Gordon Brown: "i Called For Global Financial Reform Ten Years Ago"

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• OECD says UK should do more to curb rising house prices

Time for a David Cameron thread?

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http://archive.treasury.gov.uk/press/1998/p209_98.html

Continues at the link, all in caps so it appears a bit shouty.

I think this is what's being referred to.

http://forum.iop.harvard.edu/content/rediscovering-public-purpose-new-global-economy

The original text link isn't working but this has the video of the speech.

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I think this deserves to be posted here in full especially as it appears to have been removed from the Treasury archive. Recovered from the Internet archive.

http://web.archive.org/web/20081205025417/http://archive.treasury.gov.uk/press/1998/p209_98.html

# = pounds sterlingHM Treasury News Release209/98                                    15 December 1998--------------------------------------------------------------                                       REDISCOVERING PUBLIC PURPOSE IN THE GLOBAL ECONOMY                                Attached is the text of the lecture that the Chancellor of theExchequer, Gordon Brown, will deliver this evening at theKennedy School, Harvard University.Tomorrow the Chancellor will be in Washington where he willmeet:     US Treasury Secretary - Robert Rubin;     Chairman of the Federal Reserve - Alan Greenspan;     Managing Director of the IMF - Michel Camdessus; and, on     Thursday,     President of the World Bank - Jim Wolfensohn.  The Chancellor is visiting the United States at the end of theUK Presidency of the G7 to press forward the major reformsneeded to strengthen the international financial system.Media enquiries:Charles Keseru - 0171 270 5188Charlie Whelan - 0468 003425 (in the US)CHANCELLOR OF THE EXCHEQUER'S LECTURE AT THE KENNEDY SCHOOL,HARVARD UNIVERSITY ON 15TH DECEMBER 1998"REDISCOVERING PUBLIC PURPOSE IN THE GLOBAL ECONOMY"INTRODUCTIONTHERE CAN BE NO MORE APPROPRIATE COUNTRY TO DISCUSS THECHALLENGES FACING THE NEW GLOBAL ECONOMY THAN THE UNITED STATESOF AMERICA: THE PRE-EMINENT ARCHITECT OF THE POST-WAR GLOBALSYSTEM.THERE CAN BE NO FORUM MORE APPROPRIATE THAN THE KENNEDY SCHOOL,NAMED AFTER THE PRESIDENT, WHO ON JULY 4th MORE THAN A THIRD OF ACENTURY AGO, MATCHED THE DECLARATION OF INDEPENDENCE OF 1776 WITHA NEW DECLARATION OF ECONOMIC INTERDEPENDENCE FOR OUR TIME.AND THERE CAN BE NO MORE APPROPRIATE INSTITUTION THAN HARVARDWHERE 50 YEARS AGO, THE MARSHALL PLAN, THE MOST AMBITIOUSMULTI-NATIONAL EFFORT FOR ECONOMIC RECONSTRUCTION THE WORLD HASSEEN, WAS FIRST LAUNCHED.MORE THAN HALF A CENTURY AGO, LEADERS WHO WERE STILL  ENGAGED INWAR TOOK THE TIME TO PREPARE FOR PEACE.  IN A BREATHTAKING LEAPINTO A NEW ERA, THE WORLD CREATED NOT JUST NEW INTERNATIONALINSTITUTIONS - THE IMF, THE WORLD BANK, THE GATT AS WELL AS THEUN - AND A WHOLE SET OF NEW RULES FOR A NEW INTERNATIONALECONOMY, BUT GAVE EXPRESSION TO A NEW PUBLIC PURPOSE BASED ONHIGH IDEALS.A GENERATION OF LEADERS WHO HAD KNOWN THE GREATEST OF DEPRESSIONSAND THE GREATEST OF WARS KNEW ALSO THAT JUST AS PEACE COULD NOTBE PRESERVED IN ISOLATION, PROSPERITY COULD NOT BE MAXIMIZED INISOLATION.WHAT THEY DID FOR THEIR DAY AND GENERATION WAS SO DRAMATIC THATDEAN ACHESON SPOKE OF THAT PERIOD AS AKIN TO BEING PRESENT AT THECREATION.ONE OF THE SIGNAL EVENTS WAS THE BRETTON WOODS CONFERENCE - AND IASK MYSELF WHY IT WAS HELD NOT IN WASHINGTON, OR NEW YORK, ORBOSTON, BUT IN THE WHITE MOUNTAINS OF NEW HAMPSHIRE.  IN FACT THELOCATION WAS THE PRICE THE ROOSEVELT ADMINISTRATION HAD TO PAY TOPERSUADE A NEW HAMPSHIRE SENATOR TO ABANDON ISOLATIONISM.  AS TIPO'NEILL USED TO SAY, "ALL POLITICS IS LOCAL" ... EVEN GLOBALPOLITICS.  IF MASSACHUSETTS AND NOT NEW HAMPSHIRE HAD THREATENEDTO BE ISOLATIONIST WE MIGHT BE TALKING TODAY OF THE CAMBRIDGEAGREEMENT.  NOTHING COULD MORE VIVIDLY SHOW THE PRACTICAL NATUREOF THE VISIONARIES WHO CREATED THE NEW WORLD THAN THEIR CHOICE OFBRETTON WOODS.BUT AS PRACTICAL AS IT WAS, BRETTON WOODS ALSO DEFINED A NEWPUBLIC PURPOSE CHARACTERISED BY HIGH IDEALS.  THE CONFERENCE WASABOUT MORE THAN EXCHANGE RATES, THE MECHANICS OF FINANCIALARRANGEMENTS OR EVEN NEW INSTITUTIONS.  AS THE AMERICAN SECRETARYOF THE TREASURY SAID AT THE VERY START OF THE OPENING SESSION:     "PROSPERITY HAS NO FIXED LIMITS IT IS NOT A FINITE SUBSTANCE     TO BE DIMINISHED BY DIVISION. ON THE CONTRARY THE MORE OF IT      THAT OTHER NATIONS ENJOY THE MORE EACH NATION WILL HAVE FOR     ITSELF.     "PROSPERITY LIKE PEACE IS INDIVISIBLE.  WE CANNOT AFFORD TO     HAVE IT SCATTERED HERE OR THERE AMONGST THE FORTUNATE OR     ENJOY IT AT THE EXPENSE OF OTHERS....."     IN SHORT, PROSPERITY TO BE SUSTAINED HAD TO BE SHARED. PRACTICALITY AND MORALITY WENT HAND IN HAND.GEORGE MARSHALL REAFFIRMED THIS IN HIS OWN HISTORIC SPEECH HEREAT HARVARD.  WE MUST FIGHT AGAINST "HUNGER, POVERTY, DESPERATIONAND CHAOS", HE INSISTED, TO SECURE "THE REVIVAL OF A WORKINGECONOMY IN THE WORLD [THAT WOULD] PERMIT THE EMERGENCE OFPOLITICAL AND SOCIAL CONDITIONS IN WHICH FREE INSTITUTIONS CANEXIST".SO THE POST-WAR ARRANGEMENTS WERE FOUNDED ON THE BELIEF THATPUBLIC ACTION ON A NEW AND WIDER STAGE COULD ADVANCE A NEW ANDWORLDWIDE PUBLIC PURPOSE OF HIGH IDEALS ROOTED IN SOCIAL JUSTICE:TO ACHIEVE PROSPERITY FOR ALL BY EACH CO-OPERATING WITH EVERYOTHER: NEW  INTERNATIONAL RULES OF THE GAME THAT INVOLVED ACOMMITMENT TO HIGH LEVELS OF GROWTH AND EMPLOYMENT.  IN SHORT,THE JOB OF EVERY ECONOMY WAS TO CREATE JOBS FOR ALL.THE FOUNDERS OF BRETTON WOODS RESOLVED THAT THE FAILED  POLICIESOF LAISSEZ-FAIRE WHICH RESULTED IN VAST INEQUITIES AND RECURRINGDEPRESSION FROM THE 1870S TO THE 1930S WOULD NOT BE REPEATED. UNTRAMMELLED, UNREGULATED MARKET FORCES HAD BROUGHT GREATINSTABILITY AND EVEN GREATER INJUSTICE.  IN THE POST-WAR ERAGOVERNMENTS HAD TO WORK COLLECTIVELY IF THEY WERE TO ACHIEVEEITHER JUSTICE OR STABILITY.THE INITIATIVES AND INSTITUTIONS OF THAT ERA WERE SHAPED TO THECONDITIONS OF THE TIME - A WORLD ECONOMY OF PROTECTED NATIONALMARKETS, LIMITED CAPITAL FLOWS, AND FIXED EXCHANGE RATES.  ANDFOR NEARLY THIRTY YEARS THE SYSTEM WORKED, FOR HUNDREDS OFMILLIONS WHO ENJOYED UNPARALLELED PROSPERITY BRETTON WOODS TOOKUS A LONG WAY.  