new
global monetary regime that operates without currency hegemony, (2) global
trade relationships that support rather than retard domestic development and
(3) a global economic environment that promotes incentives for each nation to
promote full employment and rising wages for its labor force.
Sincerely, Paul Davidson, Editor, Journal of Post Keynesian Economics, Visiting
Scholar, Schwartz Center for Economic Policy Analysis, The New School, New
York, USA; Henry C K Liu, Visiting Professor of Global Development, Department of
Economics, University of Missouri-Kansas City, USA.
Partial list of supporters: Irma Adelman, Professor of Economics, Graduate School, University of
California at Berkeley, USA; Philip Arestis, Director of Research, University of Cambridge, UK; Angel Asensio, University Paris 13, France, member of ADEK and Post
Keynesian Economics Study Group; H Sonmez Atesoglu, Professor of Economics, School of Business, Clarkson
University, Potsdam, USA; Rainer Bartel, Associate Professor of Economics, Johannes Kepler
University, Linz, Austria; Janine Berg, Senior Labour Economist, International Labour Office,
Brasilia, Brazil; W Robert Brazelton, Professor-Emeritus/Economics, University of
Missouri-Kansas City; Luiz Carlos Bresser-Pereira, Professor Emerito da Fundacao Getulio
Vargas, Brazil; Christopher Brown, Professor of Economics, Arkansas State University,
USA; Paul D Bush, Professor Emeritus of Economics, California State
University, Fresno, USA; Fernando J Cardim de Carvalho, Professor of Economics, Institute of
Economics, Federal University of Rio de Janeiro, Brazil; Massimo Cingolani, Directorate for Lending Operations in Europe,
European Investment Bank, Luxembourg; Eugenia Correa, Posgrado de Economia, Universidad Nacional Autonoma de
Mexico; Dr James M Cypher, Researcher-Professor, Economics, Doctorate in
Development Studies, Universidad Autonoma de Zacatecas, Mexico; Sheila C Dow, Professor, Department of Economics, University of
Stirling, Scotland, UK; Miguel Angel Duran, Lecturer in Economic Theory, University of Malaga,
Spain; Jorge Garcia-Arias, Associate Professor of Economics, Department of
Economics, University of Leon, Spain; Alicia Giron, Instituto de Investigaciones Economicas, Universidad
Nacional Autonoma De Mexico; Eric R Hake, Assistant Professor, Eastern Washington University, USA; John T Harvey, Professor of Economics, Texas Christian University, USA; Baban Hasnat, Professor, Dept of Business Administration &
Economics, The College at Brockport, State University of New York, USA;
Geoffrey M Hodgson, Professor of Economics, University of Hertfordshire,
UK; Lena Lavinas, Assistant Professor of Welfare Economics, Institute of
Economics at the Federal University of Rio de Janeiro, Brazil; Frederic S Lee, Professor, Department of Economics, University of
Missouri-Kansas City, USA;
Noemi Levy-Orlik, Professor, Economic Department, National Autonomous
University of Mexico; Brent McClintock, Associate Professor of Economics, Department of
Economics, Carthage College, Wisconsin, USA;
John McCombie, Director, Cambridge Centre for Economic and Public
Policy, Department of Land Economy, University of Cambridge, UK; Sergio Cabrera Morales, Economics Faculty, Universidad Naciona Autonoma
de Mexico; Tracy Mott, Associate Professor, Department of Economics, University of
Denver, USA; Alcino Ferreira Camara Neto, Dean of Law and Economics, Federal
University of Rio de Janeiro, Brazil; Paulette Olson, Professor, Department of Economics, Wright State
University, Dayton, Ohio, USA; Walter O Otsch, Head of the Centre for Social and Cross-Cultural
Competency, Johannes Kepler Universitat Linz, Austria; Maria Cristina Penido de Freitas, Brazilian Economist, PhD on economics,
University of Paris, France; Daniela Magalhaes Prates, Professor, the Economy Institute of the
University of Campinas, Sao Paulo, Brazil; Alcino F Camara Neto, Professor and Dean Federal University of Rio de
Janeiro, Brazil; Clyde Prestowitz, President, The Economic Strategy Institute, Washington
DC, USA; Colin L Richardson, Internet Economist, William Penney Laboratory,
Imperial College London, UK;
Louis-Philippe Rochon, Associate Professor, Laurentian University,
Ontario, Canada; Irma Erendira Sandoval, Social Science Research Institute, Universidad
Nacional Autonoma de Mexico;
Prof Dr Herbert Schui, former professor of economics, University for
Economics and Policy, Hamburg, Germany; MP at the Deutscher Bundestag
Parliamentary Group, DIE LINKE economic spokesman; Mario Seccareccia, Professor of Economics, University of Ottawa, Canada;
Editor, International Journal of Political Economy; Mark Setterfield, Professor of Economics, Trinity College, Connecticut,
USA; Anwar Shaikh, Professor of Economics, Department of Economics, Graduate
Faculty, New School for Social Research, New York, USA; James I Sturgeon, Professor of Economics & Economics Department
Chair, University of Missouri-Kansas City, USA; Eric Tymoigne, Assistant Professor, Department of Economics, California
State University, Fresno, USA; Cathleen Whiting, Associate Professor of Economics, Willamette
University, Oregon, USA; Gregorio Vidal, Department of Economics, Posgraduate Programme,
Universidad Autonoma Metropolitana, Mexico;
L Randall Wray, Research Director, Center for Full Employment and Price
Stability, Department of Economics, University of Missouri-Kansas City; Senior
Scholar Levy Economics Institute, New York, USA; Haibo Yan, Associate Professor, Postdoctoral Mobile Research Station,
Institute of Economics, Chinese Academy of Social Sciences, Beijing, China.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
