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Published by Om Prakash Yadav
The on going world economic crisis has necessitated the formation of a new global financial order
The on going world economic crisis has necessitated the formation of a new global financial order

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Published by: Om Prakash Yadav on Sep 19, 2009
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Is it not very astonishing that when the whole of world is plunginginto recession, American currency Dollar is not being devaluedaccordingly? Who determines the rate and value of dollars? Why isthis discrepancy? Is the dollar’s value is the real picture? These aresome questions which desperately need answer and this essay is anattempt to do this only. The World economic crisis is a pandemic now. Every crisis has to befaced and solutions thereof have to be explored therefore whengreat depression took place in 1930s and the world economyplummeted into bottomless nadir, the Bretto-Wood conference washeld which led to emergence of new global financial order.Although it was not a grand success, it ushered in a new era.Keynes, the famous economist, suggested creation of a globalreserve currency called ‘bancor’ whose value was to be determinedby a basket of about 30 commodities including gold. The aim was toprotect the global currency against any vulnerability to vicissitudesof any single currency. This arrangement went on smoothly till1971, but after US-Vietnam war, when Americans were undertremendous financial chaos, the system was overturned and afterthat gradually US dollars assumed the role of global currency,though it was officially never accepted. Till then US dollar is the hardglobal currency and as many 2/3
of the official foreign exchangereserves of national governments are in dollars. It is in thisperspective that the valuation of dollars can be perceived.So far as ongoing financial meltdown is concerned, IMF says onlythat recession would prolong for much longer period in contrary tothe hopes of many countries including USA. Even when some signsof recovery is emerging hither and thither, it has miles to go.One may accept it or not, the crisis is not less than the GreatDepression of 1930s. It would however be financially naive toprescribe remedies for what had happened, because, it is easy towrite ‘prescription in retrospection’. But certainly, this does notmean that no lesson is learnt from this ‘economic catastrophe’.
It would be however be wastage of time to further analyse thecauses and circumstances which led to this fiasco, but it would begreat injustice to the economic history also, if some glaringaberrations and maladies of this financial order are not enunciatedand diagnosed. ‘Crisis is the engine of change’; therefore, this crisiswould also bring about changes in the global financial order, anorder which came into existence after ‘Bretton-wood conference, Itis therefore; when the global economy is facing the threat of recession and global financial order has failed, the demands arecertainly to be made to change the global financial order.
 Thesummit held in London to discuss the affects of aftermath of worldeconomic crisis and steps to tackle it failed to evolve a consensus.Many people called it as the 2
Bretton-Wood conference andexpectations were soaring in hype. There was euphoria all aroundbut it also burst like the ‘housing bubble’. The world leadersspecially the members of G-7 like Britain, Germany, France andAmerica were vertically divided. Germany and France were of theopinion that the screws of financial institutions should be furthertightened because what they thought, and to some extent they arecorrect also, that the ‘excessive financial leverage’ and ‘bottomlessgreet’ of these institutions are the root cause this crisis. USA and UK on the other hand, were averse to it and pleaded that tightening of screws would mean reversal of process of free market economywhich is the basic of the capitalist economy. Anyway, the latterprevailed and under their pressure nothing tangible could emergeout of this much published and hyped summit. Well it was not afailure too.Most important issue which was raised in this summit was the issueof‘NEW
’ china had raised this issuewell before the summit could begin in April, 2009. The governor of people’ bank of china, Zhou Xioachun had raised it vociferously.China wants that the USD be replaced by Special drawing rights(SDRs). This demand of china caused a stir in the world politico-economybecause it is nothing short of determined challenge to theestablished financial hegemony of Americans over the world.Although USA has rejected this proposal out rightly, this demandmay be raised again in the forthcoming Pittsburgh Summit inSeptember, 2009 and may be supported by countries like India,Russia, and Brazil and host of others.
Many countries believe that USA has been printing dollars to payoff its debts in turn causing inflationary trends across the globe. This unfettered financial regime must go and be replaced by auniversally accepted and more transparent convertible globalcurrency so that the monopolistic and hegemonic US dollar eracome to an end. This would be perhaps the best achievement wecould have in this ‘financial tsunami’.
-Now the wheel has turned and no one can prevent change of guard. Pittsburgh summit of G-20 may take into considerationsfollowing changes in the global financial order so that aspirationsof billions of under-nourished and starved people across theworld is fulfilled-1.IMF and World Bank’s functioning should be overhauled to makethem more democratic. Voting rights of member countries should bechanged and ‘bossism’ of west should go. ‘Each Nation equal vote’theory should be enshrined into.2.Appointments in IMF especially on the post of Managing Director(MD) should be made in a more transparent manner so that poornations should also get a comfortable say. The system of nomination to President of World Bank by US President should bedone away with.
World Bank and its different organisations should also undergoradical changes. The basis of percentage of voting in World Bankshould be changed so that developing nations should have a‘greater say’ in fund distribution and other administrative matters.Some short of 
‘global financial regulatory body’
may be set upto ensure proper monitoring of global monetary health and to ‘injectcurative drugs’ when necessary. The fate of global market can nolonger be left in the hands of elements of ‘excessive financialleverage enjoyed by greedy speculators and fund managers.’
United Bank of Switzerland (UBS) or Swiss Bank has been depositoryof hundreds of trillions dollars from across the world. Tax evadershave used ‘Banking Act, 1934 of Switzerland’ in their favour. Tons of gold deposited during ‘Nazi’s Nuremberg trial’ can play vital role intiding over this crisis. Time has come to amend or repeal this lawaltogether, so that the ‘rich men from poor nations’ cannot drain thewealth and make the citizen to suffer. Un substantiated reportssuggests that
about 1456 billion dollar of Indians has beendeposited in UBS; followed by Russia 470 billion USD, UK 390 b USD, Ukraine 100 billion USD, China 96 b USD.

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