For Immediate Release
Bush’s Schizophrenic Economic Summit Plan
With World Calling for Regulation of Global Finance to Counter Wild Volatility, Bush Calls for Session to ‘Enhance Commitments’ to Deregulation, Liberalization
WASHINGTON - That President George W. Bush's idea of a global plan "to avoid a repetition" of the financial crisis spawned in large part by radical deregulation of financial services is to call a summit for nations "to strengthen the underpinnings of capitalism by discussing how they can enhance their commitment to open, competitive economies, as well as trade and investment liberalization" brings to mind Einstein's definition of insanity: doing the same thing over and over and expecting a different result.
The White House today said that the Nov. 15 summit would advance a common understanding of the crisis' causes and lead global leaders to agree "on a common set of principles for reform of regulatory and institutional regimes for the world's financial sectors." Yet unless the radical financial services deregulation agenda that has been aggressively promoted and entrenched by the World Trade Organization (WTO), World Bank and International Monetary Fund is understood as a source of the current crisis, reform proposals will not address the crisis' root causes.
The content of the Bush administration summit announcement suggests
that trying to resuscitate the radical deregulatory agenda and the
laissez faire ideology thoroughly discredited by this crisis is the
primary objective of the summit, rather than a serious discussion of
what new global governance and regulation is required.
While an extreme deregulation agenda had been pursued in the United
States by various administrations, it was the WTO's 1995 General
Agreement on Trade in Services (GATS) and 1999 WTO Financial Services
Agreement (FSA) that exported the radical deregulation agenda worldwide
and locked it into place. Deregulation of the financial services sector
- including banking, insurance, asset management, pension funds,
securities, financial information and financial advisory services - has
been among the most important but least discussed aspects of the WTO's
agenda since its inception.
As part of its original WTO commitments, the United States agreed to
conform a broad array of financial services including banking,
insurance and other financial services to comply with GATS rules. In
some cases, for instance regarding the "firewall" policies established
in the 1933 Glass-Steagall Act that forbade bank holding companies from
operating other financial services, U.S. WTO commitments that
contradicted domestic policy were used to push for domestic revocation
of existing laws. (The U.S. WTO GATS schedule explicitly includes a
Clinton administration commitment to roll back Glass-Steagall, which
had been keeping foreign financial service firms that offered both
traditional consumer banking and investment banking services from
operating here.) Other U.S. WTO commitments in financial services
simply locked into place existing U.S. policies because the GATS
includes a "standstill" rule - meaning countries may not roll back
liberalization and deregulation once a sector is bound to GATS.
The United States then used ongoing WTO financial service
negotiations to export the U.S. model of extreme financial service
deregulation to the other 100-plus WTO signatory countries, including
through a 1999 WTO Financial Service Agreement. Further financial
service deregulation is currently on the agenda of the WTO Doha Round
READ our backgrounder on the WTO's role in the crisis.