YET EVEN IN THE 70S WITH HUNDREDS OF MILLIONSSTILL IN POVERTY WE HAD STILL A LONG WAY TO GO.IN THE FIRST HISTORIC PHASE OF INTERNATIONAL ECONOMIC MANAGEMENT,NATION STATES SPOKE UNTO NATION STATES, WITH AN UNPRECEDENTEDDEGREE OF CO-OPERATION BETWEEN SEPARATED AND STILL LARGELYINSULATED ECONOMIES.  THE INTERNATIONAL RULES OF THE GAME THENLARGELY CONSISTED OF OPEN CURRENT ACCOUNTS, FIXED EXCHANGE RATESAND CLOSED CAPITAL ACCOUNTS AND OF COLLECTIVE SUPPORT WHENCOUNTRIES RAN INTO BALANCE OF PAYMENTS PROBLEMS.BUT OVER THE NEXT GENERATION, THAT NEW WORLD, TOO, BECAME OLD, ASTHE EXISTING ORDER OF NATION STATES AND COLLECTIVE INTERNATIONALACTION WAS INCREASINGLY BYPASSED BY THE GROWTH AND EVENTUALLY THESHEER FORCE OF INTERNATIONAL FINANCIAL FLOWS, SUCCESSIVELY ENDING DOLLAR CONVERTIBILITY INTO GOLD, THE FIXED EXCHANGE RATE SYSTEM,AND POST-WAR KEYNESIAN CERTAINTIES, BRINGING IN ITS WAKE ANOUTBREAK OF INFLATION AND THEN STAGFLATION THAT SPREAD ACROSS THEWESTERN WORLD.THE 1980S SAW A NEW CONSENSUS EMERGE, ESSENTIALLY AN ATTEMPT TORETURN TO LAISSEZ-FAIRE.  IT FOCUSSED NOT ON WHAT GOVERNMENTSSHOULD DO, BUT ON WHAT GOVERNMENTS SHOULD NOT DO, EMPHASISINGPRIVATE PURSUITS ALMOST TO THE EXCLUSION OF PUBLIC PURPOSE. ENLIGHTENED SELF-INTEREST GAVE WAY TO SHEER SELF-INTEREST. INSTEAD OF RISING TO THE CHALLENGE OF APPLYING THE HIGH IDEALS OFTHE POST WAR WORLD TO A NEW WORLD, INSTEAD OF AIMING FOR HIGHLEVELS OF EMPLOYMENT AND PROSPERITY FOR ALL, SIGHTS WERE LOWERED,THE VISION WAS NARROWED.  THE NEW RIGHT CONSENSUS FOCUSSED ALMOSTENTIRELY ON INFLATION AND MINIMAL GOVERNMENT.OF COURSE IT WAS AND IS RIGHT TO SAY THAT INFLATION IS COSTLY,AND ONCE OUT OF CONTROL, IT IS EVEN MORE COSTLY TO REVERSE. MACROECONOMIC STABILITY, BASED ON LOW INFLATION AND SOUND PUBLICFINANCES, IS AN ABSOLUTE  PRECONDITION OF ECONOMIC SUCCESS. INDEED THERE IS A NEW PREMIUM ON ECONOMIC STABILITY IN THE GLOBALECONOMY.  A NATION STATE RELYING ON INVESTMENT FLOWS FROM ROUNDTHE WORLD - AND ALSO VULNERABLE TO THEM - NOW KNOWS THATRETRIBUTION FOR GETTING THINGS WRONG IS SWIFT AND TERRIBLE.THE 1980s CONSENSUS DID UNDERSTAND THE IMPORTANCE OF LIBERALIZINGECONOMIES FROM EXCESSIVE REGULATION AND BAD GOVERNMENT.  BUT THEYCONFUSED MEANS WITH ENDS AND SAID IN EFFECT THAT INFLATION ALONE,NOT JOBS AND GROWTH ALSO, WERE EXCLUSIVE CONCERNS.  AND THEY SAIDTHAT ALL  GOVERNMENT WAS BAD: THAT GOVERNMENT CAN'T MAKE ADIFFERENCE, AT LEAST A POSITIVE ONE, IN JOBS AND GROWTH, AND THATGLOBAL MARKETS HAVE TO BE LEFT ENTIRELY TO  MARKET DOGMAS, WHICHHAVE NO PLACE FOR THE PUBLIC PURSUIT OF HIGH IDEALS.  BUT THIS1980s CONSENSUS FAILED EVEN IN ITS OWN STATED PURPOSE - BRINGINGTHE LARGEST FISCAL DEFICIT IN AMERICAN HISTORY AND REDUCINGBRITAIN TO INFLATIONARY BOOM-AND- BUST.AND BY 1997, AN INCREASINGLY TURBULENT AND INADEQUATELYSUPERVISED INTERNATIONAL FINANCIAL SYSTEM THREATENED TO CREATEBOOM AND BUST ON A GLOBAL SCALE.  NOW BOTH OF THE BRETTON WOODSOBJECTIVES - NOT ONLY PROSPERITY FOR ALL BUT STABILITY FOR ALL -WERE AT RISK.  THE POST-WAR HOPE FOR AN INDIVISIBLE PROSPERITYWAS REPLACED BY THE SUDDEN FEAR OF INDIVISIBLE INSTABILITY.  THE1980s CONSENSUS COULD NOT ENDURE.AS THE DOWNTURN IN ASIA REVERBERATED AROUND THE GLOBE, PRESIDENTCLINTON SAID THAT 'THE WORLD FACES PERHAPS ITS MOST SERIOUSCRISIS IN HALF A CENTURY'.IN RECENT MONTHS AS INTEREST RATES HAVE COME DOWN, AND THE G7GROUP OF LEADING INDUSTRIALISED NATIONS HAVE SET A TIMETABLE FORREFORM, FINANCIAL MARKETS HAVE BECOME LESS UNSTABLE.BUT THIS IS NO TIME FOR COMPLACENCY. WE MUST RECOGNISE  HOW FARWE HAVE COME - IN PURPOSE AS WELL AS TIME - FROM 1945 AND HOW,WITHOUT PUBLIC PURPOSE IN THIS NEW GLOBAL ECONOMY, ONE SET OFEVENTS IN ONE CONTINENT COULD INFLICT SO MUCH DAMAGE ON SO MANYPEOPLE.THIS YEAR WE HAVE EXPERIENCED EVENTS THAT WERE  UNTHINKABLE JUSTTWO OR THREE YEARS AGO:  FREE ENTERPRISE HONG KONG TAKINGPUBLICLY OWNED STAKES IN ALL ITS PRIVATE COMPANIES; JAPANNATIONALISING ITS BANKS; RUSSIA GOING INTO DEFAULT; IN AMERICATHE MOUNTING OF ONE OF THE BIGGEST EVER EMERGENCY REFINANCINGSNOT FOR A BANK, BUT FOR A HEDGE FUND; MOST DAMAGING OF ALL, THEBIGGEST GROWTH ECONOMIES OF THE LAST DECADE IN EAST ASIASUFFERING LARGER CONTRACTIONS IN OUTPUT EVEN THAN EXPERIENCED INTHE GREAT DEPRESSION OF THE 1930S.THE POLITICAL DIMENSION AS GEORGE MARSHALL FORESAW, IS EQUALLYFAR-REACHING: IN ONLY ONE YEAR, REVOLUTION IN INDONESIA; CIVILSTRIFE IN MALAYSIA; THE LOSS OF AUTHORITY IN RUSSIA; AND ASUNEMPLOYMENT RISES, UNREST IN SOUTH AMERICA, TYPIFIED BY THEOUTCOME OF LAST WEEK'S VENEZUELAN ELECTION.  IT IS A SIGN OF THETIMES THAT ONLY ONE OF THE ASIAN FINANCE MINISTERS I MET WITH INBANGKOK LAST SEPTEMBER IS STILL IN OFFICE TODAY.THE ULTIMATE PRICE OF ALL THIS IS PROFOUND HUMAN SUFFERING.  INKOREA UNEMPLOYMENT HAS TREBLED IN ONE YEAR;.IN INDONESIA TENYEARS OF GROWTH HAVE BEEN WIPED OUT; AND IN THE ASIAN CRISISCOUNTRIES AS A WHOLE THE NUMBER OF PEOPLE IN POVERTY IS SET TODOUBLE BY 2000.  WE CAN'T SIMPLY DECLARE WHENEVER THE STOCKMARKET BOUNCES BACK THAT THE CRISIS IS OVER AND WE CAN RETURN  TOTHE STATUS QUO.  WE MUST ACT - BOTH BECAUSE IT IS IN OURSELF-INTEREST - TO SAFEGUARD OUR OWN PROSPECTS AND PROSPERITY -AND BECAUSE IT IS RIGHT.SO NOW THE RESPONSIBILITY FALLS ON THIS GENERATION TO BE PRESENTAT A NEW CREATION - OF NEW RULES THAT BREAK WITH THE PAST ANDBOTH EFFECTIVELY AND FAIRLY MEET THE DEMANDS OF THE NEW GLOBALECONOMY.  WE MUST REJECT THE FALSE CHOICE BETWEEN CLINGING TOLAISSEZ FAIRE AND RETREATING TO 1930S PROTECTIONISM OR THETIGHTLY-CONTROLLED, RESTRICTED CAPITAL MARKETS OF THE 1940S.  WEMUST MEET THE NEW CHALLENGE BUT WE MUST REMEMBER THAT WHILE TIMESAND CIRCUMSTANCES CHANGE, IDEALS ENDURE.OUR AIM MUST BE AN INTERNATIONAL FINANCIAL SYSTEM FOR THE TWENTYFIRST CENTURY THAT RECOGNISES THE NEW REALITIES - OPEN NOTSHELTERED ECONOMIES, INTERNATIONAL NOT NATIONAL CAPITAL MARKETS,GLOBAL NOT LOCAL COMPETITION.  IT MUST BE ONE THAT CAPTURES THEFULL BENEFITS OF GLOBAL MARKETS AND CAPITAL FLOWS, MINIMISES THERISK OF DISRUPTION, MAXIMISES OPPORTUNITY FOR ALL AND LIFTS UPTHE MOST VULNERABLE, IN SHORT, THE RESTORATION IN THEINTERNATIONAL ECONOMY OF PUBLIC PURPOSE AND HIGH IDEALS.OUR PREDECESSORS DID THIS FOR THE POST-WAR WORLD OF DISTINCTNATIONAL ECONOMIES DRAWING CLOSER TOGETHER.  