Page 157 - Culture Society and Economy

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CULTURE, SOCIETY AND ECONOMY

could have perverse effects as Davidson has pointed out, but is, in any
event insufficient. 14 It potentially can provide funds for developmental
purposes and for increased social and environmental purposes but it does
not address the fundamental issue of speculative capital movements –
‘hot money’ – undermining the economy of particular countries. This can
only be addressed by a return to a comprehensive global system of
exchange controls which allows for capital to move to areas in which it
is needed but also allows for this to be done on a stable and equitable
basis. Arrangements must also be made – as in Davidson’s resurrection of
Keynes’ proposal – for creditor rather than debtor nations to bear the
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burden of the costs of structural adjustment. This is essentially the current
system of IMF special drawing rights, minus the conditionality and with
the burden of adjustment shifted away from the debtor to the creditor
nations. All these issues are not just matters for developing economies
but are vital ones also for Europe and especially the United States in
which export of capital and the neglect of investment in domestic social
and physical infrastructure as well as manufacturing, are major issues.
The restoration of exchange controls is therefore an area in which both
developing and developed countries have a common interest. It should be
accompanied by – indeed, makes no sense without – the cancellation of
the debt of the developing countries.
In general, an entirely new set of international financial institutions need
to be created. In other words, an international economic agency will have
to be formed which is not only responsible for international macroeconomic
management in the manner of the International Monetary Fund (IMF) and
whose powers and functions go beyond the International Clearing Agency
proposed by Davidson. This is because any restructuring of international
public financial institutions must bring to the fore that part of the system
which provides development funds (not just balance of payments support)
to the developing countries on a substantial and long-term basis.
In any serious alternative to contemporary capitalist globalization,
therefore, it should be obvious that entities such as the IMF, far from
being abolished, will become more important and powerful than ever.
This is because it will be of the utmost importance and very much in the
interests of ordinary working people, to manage international and national
inflation and the global movement of capital and exchange rates. Failure
to maintain, indeed expand, this international macroeconomic manage-
ment will lead to the persistence of global unemployment, the sluggish-
ness in global growth, currency instability, sudden flows of hot money
from one economy to another and profound dangers of depression to the
global economy. A real global central bank of some kind will therefore be

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