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New Economic World Order Must Reflect New Economic Realities

No one can disagree with French President Nicolas Sarkozy’s argument that the world has dramatically changed and that the global financial system needs to change too. The French leader made the observation ahead of his meeting with US President George W Bush at the Camp David retreat this weekend to brainstorm over the current economic meltdown.

Sarkozy is right of course. However, it is not possible to reform the present financial order if the global movers and shakers do not care to examine what is at the heart of the current economic crisis and who is responsible for bringing us all here. This reality check is crucial to any corrective measures that the US and other big economic powers are planning to introduce or have already put in place.

Bush and European leaders have proposed a series of leadership summits around the world to deliberate on the issue and come up with possible solutions.

Given the unprecedented nature of the crisis and the fact that all attempts by the Bush administration to stanch the free fall of markets have so far failed do not give anyone much hope that they will work now.

After the much-reviled $700 billion bailout package, financed by the taxpayers’ money, failed to reassure the Wall Street and markets around the world, the administration has started buying into sick and shaky banks. Even this measure introduced following the successful example of British Prime Minister Gordon Brown has failed to help markets gain confidence in themselves.

Which is why the latest move by the US and EU countries, representing the world’s richest nations, is unlikely to end the global economic woes. This crisis originated in and was largely created by the US and the disastrous political and economic policies of the current administration. This is essentially a crisis of confidence in the US leadership. Which is why only a change of guard in Washington may help markets revive themselves and recover from the carnage of the past couple of months.

This reality is not totally lost on the US and EU leadership. Which is probably why the proposed series of high end meetings have been planned after the November 4 presidential elections in the US.

However, such deliberations will not lead to anything constructive if they do not acknowledge the new global economic realities and suggest reforms accordingly. Reality is, economic power is shifting from the West to the East. The past few weeks are a testimony to the fact.

China and India with almost half of the world’s population are the two obvious big economic stories of the 21st century. The Arab and Gulf countries with their incredible economic clout are another new big player. They have both attracted trillions of dollars in investments from around the world and are investing big time in Asia, Africa, Europe and the US of course. The fact that many Middle East investors lost their money in the Lehman Brothers bankruptcy is an example how economic equations have changed and are changing. Sarkozy is right. The world has indeed changed. And the new global economic - and political - order must reflect this reality.