NOW WE MUST DO ITFOR THE POST-NATIONAL ECONOMY - WHERE ECONOMICALLY NO NATION ISAN ISLAND.THE CONSENSUS OF THE 1980S WITH ITS NARROW FOCUS ON INFLATION,PRIVATISATION AND DEREGULATION MUST EVOLVE INTO A NEW 1990SCONSENSUS WITH A NEW AND BROADER EMPHASIS ON COMPETITION,SUPERVISION AND THE RIGHT CONDITIONS FOR GROWTH AND EMPLOYMENT.BEFORE I DESCRIBE THE SPECIFIC REFORMS WE NEED, LET ME BE CLEARTHAT THIS NEW PUBLIC PURPOSE WILL REQUIRE PUBLIC ENDEAVOUR.IN THE INTERNATIONAL ECONOMY THE ERA OF ABSENTEE GOVERNMENT ISOVER.WE NEED THAT MIDDLE WAY BETWEEN GOVERNMENT DOING EVERYTHING ANDGOVERNMENT DOING NOTHING.IT WAS HERE IN YOUR COUNTRY THAT FRANKLIN ROOSEVELT IN THE 30SFOUND A THIRD WAY FOR A NATIONAL ECONOMY - SECURING THE BENEFITSOF THE MARKET WHILE TAMING ITS EXCESSES.AND I BELIEVE THAT THE THIRD WAY INITIATED AND DEVELOPED BY TONYBLAIR HAS PROFOUND RELEVANCE FOR THE CHALLENGE WE NOW CONFRONT ONTHE GLOBAL STAGE.  THE ISSUE IS NOT ONE OF EITHER MARKETS ORGOVERNMENT, BUT HOW MARKETS AND GOVERNMENT CAN BEST WORKTOGETHER.  AND THE WAY FORWARD FOR THE NEW GLOBAL ECONOMY IS NOTTO RETREAT FROM GLOBALISATION - INTO EITHER PROTECTIONISM OR OLDNATIONAL CONTROLS - OR TO RETREAT INTO A FAILED LAISSEZ FAIRE. IT IS TO ENSURE GLOBAL MARKETS CAN WORK IN THE PUBLIC INTEREST. AND TRANSPARENCY IN POLICY-MAKING IS ONE WAY TO DEVELOP THEINFORMED AND EDUCATED MARKETS WE NEED.IN A WORLD WHERE THE NEW FRONTIER IS NO FRONTIERS, WE MUSTREDISCOVER THE PUBLIC PURPOSE AND HIGH IDEALS OF 1945 WITH FOURMAJOR REFORMS THAT ADD UP TO A TRANSFORMATION OF THEINTERNATIONAL FINANCIAL SYSTEM - A NEW ECONOMIC CONSTITUTION FORTHE NEW GLOBAL ECONOMY.NEW RULES OF THE GAME FOR THE GLOBAL ECONOMYFIRST, INTERNATIONALLY AGREED CODES OF CONDUCT FOR TRANSPARENCYAND PROPER PROCEDURES THAT ENSURE  EDUCATED MARKETS.  THESE WOULDCOVER MONETARY,  FINANCIAL AND FISCAL POLICY AND CORPORATEGOVERNANCE AND WOULD BE APPLIED BY ALL COUNTRIES, RICH AND POOR,AS A CONDITION FOR PARTICIPATION IN THE INTERNATIONAL FINANCIALSYSTEM.RECALL THAT THE FIRST CONSTITUTIONAL SETTLEMENT OF THE WORLDECONOMY IN 1945 WAS NOT SIMPLY ABOUT INSTITUTIONS BUT ABOUT RULESOF THE GAME.  AND WE MUST NOW RETURN THE INTERNATIONAL FINANCIALSYSTEM TO THIS IDEA OF RULES OF THE GAME.  WHILE THE FOUNDERS OFBRETTON WOODS DEVISED RULES FOR A WORLD OF LIMITED CAPITAL FLOWS,WE MUST DEVISE NEW RULES FOR A WORLD OF GLOBAL CAPITAL FLOWS. BUT OUR GUIDING PRINCIPLE REMAINS THE SAME - THE PROMOTION OFGLOBAL ECONOMIC STABILITY AND INTERNATIONAL COOPERATION TOPROMOTE GROWTH AND EMPLOYMENT.THE CODES WILL REQUIRE ACCURATE REPORTING TO THE  INTERNATIONALCOMMUNITY, BY EACH NATIONAL ECONOMY, OF ALL RELEVANT INFORMATION- FOR EXAMPLE THE SIZE OF A BUDGET DEFICIT, THE STATE OF BANKRESERVES AND THE LEVEL OF CURRENCY LIABILITIES.AND THE CODES WILL REQUIRE NOT ONLY THIS FLOW OF INFORMATION BUTTHE ADHERENCE TO SPECIFIC TIMETABLES AND PROPER STANDARDS FORTRANSPARENCY AND DISCLOSURE.THE NEW DISCIPLINES INVOLVE BOTH THE PRIVATE AND THE PUBLICSECTOR.  WE NEED NEW STANDARDS OF CORPORATE GOVERNANCE -INCLUDING AN INTERNATIONAL STANDARD OF BEST PRACTICE FORFINANCIAL INSTITUTIONS AND THEIR REGULATORS.WE USED TO THINK THAT ALL THAT INDUSTRIALISING COUNTRIES REQUIREDWAS RAW MATERIALS, GOOD COMMUNICATIONS, A SUPPLY OF LABOUR ANDTHE FUNDS AND ABILITY TO TAP COMMERCIAL INVENTIONS.  BUT WE NOWKNOW THAT ALL NATIONS ALSO REQUIRE A SOUND ROBUST FINANCIALSYSTEM: NO NATION CAN AFFORD - AND THE INTERNATIONAL COMMUNITYCANNOT CONDONE - NATIONAL FINANCIAL SYSTEMS THAT ARE  RECKLESS,DISORDERED AND DISHONEST.  LACK OF TRANSPARENCY ANYWHERE CANCREATE LACK OF CREDIBILITY EVERYWHERE.BY REQUIRING EXPOSURE OF DETERIORATING CONDITIONS, THE CODESWOULD PREVENT THE TEMPTATION FOR COUNTRIES TO DELIBERATELY MASKPROBLEMS, WHICH IS WHAT HAPPENED IN THAILAND AND KOREA WITHCONSEQUENCES FELT ACROSS ASIA AND THEN THE WORLD.AND WE SHOULD NOT BE SO COMPLACENT AS TO ASSUME THAT CODES OFCONDUCT ARE NEEDED ONLY IN OTHER COUNTRIES AND NOT OUR OWN. GIVEN THAT THE MOST RECENT THREAT TO GLOBAL STABILITY CAME FROMLACK OF TRANSPARENCY IN HEDGE FUNDS IN BOTH THE UNITED STATES ANDBRITAIN, WE NEED TOUGHER STANDARDS AND REQUIREMENTS FORDISCLOSURE ALL ROUND.THE CODES I PROPOSE WILL MEAN RADICAL CHANGES IN THE WAYGOVERNMENTS AND FINANCIAL MARKETS OPERATE.THESE NEW RULES OF THE GAME ARE NOT INCIDENTAL TO THE  FINANCIALARCHITECTURE FOR THE NEW GLOBAL ECONOMY: THEY ARE THE FINANCIALARCHITECTURE FOR THE NEW GLOBAL ECONOMY.  THEY REQUIRE COUNTRIESTO PURSUE SELF DISCIPLINE WITH THE PROSPECT, IF THEY DO NOT, OFIMPOSED DISCIPLINE.  SO THE RIGHT TO PARTICIPATE FULLY IN THESYSTEM SHOULD THUS BE CONDITIONAL ON MEETING EXPLICIT RESPONSIBILITIES.  IN THIS WAY THE CODES WILL REDUCE THE RISK OFFUTURE FAILURES.  AND IF FAILURES DO OCCUR, A STRONGER FINANCIALSYSTEM WILL BE BETTER ABLE TO DEAL WITH THEM.THE CODES ARE AS RELEVANT FOR UNDERDEVELOPED AFRICA AS THEY AREFOR INDUSTRIALISING ASIA AND LATIN AMERICA AND INDUSTRIALISEDAMERICA AND EUROPE.  THEY HELP US TO LAY DOWN A ROUTE MAP FORSEQUENCING CAPITAL ACCOUNT LIBERALISATION.  BY MAKING SURE THATECONOMIC FACTS CAN'T BE MANIPULATED AND UNDERLYING PROBLEMS CAN'TBE HIDDEN, CITIZENS WILL KNOW THEIR COUNTRY'S REAL PROBLEMS ANDPROSPECTS, THE CODES WILL DETER CORRUPTION, RESTORE PUBLICCONFIDENCE AND BUILD PUBLIC SUPPORT FOR THE SOMETIMES PAINFULREFORMS THAT ARE ESSENTIAL TO LONG-TERM ECONOMIC GROWTH ANDPROSPERITY.  AND THIS IS CRITICAL FOR INVESTOR CONFIDENCE IN THEWAKE OF THE ASIAN CRISIS.  WITHOUT TRANSPARENCY AND THE PROPERPROCEDURES THAT THE CODES OF CONDUCT WILL REQUIRE, INVESTORS MAYNOT REINVEST ON THE LONG TERM SCALE THAT IS NECESSARY FOR JOBS,GROWTH AND SOCIAL PROGRESS.NATIONAL GOVERNMENTS SHOULD NOT PICK AND MIX WHICH STANDARDS THEYCHOOSE TO MEET AND WHICH STANDARDS THEY CHOOSE TO IGNORE.  SOPROPER IMPLEMENTATION OF THE CODES SHOULD BE A CONDITION OF ANYIMF AND WORLD BANK SUPPORT.  IN THE GLOBAL ECONOMY NATIONALGOVERNMENTS HAVE RIGHTS BUT THEY ALSO HAVE RESPONSIBILITIES THEYMUST MEET.GLOBAL FINANCIAL REGULATIONAND BECAUSE TODAY'S FINANCIAL MARKETS ARE GLOBAL, WE NEED NOTONLY PROPER NATIONAL SUPERVISION BUT ALSO A SECOND FUNDAMENTALREFORM - GLOBAL FINANCIAL REGULATION.  THAT IS WHY BRITAIN HASPROPOSED BRINGING TOGETHER THE IMF, THE WORLD BANK AND KEYREGULATORY AUTHORITIES: A NEW PERMANENT STANDING COMMITTEE FORGLOBAL FINANCIAL REGULATION CHARGED WITH DELIVERING THE GLOBALOBJECTIVE OF A STABLE FINANCIAL SYSTEM.THE G7 HAVE NOW AGREED ON THE URGENT NEED FOR THIS KIND OFCOORDINATION, AND WE ARE GRATEFUL TO THE PRESIDENT OF THEBUNDESBANK, HANS TIETMEYER, WHO HAS UNDERTAKEN THE CRITICAL TASKOF PREPARING DETAILED RECOMMENDATIONS.I SEE THE STANDING COMMITTEE NOT AS AN ADDITIONAL INSTITUTION BUTAS PROCESS OF MONITORING DEVELOPMENTS IN GLOBAL FINANCE, ENSURINGTHAT NECESSARY WORLDWIDE STANDARDS ARE PUT IN PLACE, ANDPROVIDING TIMELY SURVEILLANCE OF FINANCIAL CONDITIONS ANDINTERNATIONAL CAPITAL FLOWS. THE STANDING COMMITTEE'S WORK WOULD MAKE CO-OPERATION BETWEENINTERNATIONAL INSTITUTIONS AND NATIONAL REGULATORS A FACT OFINTERNATIONAL ECONOMIC LIFE.  