Week words

The outlines of the international community8217;s initial response to the crisis are beginning to be discernable. The 43-nation Asia Europe Meeting ASEM at Beijing this weekend declared that they had found consensus for 8220;comprehensive8221; reform of the international monetary and financial system. In actual fact the only thing spelled out was that the IMF needs to take a more active role in propping up countries that are severely affected, something that UN Secretary-General Ban Ki-Moon said on Monday that he would also like to see. The IMF has since taken the lead in bailing out beleaguered Iceland, and has announced that it will also stabilise Ukraine and Hungary.

This is all very well: but the truth is that this is little more than what the IMF8217;s mandate has always been. It stops well short of any sort of attempt to actually alter the international financial architecture. The ASEM8217;s concluding statement is startling in how anodyne it is, how completely devoid of any actual substance: suggesting only 8220;firm, decisive and effective measures in a responsible and timely manner8221; 8212; a phrase with many adverbs but not much action. And while the Europeans might have managed to persuade President Bush that an international summit is essential, they do not seem to have persuaded him of much beyond that. Every message, overt and covert out of Washington recently has implied that the DC summit, on the 15th of November, will be about nothing more than 8220;principles8221;. This may be expectations management, or it may be concern that the outgoing president risks being humiliated by his successor; but either way, the financial system cannot afford to wait on the antiquated horse-and-carriage schedule of the American presidential succession.

Every week that we waste, the probability that we can make something useful out of this crisis reduces. Every week that passes, the likelihood that effective, cross-border institutions are set up goes down; and that, instead, relatively ineffective domestic regulatory regimes are strengthened goes up. Every week that stopgap measures are employed to save individual institutions or economies, every week that high-powered meetings come up with under-negotiated, empty statements, is a week that real problems are being papered over that will come back to haunt us sooner rather than later. If the larger, more developed, economies, feel they have too much to lose from international restructuring, than India needs to take guard and persuade them. The prime minister is said to be gratified that India is being listened to now; he needs to persuade the world to craft something worth saying.