A captain weathering a storm will not only focus on how to stay afloat, but knows that he has to find his course and deal with other crises thereafter, whether due to the previous storm or of a different nature all together.
As captains of industry and of political institutions we are weathering the current financial storm, though risk focusing all of our attention to this particular crisis and the present challenges.
At the World Economic Forum we are likely to conclude that the current crisis is not one due to mortgages, but of financial governance. We therefore have to discuss banking regulations (Basil 1, 2, and 3). We will also likely reconsider renewing the old separation between deposit and investment banks, which in a way will help the industry to self regulate.
Furthermore we should prohibit the use of bank functions (credit) by non-banking institutions, such as insurance companies or hedge-funds. Perhaps more important is enforcing a size limitation of certain financial institutions, to avoid them becoming so large that governments have to save them from bankruptcy to stave off economic disaster.
These banks are by their mere size out of control of the market system we should considersplitting them up. In the mean time we will see a wave of nationalization.
Finally, we will hopefully conclude that we need to develop a supranational monetary system, using a global greenback, for example under control of the IMF or extending the use of the special drawing rights. This in order to decouple the dominant national currencies, such as the US dollar, from its function as a supranational reserve currency. The combination of both extends the reach of the crisis. We will have to try to separate what can and should be regulated by the market and what can no longer be let to the market system or to some less credible governors of our main economic vessels.
Meanwhile, as captains navigating this storm, we also continue to look beyond this storm. We should not lose focus of potentially larger crises looming ahead that might not seem immediate to us at this particular moment, but could become far greater due to the financial crisis. Climate change, air, water and soil quality, shrinking populations in developed countries and population explosion in Africa and the Far East, poverty, scarcity of natural resources, global health threats and violent conflicts as a consequence of instability.
The current financial crisis is the opportunity to take global governance and control mechanisms as a whole into account. We have the chance to demonstrate our collective foresight as captains: to ensure that our societies become more resilient to the global shocks to come.
Author's Note: This article was written in collaboration with
Aaron Pereira, Co-Founder, CanadaHelps and Vartana, Canada
Daniel Shapiro, Director, Harvard International Negotiation Initiative, Harvard Law School, USA; Chair, Global Agenda Council on Negotiation and Conflict Resolution