IN SHORT, THE STANDING COMMITTEEWOULD BE THE WORLD'S EARLY WARNING SYSTEM FOR REGIONAL AND GLOBALECONOMIC RISK.GLOBAL CRISIS PREVENTION AND RESOLUTIONOUR AIM MUST BE CRISIS PREVENTION WHERE POSSIBLE CRISISRESOLUTION WHERE NECESSARY.SO IN PLACE OF THE OLD APPROACH WHEREBY CRISIS-TRIGGEREDINTERVENTION, WE NEED, THIRDLY, A MODERN MECHANISM ,ROOTED INTRANSPARENCY AND RELIABLE SURVEILLANCE, AND BUILT ON PUBLIC ANDPRIVATE SECTORS BOTH ACCEPTING THEIR RESPONSIBILITIES, WHICH CANIDENTIFY POTENTIAL PROBLEMS AT A STAGE WHERE PREVENTATIVE ACTIONCAN BE EFFECTIVE.THE MECHANISM THEY AGREED IN 1945 FOR CRISIS PREVENTION DEALTWITH IMBALANCES IN CURRENT ACCOUNT FLOWS IN A WORLD OF RESTRICTEDCAPITAL FLOWS AND FIXED EXCHANGE RATES: TO TACKLE PUBLIC SECTORDEFICITS AND BALANCE OF PAYMENTS CRISES, IT OFFERED TEMPORARYFINANCIAL SUPPORT OR PERMANENT EXCHANGE RATE ADJUSTMENT.THE NEW MECHANISM FOR CRISIS PREVENTION MUST DEAL WITH IMBALANCESAS A RESULT OF GLOBAL CAPITAL FLOWS.WE NEED A PROCESS OF ACTIVE AND TRANSPARENT SURVEILLANCE THAT ISA MATTER OF COURSE FOR ALL COUNTRIES, OPERATING  IN NORMAL TIMES,ALL THE TIME : NOT ONE TRIGGERED ONLY BY THE WARNING SIGNS ORONSET OF CRISIS IN A PARTICULAR REGION OR COUNTRY.AND ALL MAIN PARTICIPANTS, PUBLIC AND PRIVATE, MUST ACCEPT THEIRRESPONSIBILITIES.SO EMERGING MARKET ECONOMIES IN PARTICULAR MUST NOT ONLY BETRANSPARENT IN THEIR ACTIVITIES: THEY MUST NOW ALSO FORGE REGULARCONTACTS AND LASTING RELATIONSHIPS WITH THEIR PRIVATE INVESTORS. AN OPEN AND HONEST DIALOGUE, IN WHICH INVESTORS CAN ASK HARDQUESTIONS AND THEN ADVISE, WILL MAKE IT MORE DIFFICULT TO COVERUP BAD NEWS, AND MAKE IT EASIER TO ASSESS WHAT POLICIES WILLINCREASE OR REDUCE MARKET CONFIDENCE, THUS MAKING IT MORE LIKELYTHAT WE CAN PREVENT TODAY'S PROBLEMS FROM DEEPENING INTOTOMORROW'S CRISIS.THE SHORT-HAND PHRASE FOR THESE CREDITOR-TO-COUNTRY ARRANGEMENTSIS COUNTRY CLUBS, BUT THESE ARE NOT EXCLUSIVE CLUBS, OLD BOYNETWORKS, AN INFORMAL MEANS OF DEFENDING PRIVILEGE.  THESE AREMODERN INVESTOR NETWORKS THAT CAN BRING REAL BENEFITS IN RETURNFOR REAL RESPONSIBILITIES: NETWORKS THAT EVERY COUNTRY SHOULDFORM AND EVERY CREDITOR SHOULD JOIN.TO MAKE THESE WORK THERE SHOULD, BE A NEW PRESUMPTION ACROSS THEBOARD, IN FAVOUR OF THE RELEASE OF INFORMATION WHEREVER POSSIBLE.THE G7 HAVE PROPOSED GREATER OPENNESS FROM THE WORLD BANK, THEIMF AND OTHER INTERNATIONAL FINANCIAL INSTITUTIONS.  THEIRMONITORING TELLS THEM MUCH OF WHAT IS HAPPENING IN EVERY NATIONALECONOMY.  CLEARLY IN EXCEPTIONAL CASES SOME POLICY DISCUSSIONSWILL HAVE TO BE KEPT CONFIDENTIAL BUT I STRONGLY SUPPORT THEPUBLICATION OF THE IMF'S COUNTRY SURVEILLANCE REPORTS UNDERARTICLE IV.  THE CASE FOR AN EXCEPTION MUST BE MADE ANDJUSTIFIED, WHILE OPENNESS SHOULD BE THE NORM.PUT SIMPLY WE SHOULD ESTABLISH AN INTERNATIONAL RIGHT TO KNOWTHAT IS NOT OCCASIONAL OR VOLUNTARY BUT ONGOING  AND MANDATORY.THIS WILL WORK BEST IF THE IMF AND OTHER INTERNATIONALINSTITUTIONS ARE MORE OPEN ABOUT THEMSELVES.  THEY SHOULD DO MORETO EXPLAIN THEIR PRACTICES AND PROCEDURES TO THE PUBLIC.  ANDTHEY TOO SHOULD JOIN IN A NEW PARTNERSHIP WITH THE PRIVATE SECTOR- ONGOING DISCUSSIONS ABOUT BROADER AND MORE SYSTEMIC ISSUESFACING THE WORLD ECONOMY.WITH A RIGHT TO A GREATER FLOW OF INFORMATION COMES GREATERPRIVATE SECTOR RESPONSIBILITY.  WE NEED A SYSTEM OFDEBTOR-CREDITOR AGREEMENTS - CRISIS RESOLUTION PROCEDURES SIGNEDUP TO IN NORMAL TIMES WITH PRIVATE SECTOR RESPONSIBILITY CLAUSES,SUCH AS AGREEMENT ON COLLECTIVE REPRESENTATION AND MAJORITYVOTING WHEN CREDITOR DECISIONS ARE BEING MADE.  WHEN TROUBLE HITSAN ECONOMY, THE PRIVATE SECTOR MUST BE PREPARED TO DO MORE THANSIMPLY PULL MONEY OUT AND ACCELERATE THE PANIC.  ON AN AD-HOCBASIS INVESTORS DID THE OPPOSITE IN KOREA AND BRAZIL AND THEIRDECISIONS WERE ESSENTIAL IN HALTING THE FLIGHT OF CAPITAL.WITH THESE THREE CHANGES - TRANSPARENCY, ENHANCED SURVEILLANCEAND INVESTOR NETWORKS WE CAN ESTABLISH A MARKEDLY LOWER THRESHOLDFOR EFFECTIVE RESPONSE THAN THE OLD AD-HOC CRISIS-TRIGGEREDSYSTEM.DETAILED DISCUSSION SHOULD NOW TAKE PLACE ON THE RIGHT MECHANISMS FOR PRIVATE SECTOR INVOLVEMENT IN CRISIS RESOLUTION. OF COURSE MORE INFORMATION AND MORE PARTICIPATION MUST NOT BECOMEA LICENCE FOR RECKLESS INVESTMENT OR INSIDER DEALING INSTEAD, BYUNIVERSALISING RELIABLE INFORMATION AND CREATING ORDERLYCONSULTATION  PROCEDURES OPEN TO ALL, WE CAN MINIMISE THE RISKSARISING FROM INSIDER INFORMATION ON THE ONE HAND AND MORAL HAZARDON THE OTHER.IN THE NEW FRAMEWORK IT SHOULD BE THE DUTY OF THE PUBLIC SECTORTO INFORM, THE DUTY OF THE INTERNATIONAL FINANCIAL INSTITUTIONSTO MONITOR AND THE DUTY OF THE PRIVATE SECTOR TO ENGAGE.AND BECAUSE OF THE NEW DISCIPLINES WE PROPOSE THE PUBLIC SECTORCAN NOW JUSTIFY A SYSTEM OF MUTUAL FINANCIAL SUPPORT, ASSISTANCETO COUNTRIES PURSUING SOUND POLICIES AND TO CONTAIN THE SPREAD OFFINANCIAL CONTAGION.IN THE LAST FEW WEEKS THE INTERNATIONAL COMMUNITY HAS PROPOSED ATEMPORARY PREVENTATIVE FACILITY, WITH SHORT-TERM LINES OF CREDITFOR SOUND ECONOMIES THAT ARE THE VICTIMS OF CONTAGION.  ONCETRANSPARENCY, SURVEILLANCE AND AGREED PRIVATE SECTORRESPONSIBILITY CLAUSES ARE EMBEDDED IN THE NEW SYSTEM OF CRISISPREVENTION, THIS FACILITY SHOULD BE MADE PERMANENT, AND BEPROPERLY FUNDED.OF COURSE COUNTRIES THAT DO NOT FOLLOW THESE PROCEDURES OR ACT ONADVICE CANNOT EXPECT THAT THEY AND THEIR PRIVATE SECTORS WILLSECURE CRISIS SUPPORT, THE MORAL HAZARD WOULD BE TO GUARANTEESUCH SUPPORT INDEPENDENT OF WHETHER THEY DO THE RIGHT THINGS.WITH THE REFORMS WE PROPOSE, WE HAVE A REAL OPPORTUNITY TO MOVETHE EMPHASIS OF INTERNATIONAL FINANCIAL GOVERNANCE FROM ONE OFCRISIS RESOLUTION TO ONE OF CRISIS PREVENTION AND CRISISCONTAINMENT.A GLOBAL SOCIAL CODETHERE IS A FOURTH REFORM: WE PROPOSE A CODE OF GLOBAL BESTPRACTICE IN SOCIAL POLICY WHICH WILL APPLY FOR EVERY COUNTRY,WILL SET MINIMUM STANDARDS AND WILL ENSURE THAT WHEN THE IMF ANDWORLD BANK HELP A COUNTRY IN TROUBLE THE AGREED PROGRAMME OFREFORM WILL PRESERVE INVESTMENT IN THE SOCIAL, EDUCATION ANDEMPLOYMENT PROGRAMMES WHICH ARE ESSENTIAL FOR GROWTH.  