Global Summit Takes On Economic Turmoil
RENEE MONTAGNE, host:
This is Morning Edition from NPR News, I'm Renee Montagne.
STEVE INSKEEP, host:
And I'm Steve Inskeep. Good morning. At least one of the presidents who met over the weekend wants to remake the global financial system. Nicholas Sarkozy met President Bush over the weekend. The French president represented European leaders who've been talking about sweeping changes amid the global financial crisis. The presidents agreed to hold a series of summits on that issue. And to see where all this is going, we've called Philip Coggan, a columnist and editor at the Economist magazine. He's in London. Welcome back to the program.
Mr. PHILIP COGGAN (Columnist and Editor, The Economist Magazine): Thank you.
INSKEEP: What are the Europeans want to do?
Mr. COGGAN: They want more regulation. They're very worried in particular about hedge funds and indeed the Italian Finance Minister was talking about banning them all together, and they're worried about off-shore markets. And they would like to see a much more regulated system as used to be the case, particularly in Europe, where capital flows are more closely controlled and monitored.
INSKEEP: And are they talking about the kind of changes that all countries or many countries would have to make at once because otherwise, the money would just flow out of your country to some place less regulated.
Mr. COGGAN: Exactly. You couldn't possibly do this unless you did this globally. And even then, there would always be one or two countries which might find it attractive to stand out from the system. But if you regulate the banks strongly enough, and you make sure they don't get involved in those countries then you might be able to have a reasonably water-tight system.
INSKEEP: Well, that leads to another question. Even with this crisis bearing down, is there enough agreement among countries about what regulations should be passed?
Mr. COGGAN: I don't think there is. I don't think the American government, as presently constituted, would want the kind of regulations that the Europeans do. Of course, the first of these meetings will be held by President Bush after the election in November. But he'll only have two months in office then, so whether Senators Obama or McCain would want the same sort of rules as President Bush wants is another matter.
INSKEEP: OK. Well given what you've said then, let's talk about what's possible here. I know the prime minister of your country, Gordon Brown, is talking about something approaching the Bretton Woods Agreement, which set up the financial system that the people have grown up with and have known for decades now. Is anything like that remotely possible?
Mr. COGGAN: I don't think it is. There's a lot of grand talk. Bretton Woods, which was set up at the end of the Second World War had fixed exchange rates which lasted until the early 1970s. But then, President Nixon took the dollar off that fixed exchange rate system, and it's very hard to imagine how we could go back there now. The Chinese, even they adjust their currency on a pretty regular basis. Apart from that, we have these big bodies set up called the International Money Tree Fund and the World Bank out of Washington. It'll be a lot of efforts just trying to reconstitute and reform those bodies. So I think, Bretton Woods is a very - is a grandiose way of describing what might be done.
INSKEEP: I'm glad you mentioned China because that raises another question here. We're talking about the American president meeting a representative of European nations to talk about this, and those are the people who certainly would have discussed the major aspects of the financial agreement 50 or 60 years ago. How do China and India come into this at all?
Mr. COGGAN: Well, I think they have to be invited, indeed. That has been discussed. The G8 is the starting point which includes Russia, but neither China nor India. But it would be silly to have a world system which didn't include those two countries. Now of course, both China or India are more regulated than either Europe or America. So it does not say, we couldn't construct a system which is a bit more regulated, which they both played a part. But the key thing, of course, is that both China and India are the rising nations which have the savings on which us in America and Europe depend. So we really need to make sure they're comfortable with any new system because it's their money that we are relying on.
INSKEEP: Is there any level of which China and India are watching this crisis? And I don't want to say smiling, but anticipating some benefits over the long term, over the United States being humbled a little bit.
Mr. COGGAN: Yes, I think already correspondents in China have said that they look down on the American system now. They used to be told to admire it, and now, they think it's chaos, and they're glad they don't have it. But there is a caveat to that, in which - in that China is a very big investor in the U.S., both through equities and more prominently through treasury bonds and treasury bills. So it doesn't want to see complete collapse of the American financial system because China would lose a lot of money.
INSKEEP: Philip Coggan is with The Economist Magazine in London. Thanks very much.
Mr. COGGAN: Thank you.