Credit crisis driving global cooperation
World markets responded positively Monday to new initiatives emerging from meetings in Washington and Paris.
WASHINGTON, PARIS, AND LONDON
As governments of the industrialized world struggle with the global credit crisis, they may be relearning an old lesson: there is more strength in standing together than in struggling alone.Skip to next paragraph
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The international nature of capital flows and stock markets has forced unprecedented cooperation between nations on interest rate cuts, support for banks, and other measures meant to restore investor confidence. Philosophical and political differences that seemed insurmountable only weeks ago have melted away as leaders search for pragmatic means to prevent their economies from melting down.
It's true that financial systems are among the most integrated parts of the modern world. Not every nation is happy about serving in this ad hoc alliance to save capitalism.
But if nothing else, leaders are learning that they can pull together constructive initiatives in the face of danger. And if they can save banks, why not the environment? If they can stop the spread of shareholder panic, why can't they stop the spread of nuclear weapons?
"We may find if we deal with the global credit crisis, we will start to think we can deal with the problem of global warming, or energy, or rogue states," says Colin Camerer, an economic behaviorist at California Institute of Technology in Pasadena.
"This might help invest world institutions with greater responsibility."
The world needs a modernized multilateralism for a new global economy, argued Mr. Zoellick in his address at the annual meeting of the World Bank's board of governors.
The world's model now should be the conference held in Bretton Woods, N.H., that set up the outlines of the post-World War II financial system, said Zoellick. The leaders that took part in Bretton Woods left both a legacy of specific international monetary institutions and "an intellectual, policy, and political commitment to act multilaterally to turn the problems of an era into opportunities," said Zoellick.
Investors Monday appeared to find comfort in weekend actions and pledges from government officials. Britain's FTSE 11 jumped 8 percent, while Germany's DAX went up 11 percent. Hong Kong's Hang Seng index surged 10.2 percent on Monday.