THISSHOULD BE AN INDISPENSABLE GOAL FOR GOVERNMENT IN THE NEW GLOBALECONOMY: NOT GUARANTEEING THAT NOTHING WILL CHANGE, BUT EQUIPPINGPEOPLE TO TURN CHANGE INTO NEW OPPORTUNITY.INTERNATIONAL ECONOMICS IS NOT JUST ABOUT NUMBERS IN A LEDGER,BUT ABOUT THE LIVES OF PEOPLE.  FOR TOO LONG IT HAS BEEN ASSUMEDTHAT THE COST OF CRISES WILL INEVITABLY BE PAID BY PUTTING MOREBURDENS ON THE POOR - BY CUTTING  HEALTH, EDUCATION AND BASICSOCIAL SERVICES.THIS IS WRONG IN THE SHORT TERM AND IT WILL NOT WORK IN THE LONGTERM BECAUSE IT ERODES BOTH THE ECONOMIC AND THE POLITICALFOUNDATIONS OF A SOCIETY.  FOR REASONS OF SELF-INTEREST AS WELLAS CONSCIENCE, WE CANNOT ACCEPT A WORLDWIDE REGIME OF THEWELL-OFF IN THE CASTLE, AND THE VAST MAJORITY AT THE GATE. CREATING NATIONAL SUPPORT FOR NEEDED REFORM DEPENDS ON SHARINGGAINS, AND HELPING THOSE WHO ARE HURT BY  ECONOMIC CRISES.  ASJIM WOLFENSOHN, PRESIDENT OF THE WORLD BANK, HAS SO VIVIDLY PUTIT "SOCIAL AND ECONOMIC ISSUES ARE INSEPARABLE, THEY ARE LIKEBREATHING IN AND OUT".IN THEIR OCTOBER STATEMENT THE G7 RECOGNISED THE URGENT NEED FORA CODE FOR GOOD SOCIAL PRACTICE AND ASKED THE WORLD BANK TO WORKCOUNTRIES AND WITH THE UNITED NATIONS AND OTHERS TO DEVELOP THEPRINCIPLES AND PROVISIONS OF SUCH A CODE.THIS IS AN HISTORIC OPPORTUNITY TO REALISE THE ENDURING PUBLICPURPOSE, THE HIGH IDEALS OF 1945. AND WE SHOULD NOT SEE THIS CODEIN NARROW TERMS AS MERELY CREATING SOCIAL SAFETY NETS.  WE SHOULDSEE IT AS CREATING OPPORTUNITIES FOR ALL BY INVESTING MORE NOTLESS IN EDUCATION, EMPLOYMENT AND VITAL PUBLIC SERVICES.THE WAY FORWARD IS NOT LEAVING PEOPLE DEFENCELESS - ANDTOLERATING A CULTURE OF POVERTY; NOT REPEATING PAST MISTAKESWHICH HAVE CREATED A CULTURE OF DEPENDENCY; IT IS EQUIPPINGPEOPLE TO COPE WITH CHANGE, THROUGH A NEW CULTURE OF OPPORTUNITY.THE FIRST BUILDING BLOCK IS, OF COURSE, MINIMUM SOCIAL PROVISIONSUCH AS SAFE WATER SUPPLIES; UNIVERSALLY AVAILABLE VACCINATIONSAND BASIC HEALTH CARE; AND IN EVERY SOCIETY- UNIVERSAL ACCESS TO SCHOOLING FOR GIRLS AS WELL AS BOYS.THE SECOND BUILDING BLOCK IS THE CHANCE TO WORK AND THE ASSURANCETHAT WORK WILL PAY, A COMMITMENT THAT WE MUST, STAGE BY STAGE,YEAR BY YEAR, FULFILL IN DEVELOPING COUNTRIES AS WELL ASDEVELOPED ONES.  THE CODE WOULD SET OUT BEST PRACTICE THAT CANHELP PEOPLE FIND AND REMAIN IN PAID EMPLOYMENT: PROGRAMMES TOMOVE THEM FROM POVERTY OR WELFARE TO WORK; LIFE-TIME LEARNING SOTHAT PEOPLE CAN MOVE THEMSELVES UP A LADDER OF OPPORTUNITY; ANDPENSION SYSTEMS THAT MEAN A LIFETIME OF WORK WILL BE FOLLOWED BYA DECENT RETIREMENT.WE SHOULD FORGE NEW PARTNERSHIPS BETWEEN THE PUBLIC AND PRIVATESECTORS - AND THE NGOS.  BUT OF COURSE THE EXISTENCE OF APROGRAMME TODAY SHOULD NEVER BE THE EXCUSE FOR ITS PERPETUATIONTOMORROW.  AND THE REFORMS THE IMF AND OTHER INTERNATIONALAUTHORITIES REQUIRE MUST BE CONSISTENT WITH THE SOCIAL PRINCIPLESAND MAKE A VIRTUE OF PRESERVING NECESSARY SOCIAL INVESTMENT.FOR THE POOREST HIGHLY INDEBTED COUNTRIES OF THE WORLD WE MUSTCREATE A VIRTUOUS CIRCLE OF DEBT RELIEF, POVERTY REDUCTION ANDECONOMIC DEVELOPMENT.  WE SHOULD NEVER  LEAVE COUNTRIES WITH ANIMPOSSIBLE CHOICE BETWEEN  PAYING OR DEFAULTING ON UNSUSTAINABLELEVELS OF DEBT.  IMMOVABLE MOUNTAINS OF DEBT RUN UP IN THE 1980SHAVE BECOME IMPASSABLE BARRIERS TO PROGRESS FOR POOR COUNTRIES INTHE 1990S.  IT SHOULD NOW BE OUR AMBITION THAT EVERY HIGHLYINDEBTED POOR COUNTRY WILL BE IN THE PROCESS OF DEBT RELIEF BYTHE MILLENNIUM. AND FOR COUNTRIES LIKE HURRICANE-HIT NICARAGUA AND HONDURAS,WEIGHED DOWN BY THE BURDEN OF DEBT AND DEVASTATION, IT IS RIGHTTO CREATE A NEW WORLD BANK TRUST FUND - NOW WITH OVER 130 MILLIONDOLLARS PLEDGED - TO ALLEVIATE THEIR DEBT PAYMENTS.  IT IS ALSORIGHT TO DEVISE THE NEW POST-DISASTER FACILITY THAT WILL GIVEFASTER RELIEF FROM DEBT, TO ALL COUNTRIES IN THIS POSITION. IBELIEVE 1999 MUST BRING A NEW URGENCY TO RELIEVING THIRD WORLDDEBT.CONCLUSIONSO WHAT WE MUST TOGETHER CREATE IS A NEW ECONOMIC CONSTITUTIONFOR A GLOBAL ECONOMY, BORN OUT OF NEW REALITIES, ,GROUNDED IN NEWRIGHTS AND RESPONSIBILITIES, ENSHRINED IN CODES OF CONDUCT THATARE AGREED NATIONALLY AND APPLIED INTERNATIONALLY, REDISCOVERINGPUBLIC PURPOSE IN THE INTERNATIONAL ECONOMY AND BRINGING TO LIFEAGAIN THE HIGH IDEALS OF 1945.WE NEED TO BUILD QUICKLY, NOT DEBATE INDEFINITELY.     AGREEMENT ON THE CODES OF CONDUCT SHOULD BE  REACHED AT THE     IMF MEETINGS IN APRIL.     A NEW SYSTEM OF GLOBAL FINANCIAL REGULATION SHOULD BE IN     PLACE BY THE SUMMER.     THE NEW MECHANISM FOR CRISIS PREVENTION AND CRISIS     RESOLUTION SHOULD BE AGREED IN PRINCIPLE THIS SUMMER AND THE     DETAIL SHOULD BE THE SUBJECT OF INTENSIVE DISCUSSIONS     BETWEEN THE PRIVATE SECTOR AND NATIONAL AND INTERNATIONAL     INSTITUTIONS TO REACH AGREEMENT BY THE END OF 1999.-    AND THE CODE FOR BEST PRACTICE IN SOCIAL POLICY SOCIAL CODE     SHOULD BE AGREED AT THE NEXT WORLD BANK MEETINGS IN THE     SPRING.THIS IS A PROGRAMME OF REFORM FOR OUR GENERATION.  IT IS MORETHAN SIMPLY A COLLECTION OF PROPOSALS.  IT RESTS ON A MODERNVISION OF GOVERNMENT, DOING THE RIGHT THING, BUT NOT EVERYTHING;OF MARKETS WORKING, BUT NOT ALWAYS PERFECTLY; OF PRINCIPLES OFECONOMIC AND SOCIAL JUSTICE THAT REFLECT OUR BEST VALUES ANDULTIMATELY DETERMINE WORLD STABILITY AND GROWTH.THIS PROJECT IS INDIVISIBLE; EACH ELEMENT IS ESSENTIAL TO THESUCCESS OF THE WHOLE.  AND ALL OF IT IS BUILT ON THEUNDERSTANDING THAT INCREASINGLY WE ARE PART OF BOTH ONE GLOBALECONOMY AND ONE MORAL UNIVERSE.  NOW MORE THAN EVER, IN THEPHRASE OF THE SCOTTISH AUTHOR, WILLIAM MCILVANNEY, WE MUSTUNDERSTAND THAT ''THE ECONOMY SHOULD BE THERE TO SERVE THEPEOPLE, NOT THE PEOPLE TO SERVE THE ECONOMY."OURS IS AN AGE OF GREAT CHALLENGES BUT ALSO GREAT POSSIBILITIES. WHAT FRANKLIN ROOSEVELT SAID TO THE CITIZENS OF HIS NATION IN1933 IS NOW POWERFULLY RELEVANT TO THE CITIZENS AND GOVERNMENTSOF ALL NATIONS.IF I READ THE TEMPER OF OUR PEOPLE CORRECTLY WE NOW REALISE - ASWE HAVE NEVE REALISED BEFORE - OUR INTERDEPENDENCE ON EACH OTHER,THAT WE MUST BE WILLING TO SACRIFICE FOR THE GOOD OF A COMMONDISCIPLINE - BECAUSE WITHOUT SUCH DISCIPLINE NO PROGRESS IS MADE.TODAY I BELIEVE THAT WE IN OUR GENERATION HAVE THE VISION, THEVALUES AND THE WILL - AS THE GENERATION WHICH PRECEDED US - TOMAKE THE WORLD ECONOMY ANEW; THE PUBLIC PURPOSE AND HIGH IDEALSTO MAKE A BETTER WORLD ECONOMY IN EVERY SENSE OF THAT WORD.

