Manuel: The world was warned

Johannesburg - Finance Minister Trevor Manuel says the world was warned about the current global financial crisis.

Writing in the Financial Times on Tuesday, Manuel said that the historical record repeated itself - "confidence gives way to exuberance, panic is followed by decline, retrenchment precedes reconstruction."

Manuel said that political economists since Thomas Hobbes and Adam Smith had understood that capitalism relied on state power to impose instrumental checks on greed and abuse of influence.

"Concern about the sustainability of global macroeconomic trends has been a persistent theme in intelligent comment since the mid-1990s," he wrote.

Yet, he said, for too long the world has allowed an unexamined faith in market incentives to drive social regulatory imperatives into the shadows.

"The calculus of financial gain has overwhelmed the discipline of public purpose and accountability.

"Pursuit of corporate advantage has dominated promotion of competitive fairness," Manuel said. He added that the world had grown used to the idea that savings generated in the industrious poorest quarter of the world should continue to finance the excess consumption of the richest nations.

"We have grown accustomed to the fact that collective global action is hamstrung by institutional and diplomatic rigor mortis.

"We have grown accustomed to widening inequality in an era of unprecedented prosperity," he said.

He asked if the world could now build a shared vision of a different global economic order - "a model that builds on the dynamic impetus of market forces while taming the influence of power and self-interest."

He also asked if the world could reconcile free enterprise and good governance.

Manuel said the world needed to acknowledge that the financial crisis could not be unwound without addressing global trade imbalances.

"Absorption of resources will rise in China, consumption growth in the west has to moderate.

"And as trade policy is bound up with the global structure of wages, there is surely greater hope in raising living standards in China and flattening US earnings differentials than in volumetric boosts to bank credit."

Manuel said the world needed a shared commitment to resist protectionism, and to take the actions required to build more balanced trade relations and earnings patterns.

- Sapa