*{Is Global Capitalism Delivering the Goods? [http://www.weforum.org/site/knowledgenavigator.nsf/Content/Is%20Global%20Capitalism%20Delivering%20the%20Goods%3F?open&topic_id=300250000&theme_id=300]

            29.01.1999

            Annual Meeting 1999

            Is global capitalism delivering the goods?}

            Panellists said there is no better alternative to capitalism but noted that unfettered markets have wrought havoc on the world economy with devastating socio-political consequences for some countries. There is an urgent need to rein in unbridled flows of capital which have destabilized the economies of many developing countries in the last 18 months. But fixing the problems of the capitalist system is easier said than done. At the macro level, capitalism has exacerbated economic inequalities and has not produced adequate solutions to unemployment and poverty.

            Jean Chrétien, Prime Minister of Canada, noted that events in Russia, Latin America, Africa and parts of Asia suggested that the Western world has "been too triumphant" about capitalism. "To me, capitalism hasn't come up with all the answers," he said, pointing out that when economies and markets collapse, the losers are ultimately the ordinary people. Chrétien called for currency traders to be controlled: "We cannot see prosperity disappear overnight because some boy in red suspenders in New York decides this is not a good currency," he said. The free market system has to be restructured, he maintained, but conceded that there is no easy solution.

            Aleksander Kwasniewski, President of Poland, said his country is better off under the present capitalist system than the command economy of the past 50 years. He noted, however, that the free market system hasn't provided lasting solutions to the intractable problems of unemployment and poverty. He warned that while under the old bipolar system the world was divided along ideological lines, under the capitalist regime it is in danger of being divided along economic levels. That, he said, would be a huge mistake.

            Lee Kuan Yew, Senior Minister of Singapore, said capitalism has served Asia well in the last two decades. A combination of factors, including excessive borrowings in South Korea, Thailand and Indonesia as a result of easy credit from international lenders, compounded by the speed at which portfolio investors rushed out of East Asian markets, triggered the Asian financial crisis. He believes that the problems with unfettered markets cannot be solved by just having international rules. "I think the answer should be the more you join the free market economy in the financial sector, the more benefits you get, although you are taking more risks. But if you have weak banks, weak supervision, and you don't know that your private sector has borrowed excessively, then you should not join," he said. A high level of sophistication is required for sound banking supervision, and Lee commented that some developing countries do not have the means or discipline for it. As such, they should consider controls to protect their financial systems from being devastated by the excesses of free markets.

            Jon Corzine, Senior Partner of Goldman Sachs, maintained that global capitalism is delivering results and doubters should not judge its success by events in the last 18 months. The challenge, he added, is not to reconfigure capitalism but to broaden the benefits that open markets offer. He said countries should pursue sound monetary and fiscal policies. The market is less likely to panic when the system is credible than when it is not. Capital controls to curb fund flows are blunt weapons. "Put simply, no one will invest in a country if they do not believe that they can get the money out," Corzine said. He recognized that there are selective, short-term controls such as those imposed by Chile, which could act as "speed bumps" to control unfettered markets. He also urged more transparency so that investors are not kept in the dark. He accepted that "global capitalism must have a visible heart as well as an invisible hand."                  

                  *{Contributors:       Chrétien Jean
                  Kwasniewski Aleksander
                  Lee Kuan Yew       Monod Jérôme}