[interestrateripoff]

http://news.bbc.co.uk/1/hi/uk_politics/458871.stm

Now the new economy of the next decade will need more competition, more entrepreneurship, more flexibility, more long-term investment.

And companies, indeed countries, which fail to adapt, reform and lead the way will simply be left behind.

Let us be honest with ourselves: we must never again become a Party that is seen as anti-success, anti-competition, anti-profit, anti-markets.

Our enemy is not markets but monopoly, not competition but cartels, not profits but privilege and greed.

And it is because we are the party that understands the importance of opportunity for all, that we must be the party that promotes enterprise open to all.

Too often in the old Britain, Conservatism exalted a closed system of enterprise for the few and put the speculator above the long term investor and entrepreneur.

So in the new Great Britain, we are creating, we are rewarding long term investment with a lower long term rate of capital gains tax.

Our banking review, set up last year, reporting this year, to be implemented next year will want to ensure that big institutions cannot hold back small business from investing, growing and creating jobs.

[interestrateripoff]

[interestrateripoff]

http://www.bbc.co.uk/news/special/politics97/budget97/live/housing.shtml

Mr Brown said: "I will not allow house prices to get out of control and put at risk the sustainability of the future." He said he was determined that the UK should not return to the "instability, speculation and negative equity" of the 1980s and 1990s.

[interestrateripoff]

Now Miliband raises spectre of 1930s as he attacks Tory cuts: Labour leader to say his party would also impose years of cuts - but will still condemn Conservatives' 'extreme' approach

Mr Miliband is to admit cuts are needed to curb Gordon Brown's huge deficit but he claims the Tories' approach would lead to the 'disintegration' of public services.

[billybong]

Mr Miliband claimed Labour would impose ‘year on year’ spending cuts to reduce the deficit, saying it was his ‘first pledge of the election campaign’.

and the first "pledge" to be reneged on if they get in power. They're just like the Conservatives (and the LibDems).

Edited December 12, 2014 by billybong

[interestrateripoff]

http://www.moneymarketing.co.uk/eddie-george-says-rising-house-prices-unsustainable/61668.article

Eddie George says rising house prices unsustainable

13 June 2002 0:00 am

The governor of England Eddie George said the boom in UK house prices is "unsustainably strong" when questioned today by the Treasury select committee.

Backed by members of the Monetary Policy Committee George said: "We do not believe the current rate of house price growth is sustainable but it is a factor driving consumer spending."

http://www.scotsman.com/business/finance/eddie-george-house-price-boom-will-not-bust-1-635226

Eddie George: House price boom will not bust

Published 04/01/2003 00:00

SIR Eddie George, governor of the Bank of England, nailed a "don’t panic" flag to the mast of Britain’s economy yesterday despite the uncertainties with which it has entered 2003.

Sir Eddie, who is to step down as governor later this year, said he failed to see why there should be any crash in house prices, although he predicted that they would "moderate sharply".

He acknowledged that there were risks facing the economy and that consumer spending was likely to slow down, but said all the indications were that interest rates would stay near their current 4 per cent level.

"On the basis that we are anticipating the economy, on our central expectation, will grow close to trend, that inflation will remain close to target; that’s not something that implies a sharp change in interest rates in either direction," George said.

Dismissing the likelihood of a house-price bust to follow the boom, he told BBC Radio: "What we are anticipating is that the rate of increase in house prices will moderate quite sharply. We are not expecting a fall in house prices."

The governor said that the Bank of England expected to see "a gradual moderation in consumer spending" during the year. But he said the economy was being "supported helpfully" by Chancellor Gordon Brown’s planned increases in public spending.

Employment remained "remarkably strong", George said, and incomes were increasing steadily.

A stronger rebound in the world economy would give more support to the British economy than any other factor, George added.

"The thing that would help the UK economy more than anything else I can think of is for a clearly established stronger recovery in the world economy," he said.

George also warned against reading too much gloom into some nervous statements put out by retailers in the run-up to Christmas, even though post-Christmas trading has shown an improvement.

He said: "There is always a short-term fluctuation in retail spending over Christmas and the New Year. You should not put too much weight on particular surveys at this time of year."

The Bank of England is expected to keep interest rates on hold for the 14th month running at its meeting this week. Most economists believe there will be no change.

George’s comments came as the Bank of England said that consumer credit - a sign of consumer confidence and a potential guide to the future direction of interest rates - rose at its slowest rate during November since August 2001.

The Bank said that unsecured net lending increased by 1.4 billion during the month, down from 1.76 billion in October.

A separate survey said Britain’s construction sector continued to expand strongly last month, but was down on November’s seven-month high.

