[Viewpoint] The leadership vacuumThe world economy has been caught up in another contagious epidemic and is deteriorating. In times like these, we much examine our resources and work out our strategy. The gloomy stock market and declining value of the won underscores the vulnerability of our economy to global problems.
In a broad context, the capitalist economies are undergoing necessary growing pains in their evolution that started with the Industrial Revolution. Capitalism lasted for three centuries largely because the world was split into blocks through imperialism and ideological wars.
Radical advances in science and technology bolstered and spread the market economy. But with the ebbing of the imperialistic and ideological eras, followed by globalization, Internet connectivity and information technology, the flaws in the Western capitalist formula began to be exposed.
The oil crisis in 1973 was a conflict between advanced economies and oil- producing states, but also a harbinger of an inevitable shift involving the disintegration of the political hegemony of advanced market economies. The Middle East oil-producing nations have since learned to be more resourceful with their oil assets and assertive in global affairs.
The Lehman Brothers implosion in 2008 that led to the freezing up of financial markets and a global recession accentuated the defects of capitalism. In the old days, hard labor and manufacturing were the only means to build wealth, but the modern capital market bred and encouraged speculation and easy money. The U.S. economic model, which was a global capitalistic benchmark, is now in a shameful and pitiful state dogged by astronomical trade and budget deficits.
The leadership of democratic states, which mismanaged states’ finances and poorly responded to the dynamics of globalization and the power shifts it produced, is largely to be blamed for today’s catastrophe. While the traditional market economies - the U.S. and Europe - are groaning under deficits and possible recession, emerging economies like China remain resilient. Some are now questioning the effectiveness of the traditional market economy - as well as the democratic systems of advanced societies.
But leaders among the emerging economies, like China, India and Brazil, all relied on opening up market economies for growth. The market economy has gained momentum and proved its relative effectiveness over the last half-century. What was lacking was political competence in individual states as well as an efficient international system to coordinate and manage the interlinked global economy in a balanced, sustainable way.
Since the Second World War, the global community established global financial watchdogs like the International Monetary Fund and later the World Trade Organization to maintain global economic order.
The Group of Seven was the most influential body in global economic affairs. But since the start of this century, that rich, restricted club no longer wields the same power. It hastily turned to the Group of 20 to seek cooperation from other parts of the world to help turn around the global financial meltdown several years ago.
The G-20 summit in Seoul last year agreed on a framework for balanced global growth. This year’s G-20 summit host, France, plans to expand on the Seoul consensus.
But next month’s summit in Cannes is not likely to run smoothly since countries will propose different solutions to global economic problems. And the most advanced economies will be preoccupied with fixing their economic woes.
It remains unclear if the G-20 will come to agreement on issues such as taxation on carbon dioxide emissions or international financial transactions.
French President Nicolas Sarkozy, in a meeting with former Korean government officials in September, joked that Korea favors the power of the G-2: the U.S. and China. A recent column in the International Herald Tribune said that the G-2 could be the worst and most dangerous formula for the world’s order. The writers, who were European economists, were calling for a more active role from Europe.
What the world really needs is more balanced leadership from somewhere between a G-3 and the G-20. Sarkozy often says that France, and Europe as a whole, should have more of a role. Yet China, another key player, hardly appears concerned about bettering relations with neighboring countries. At the end, we are left to find our own means to survive in the face of this global turmoil.
*The writer is a former prime minister and adviser to the JoongAng Ilbo.
By Lee Hong-koo