The present-day global financial and economic crisis must persuade policy-makers to opt for an entirely different global economic regulation system. However, this extremely simple concept is hindered by an intricate conflict of interests.
Technically speaking, this is to be expected. The classic phrase that life is existence of protein bodies should also note that life is always a conflict of interests.
This conflict of interests is highlighted by a plunging rouble after Vladimir Putin's Davos address. A conservative scenario implies that nothing extraordinary has happened because the rouble's exchange rate remains inside the new bi-currency basket. Although Russia's international reserves have dwindled by $9 billion in a week, this is no record. Under a speculative scenario, some market players got the impression that Mr Putin's liberal speech was a prelude to the Russian Central Bank's withdrawal from the currency market.
We are witnessing a conflict of interests, rather than of scenarios. The Central Bank is supposed to defend the upper limit of exchange-rate fluctuations, a redoubt due to be attacked by currency-market players. The Central Bank supports banks by replenishing their liquid assets and protects the rouble at the expense of its international reserves. I think the Central Bank, which is facing a dilemma, will decide to support banks.
This highlights a conflict of interests inside the Russian economic policy. But such conflicts tend to multiply at global economic level.
Naturally, such conflicts are not confined to the absolutely transparent export-import duties. Here is an example from an entirely different area.
All economists admit that a huge deficit of the US federal budget and balance of payments is a root cause of the crisis. The scale of the crisis can be explained by various setbacks and by the US financial system's safety cushion, namely, the dollar's status as the No 1 currency in the world.
It would be in the interest of most countries to subordinate the US financial system to common international standards like those mentioned by Prime Minister Putin in Davos.
The United States wants to continue taking out cheap loans from the global economy. Settling this conflict is a formidable task. However, the assertion of a new international system for managing the global economy will depend on the way this conflict is being resolved.
The proposed issue of new international currencies in Asia and the Arab world could play its role in this process.
The following conclusion suggests itself: The global economy is hard-pressed for economic diplomats capable of resolving conflicts of interest on the basis of a new supra-national economic regulation system, rather than selfish national goals.
Nikolai Vardul