Meeting of the Socialist International Council | Prime Minister’s speech
June 21, 2010
Ladies and gentlemen, dear friends, let me first thank the United Nations Secretary General for hosting us here in this location which is very important, from both a symbolical but also a political point of view.
But let me also begin with a few words of solidarity to our friends. Over the past months we had terrible earthquakes in Haiti, and Victor Benoit is here, our Vice President; our thoughts and solidarity go out to him and his people.
In Chile, we also stand beside you and your people, as you build a stronger nation out of the rubble of recent earthquakes. I would also want to send a word of solidarity to Obama, who is courageously handling one of the most catastrophic oil spills in history.
Solidarity is, I think, fundamental for our global society and in dealing with our big socioeconomic and other problems. It has always been very important. Let me just mention that when Greece began its Revolution many years ago, in 1821, Haiti was the first country to show solidarity across the ocean as they sent tons of coffee so that we could pay for our Revolution.
This just goes to show the essence of solidarity and how intrinsic it is to both our psychology and our respective movements. Today more than ever solidarity is needed at a global level. This is the very reason for which I wish to thank you all, all of you who gathered in this room, my dear friends and comrades, for the solidarity you have shown to Greece, as we have been fighting a difficult battle, which will nonetheless be crowned with success as we get to build a more credible economy, a more sustainable economy and a stronger nation within the next few years.
Greece has found itself in the eye of the storm over the last few months or, if you will, at the heart of the crisis. And while it was named the Greek crisis – and Greece indeed was a weak link –overall it proved to be a much larger systemic crisis, a crisis which began with the 2008 financial crisis.
Allow me to share my own experience of this crisis and communicate what it may imply for our work, for our policies, for politics around the globe.
First of all, what have I learned from this crisis? This crisis proved once more that no man, or woman, is an island. We are all in the same boat, and we are in this boat together.
So the need for solidarity and, furthermore, the need for global cooperation, the need for global governance, the need for global solutions is imperative.
Secondly, people have been asking me whether this experience has challenged my views on the welfare state, on progressive politics, or changed our values. I would definitely have to say no. It is actually the other way around as this experience has come to reconfirm what we all believe in. It has reconfirmed my own belief that we need change. And looking back at my acceptance speech in 2006, I believe what I said then still holds true, even more so today.
Back then I said that for the first time in human history we did have potential; we had technology, knowledge and the wealth to change the world. We had the power; we had the finances and the know-how to make poverty history, to stop global warming, to guarantee decent employment for all, to reduce child mortality.
We had the capability to improve healthcare, do away with pandemics such as HIV/AIDS and malaria, achieve gender equality, integrate migrants and refugees into our societies, put an end to the smuggling of drugs, arms and people, banish corrupt practices and lack of transparency, reduce inequality and relieve countries of their debt, guarantee human rights. This is what I said back in 2006.
Today I think this message and appeal is even more dramatic, as we know we have the capabilities but we are not using them. If we only look at crises, be they a financial crisis or an oil spill in the Gulf of Mexico, it dawn on us that the human capacity is huge. We have amazing power, possess huge financial capabilities in the form of trillions and trillions in dollars or euro around the world; we have energy resources at our disposal, the media, nuclear energy, biotechnology. Yet what we are faced with is the question of how we, as humanity, use such powers? What purpose do we use these powers for? And that is a profoundly political question. It is a question of democracy and of values; it regards the type of societies we want to create, develop, and live in.
That is our challenge: find out how we can harness these powers, such as the market. Are we to allow them to be controlled by the few or to be left uncontrolled, if you like, or are we going to govern them democratically and use such powers for the best of mankind and its needs? And this is the question where our movement plays a pivotal role in putting values in place, global values for global and democratic governance.
This is also where the importance of our movement lies, i.e. in creating a more humane world as we deal with crises. And there is also a dilemma there.