The Chartered Institute of Purchasing and Supply said its construction purchasing managers index - which reflects activity in the sector - fell to 55 in December from 56.2 in November. Any figure over 50 signals expansion.

[interestrateripoff]

http://www.publications.parliament.uk/pa/cm200607/cmselect/cmtreasy/299/7032003.htm

Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 100-119)

RT HON LORD GEORGE

20 MARCH 2007

Q100 Chairman: Not to mention long-term capital management and the Russian defaults?

Lord George: Yes. I put those in the category of the Asian crisis.

Q101 Chairman: The appointments process has been described by Stephen Nickell as opaque. [1]Many others have made the same point. Do you think it is necessary to have such secrecy surrounding the appointment process? From your point of view as governor at that time, how did the selection process work? Did you feel fully informed? Would you have liked more influence in the selection of members?

Lord George: I was certainly never shut out of it. The Bank suggested to the Treasury a list of potential outside appointees. We would discuss it with Treasury officials. An appointment with which I was not comfortable was never made. I was given the opportunity to say that I could not stand a particular bloke or that I thought he was hopeless. I never felt particularly uncomfortable with the appointments process. There were occasions when appointments were made pretty much at the last minute and I believe that as much as anything else that was because the Chancellor had an awful lot of other things to do. It might not have been perfect, but I did not think there was anything fundamentally wrong with it.

Q102 Chairman: In terms of the Treasury Committee itself, what role do you think it could have? Could it have an enhanced role? Could it be given the power of veto over appointments? Could there be more prior public discussion as to who should sit on the MPC?

Lord George: What you are talking about is the appointment of technicians. One needs people who know about the technical competence of the potential pool of people coming onto the MPC. You will judge whether you believe that the Treasury Committee has that kind of competence. In principle I am all in favour of public debate, but we are talking about something that is essentially technical rather than just democratic in a broader way. I do not know that public debate will be particularly helpful. It could discourage some people from participating because there is newspaper discussion saying this chap is better than that chap or this chap is no good. I do not know that that is terribly helpful in the kind of process with which we are concerned.

Q103 Chairman: The changes would be significant and the implications quite profound as a result?

Lord George: Absolutely. The last thing we want is to introduce a political element into that decision.

Q104 Chairman: You have been coming to the Treasury Select Committee for a number of years and putting forward the views of the MPC. How important are meetings such as this in terms of communicating with Parliament and the public in particular?

Lord George: Without flattering, I think they are terribly important. The opportunity for us to explain to the Treasury Committee what we were doing, and for individual MPC members to explain their thinking, was a very positive dimension. To have the technical job that the MPC is doing understood is terrific. When I was at the Bank—I imagine it continues today—we had regular meetings with groups of parliamentarians. That occurred probably four or five times a year. Those meetings at the Bank were precisely in order to explain to Members of Parliament how the Bank worked and open ourselves to questions from parliamentarians in order to try to understand it. We do it publicly through the inflation reports, publication of the minutes and so on, but that is a terrifically important process which creates understanding, and I believe that on the whole it has proceeded fairly well; and it has helped to strengthen the consensus that I described at the beginning. If people feel they can understand it and it seems to be working reasonably well that is helpful.

Q105 Mr Todd: Do you think that inflation expectations have been anchored by the actions of the MPC either in the more technical financial community or the public at large?

Lord George: I think that "anchored" is a strong word, but there is an understanding—this has been happening to varying degrees from different starting points globally, not just in the UK—that people who manage economic policy now realise that the boom-and-bust approach is a dead end and very damaging. I believe that that has been accepted by the public at large. It implies that they do not expect to see inflation reach 27% in a single year in the United Kingdom. I cannot believe that that was ever true but it was. In that sense inflationary expectations are much lower because people really understand that what government and the bank are trying to do in managing the economy is to produce greater stability. In that sense I agree. As to whether it is precisely 3%, 2½% or 2%, I do not believe that one will ever succeed in anchoring that, but it is certainly down at that level rather than in double digits.

Q106 Mr Todd: Would it surprise you that Citigroup carried out a public opinion survey which showed widespread ignorance of the precise target, or even who set it, whether it had changed recently and so on? That reinforces your point that in broad terms people understand it, but in precise terms they do not. Do you believe that there is more to be done to educate the public on the various components of inflation, for example linking it to concepts of asset price inflation with which people are often quite familiar in terms of the values of their properties? Is there more to be done to explain what these things are and how they relate to, say, one's next wage demand?

Lord George: As I hope I made clear, I believe that public explanation is absolutely critical and it is an ongoing process. I do not think we will ever get to a situation where everyone in the country knows about the MPC and the details of the target and all that. It is the broader understanding that we have to keep reinforcing.

Q107 Mr Todd: You are aware of the debate about whether the precise inflation measures being used are the right ones and whether they include the correct components and so on. Therefore, there is a public dimension to that process.

Lord George: I believe that whilst they are important questions they are second-order compared with the overall understanding of the way macro-economic management is proceeding in a broad sense. The fact is that any technical subject is not widely understood. There is great debate about climate change. If one carried out a survey to find out how many members of the public knew whether it was due to solar energy or was manmade one would find a complete void. I am very keen that there should be greater understanding of that, but the mass of the population will never understand the technical details. I believe that the same is true of macro-economic policy.

Q108 Mr Todd: Should one be satisfied that if asked people would think that inflation was around 2½% or 3% and would not rise dramatically above that level?

Lord George: Yes—and that interest rates would be 5% or, at the higher points, at 6% or even 7%, or that at the low point it would be 3% or 4%. I do not believe that the mass of the population will ever understand those things, but I believe that the broad direction, which is the important matter, is fairly well understood.

Q109 Mr Todd: The banks sponsored a competition among schools which focused on the inflation target and the various levels that could be applied to achieve it. Do you think that more could be done there?

Lord George: I believe that that was a fantastic idea on the part of Mervyn King. That focuses on economics teachers and students of economics at the school level. Part of what they are doing is to study the technicalities of this kind of thing.

Q110 Mr Todd: Perhaps there should be more emphasis on lower level awareness?

Lord George: It is an ongoing task and we must keep on doing it. I do not believe that there are particular initiatives, but perhaps I do not have the imagination of others.

Q111 Mr Todd: It has been suggested from time to time that the MPC should have responsibility for bursting asset bubbles. Do you think it desirable that its brief should enable it to deal with house price inflation and specifically adopt measures to assist with that? I merely pose that question because it is put to us from time to time.

Lord George: For years I used to quote the Chinese proverb "the man who tries to juggle with too many balls ends up in heap on the floor". I believe that that is extremely relevant to that question. The inflation target is really a form, but what it is talking about is aggregate demand in relation to the potential underlying supply capacity of the economy. The inflation target is really the barometer of success or failure in achieving that. Asset prices can be driven by all manner of outside considerations. It is tremendously important that the Monetary Policy Committee monitors, follows and studies what is happening to different asset prices, financial assets, housing and so on, as it does. Those subjects are studied extremely carefully within the bank and are discussed by the MPC. But if one decided to set a target for house prices and equity prices one would end up in "heap on floor". One just cannot focus on more than one objective. To focus on inflation is not a narrow objective; that is the form of it, but it has broader significance than that.

Q112 Ms Keeble: Do you believe that the CPI is still a credible target for inflation in the UK or should it be modified?

Lord George: Do not misunderstand me when I say I believe that to be a second-order question. I was not particularly keen to modify it from the RPIX which we had for some considerable time. There were pros and cons in that respect given that it was going to be 2% rather than 2½% which helped possibly to reduce inflationary expectations. I would be fairly reluctant to jump about with it because inevitably people will say that the goal posts are being changed and it is being done for this or that particular reason. I honestly do not believe that it makes a fundamental difference. A 2% target for CPI is a good benchmark for the kind of broad balance and stability that is the big picture here.

Q113 Ms Keeble: But do you not think there is an issue about the credibility of the MPC? You say that the general public will never understand it, but I think they do. You said that you were an inflation nut. Inflation is a matter of public debate now whereas it was not for a long time. I think people understand the difference between inflation as they experience it and inflation as the MPC defines it because of the impact of house prices. Do you believe it would be helpful if there was a slightly modified target, or do you think it does not matter if the MPC has a target that is not really credible to the general public?

Lord George: I would question the statement that it is not credible to the general public. I believe that the general public knows that the objective is to maintain stability over time and that will be reflected in relatively low inflation on whatever measure over time. As to the precise target that is set I do not believe that you will ever get people at large to agree that this is the right thing as distinct from that. I was amazed the other day to see that the Office for National Statistics was enabling individuals to calculate their own inflation index. The implication is that somehow one can target individual inflation concerns with different sectors or individuals members of the public, which is barmy. It is a broader concept than that and it must be one that is across the board and reflects the balance between demand and supply.

Q114 Ms Keeble: Do you not think that in a sense the MPC has been a victim of its own success? People have been used to low inflation—at about the rate of 2%—for a long time but now it is increasing. If you look at the discussion in the area of public sector pay bargaining, the main issue of debate is the fact that public experience of inflation is well above official versions. Do you believe that that matters, or should the MPC perhaps recognise where the public is?

Lord George: What you are saying is that they should target house prices, to which I say: absolutely not. They look at what is happening to house prices and take account of the impact of that on wage bargaining and everything else. The increase in household debt was certainly a subject that we focused on in my day job, and that will be and should be continuously focused upon. But if one suddenly says that one must look at this or that there is no end to where it can lead. I am very happy with where we are.

Q115 Ms Keeble: How do you explain to the public whose experience is that prices are going up considerably—all of us as MPs hear that—that inflation is at whatever level the MPC thinks it is, which is about 2%?

Lord George: It is not what the MPC thinks it is. That measure of inflation is calculated by the Office for National Statistics and that will anchor inflation. It may not do so to the same level but it will fluctuate around that and other measures of inflation, but it will anchor the general level of price increases. One can have endless debate about precisely what one should and should not include. I just think that the overall objective will be undermined if too much attention is paid to particular measures which reflect the expressed opinions of particular groups of people in society.

Q116 Mr Newmark: As a supplementary, you are setting the terms of reference. By definition you are saying that inflation is x because you have set those terms of reference by which to measure inflation, but I echo a lot of what Ms Keeble says. Either at the doorstep or in my surgery people say to me that they read in the papers what inflation is but their experience tells them otherwise. It is a big problem particularly for pensioners who say that for them inflation is running at 7%, 8% and 9%, not 2%. That is problematic. We need to do some thinking as to what the terms of reference necessarily are.

Lord George: I think you should look at what would be the implications for the economy as a whole if you targeted pensioner inflation

Mr Newmark: I understand the point you make about targeting individuals, but if you ask the 646 MPs they will say that when they get onto the doorstep the feedback is that these may well be the facts that people read in the papers, namely that inflation is 2%, but it bears no resemblance to real life experiences. It may be—I am not saying that we should—we need to think about what those terms of reference are for the inputs into whatever inflation index we are using, whether it is CPI, RPI or whatever.

Q117 Ms Keeble: What makes it worse is that the one tool that the MPC has is interest rates and that filters through to our constituents in the form of higher mortgages. That makes them complain even more; it becomes cyclical.

Lord George: Yes, if house prices are going up. But one has to step back and recognise—I referred to it earlier—that when we were in an environment of global economic weakness at the beginning of the decade it meant that external demand was declining. Related to that, business investment was declining. One had only two alternatives in sustaining demand and keeping the economy moving forward: one was public spending and the other was consumption. It is true that taxation and public spending can influence the demand climate and consumer spending, but confronted with what we saw we knew that we had to stimulate consumer spending. We knew that we had pushed it up to levels that could not possibly be sustained in the medium and longer term, but for the time being if we had not done that the UK economy would have gone into recession, just like the economies of the United States, Germany and other major industrial countries. That pushed up house prices and increased household debt. That problem has been a legacy to my successors; they have to sort it out, but we really did not have much of a choice about what we did unless we accepted that we would yank it back or give up stability altogether. That is the point I am trying to make in answer to Mr Newmark. There are some people—maybe lots—who say that house prices is the biggest problem, that the mortgage rate is going up, housing is not affordable and so on.

Q118 Mr Newmark: There are a whole host of other issues including council tax.

Lord George: There are always things that one can bring into this kind of pot and within that there would be social judgments which are not for the MPC; they are for government. But my concern is that if it is said inflation or RPIX is so much that is one measure. If one looks at pensions a lot of pensioners will say that inflation is at 8% or 9%. If one really wants to target that measure of inflation, or include it within the inflation target, one will be giving up low inflation and accommodating those people. The only way in which we could bring down inflation would be to clamp down on the economy which would mean rising unemployment and falling output. Of course I understand when employees in the health service and schools say that it is not good for them, but one must look at it over time. If one focuses on that too much at the moment one will either inspire action that causes the economy as a whole to weaken or undermine the commitment to stability in the broad sense which has been so successful for us over the past 15 years.

Q119 Mr Newmark: For the past four or five months in a row effectively earnings, excluding bonuses, have not kept pace with inflation. Do you see that as a problematic trend? Is there an issue about which we should be concerned?

Lord George: I believe it is something that we should all applaud because if it had kept pace with inflation then underlying inflation would have been higher looking forward.

[interestrateripoff]

http://www.cobdencentre.org/2013/07/confessions-of-a-central-bank-official/

Wednesday 12 June 2013 – TRANSCRIPT OF ORAL EVIDENCE

Q41 Mark Garnier: … If you thought that QE was creating financial instability, would you try to warn the MPC and, if so, how would you do it?

Andrew Haldane: I absolutely see it as my one of jobs as an FPC member to alert not just the MPC but this Committee and the wider world if I thought that QE, or monetary policy actions more broadly, was posing significant risks to UK financial system stability. …

To the substance, this is a risk that I feel very acutely right now. If I were to single out what for me would be the biggest risk to global financial stability right now it would be a disorderly reversion in the yields of government bonds globally, for any one of a variety of reasons. We have seen shades of that over the last two or three weeks. Let’s be clear, we have intentionally blown the biggest government bond bubble in history. That is where we are, so we need to be vigilant to the consequences of that bubble deflating more quickly than we might otherwise have wanted. That is a risk. It is one we as FPC need to be very vigilant to.

Still at least it's not all deliberate!

Edited December 22, 2014 by interestrateripoff

[interestrateripoff]

http://www.theguardian.com/business/2013/jun/12/bond-bubble-threatens-financial-system

A key Bank of England policymaker has warned of the risks to global financial stability when "the biggest bond bubble in history" bursts.

In a wide-ranging testimony to MPs, Andy Haldane, Bank of England director of financial stability, admitted the central bank's new financial policy committee is taking too long to force banks to hold more capital and appeared to criticise the bank's culture under outgoing governor Sir Mervyn King.Haldane told the Treasury select committee that the bursting of the bond bubble – created by central banks forcing down bond yields by pumping electronic money into the economy – was a risk "I feel acutely right now".

He also said banks have now put the threat of cyber attacks on the top of their the worry-list, replacing the long-running eurozone crisis.

"You can see why the financial sector would be a particularly good target for someone wanting to wreak havoc through the cyber route," Haldane said.

[interestrateripoff]

http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/c259/c25901.htm

HOUSE OF COMMONS ORAL EVIDENCE TAKEN BEFORE THE Treasury Committee Appointments of Dr Donald Kohn and Andrew Haldane to the Financial Policy Committee Wednesday 12 June 2013 Dr Donald Kohn AndREW Haldane Evidence heard in Public Questions 1 - 61 USE OF THE TRANSCRIPT

Q41 Mark Garnier: That is very interesting. Can I turn briefly to quantitative easing and just have a quick look at that? I asked about this whole idea of you suddenly have a search for yield and as a result a potential mispricing of risk, but what I wanted to talk to you more about was that although the MPC decides the size of quantitative easing, it has to now have regard to the policy actions of the FPC. If you thought that QE was creating financial instability, would you try to warn the MPC and, if so, how would you do it?

Andrew Haldane: I absolutely see it as my one of jobs as an FPC member to alert not just the MPC but this Committee and the wider world if I thought that QE, or monetary policy actions more broadly, was posing significant risks to UK financial system stability. How would we do that? Our public communications would be one means of doing that but in addition I would hope we could have occasional joint meetings between FPC and MPC. We have had one already actually and we might seek to build on that co-ordinated approach in the period ahead. That is the process answer to your question.

To the substance, this is a risk that I feel very acutely right now. If I were to single out what for me would be the biggest risk to global financial stability right now it would be a disorderly reversion in the yields of government bonds globally, for any one of a variety of reasons. We have seen shades of that over the last two or three weeks. Let’s be clear, we have intentionally blown the biggest government bond bubble in history. That is where we are, so we need to be vigilant to the consequences of that bubble deflating more quickly than we might otherwise have wanted. That is a risk. It is one we as FPC need to be very vigilant to.

[interestrateripoff]

http://news.bbc.co.uk/1/hi/business/7711408.stm

From 2008:

"What we discovered was the bottom 40% of UK households had negative cash flows, ie they didn't make their ends meet," says Sandy Chen, a banking analyst at Panmure Gordon.

"A year ago that wasn't a problem because you could get that extra credit card or you get that 130% loan-to-value mortgage easily. You can't do either of those things nowadays."

Refat Naz, a team leader at National Debt Line, has noticed the number of people struggling to get by now that cheap credit has dried up.

[billybong]

"What we discovered was the bottom 40% of UK households had negative cash flows, ie they didn't make their ends meet," says Sandy Chen, a banking analyst at Panmure Gordon.

"A year ago that wasn't a problem because you could get that extra credit card or you get that 130% loan-to-value mortgage easily. You can't do either of those things nowadays."

Refat Naz, a team leader at National Debt Line, has noticed the number of people struggling to get by now that cheap credit has dried up.

Yeah - no problem, no worries.

[interestrateripoff]

Bank Of England Was Unaware Of Impending Financial Crisis

• Ex-Bank governor in new warning

[eric pebble]

http://business.timesonline.co.uk/tol/busi...?Submitted=true

Once more brilliant journalism here which fails to nail the bar steward to the wall by his gonads.

No mention of the warnings given by the IMF, isn't this a global organisation capable of issuing warnings?

No mention of the questions raised by Vince Cable in 2003 in the houses of parliament that Brown laughed off.

No mention of the likes of Roubini etc.... who've been warning about this for years that Brown ignored.

No mention of the laughable speeches by Brown which applauded his own genius for producing a stable economy.

WTF is a matter with the press, it's like they are all asleep at the wheel or high on crack cocaine.

THIS SUMS UP THAT C NT BROON;