We are at a historical crossroads. On the one hand, we are challenged with creating a more humane world, humanizing globalization. On the other hand, should we fail to do so, we will be dealing with more populism, more fundamentalisms, more polarization, more racism and xenophobia, more nationalism, more conflict, more barbarism.
So this is our dilemma. And as the G20 are about to convene, the question of global governance is becoming all the more challenging for humanity. It is important we have an institution such as the G20. It is important for it has made important decisions in the past. Still, we see little or no implementation thereof.
Certainly, the G20 is not fully representative of the peoples of the world, let alone the poorer nations. But what this brings to mind is that we do have choices. There are choices; nothing is inevitable. The choices we make must be based on a set of values, and our values are clear. First, we talk of democracy, the need for strengthening democratic institutions, participation, representation, transparency.
Second, we highlight the need for equity, justice, solidarity for our citizens and our peoples, within nations and between our nations. And third, we insist on establishing a new relationship with our environment so that we move towards a more sustainable economy, where mankind and environment can live together, in peace.
We can offer a new model of governance, of innovative and sustainable growth and development exceeding the limitations of previous paradigms. Another example, drawing from my experience of these past few months, and which once again demonstrates the need for global governance and global solutions, is that in 2008, at the time of the financial crisis, it was governments, or politics if you will, it was the state itself that was the guarantor of last resort with a view to saving the financial system.
Governments had to come to the rescue of our economies. They were the ones that needed to be credible. Today it is governments, and particularly those in the developed world which are faced with the question of sovereign debts, that are being questioned. They helped bail out banks, they helped stimulate the economy and now they are being accused of running up high debts.
Who is the guarantor of last resort now? If it’s not governments, if it is not the financial sector, then it can only be the global institutions, global solutions, or even regional ones, as we found out through the Greek crisis, as a support mechanism was set up by, certainly, the European Union and the IMF.
Another point which I very much felt to my skin and we grasped in Greece, as we watched the markets and the spreads go up and down every single day, is that markets are not rational. They can be led by mob psychology: it is either a mob psychology of euphoria which was the case of the bubble before 2008 or a crowd psychology of fear which we experienced after that crisis and also lately in Greece.
This crowd psychology we did see at work in Greece, as we were implementing one package of measures after another to cut down on our deficit, to contain our debt, but still the markets were not responding. They continued to attack us and remained suspicious.
That is why intervention in the markets was called for and that is exactly what happened. A European support system was set up, however slow in its inception but still fast by EU standards, along with a commitment made on our part to proceed with decisive and often painful decisions, actions and packages to cut public expenses, increase revenues, curtail bureaucracy and corruption.
Markets are impatient. They have become risk-averse, and they can dangerously undermine important and credible political decisions we take while governing our countries. Which brings me to my next conclusion: markets are much quicker than our democratic institutions, especially if you turn to markets such as Wall Street, where computers and mathematical models make decisions, before we can even sit down and deliberate amongst ourselves like human beings.
So humanizing, humanizing our economies and our global system, is not simply a symbolic word. It means that we should create those systems that work for us human beings, and not for models or for opaque, non-transparent interests hiding behind these models.
And this is where, in the debate about what we want, whether to choose market over government or vice versa, I think we need to clearly state we want both markets and governments, but wish for markets that serve our people and for governments that serve our people too. And that’s why we need regulation and that’s why we need democratic governments. Luckily, Greece is now on track following difficult decisions that bore fruit and positive results. We have already reduced our deficit by 40% compared to last year’s statistics. State revenues increased, public expenses diminished. But I don’t wish to tire you with a detailed analysis of the Greek situation.
There is something, nonetheless, I do wish to elaborate on, because I have been reading about this the world over. There seem to be many conservative statespeople, many right-wing politicians, who say: “Do you see Greece? They are paying a price for their welfare system. That’s the problem. They had a lavish welfare system and that’s why they have this debt.”
That is wrong. That was not the problem. It was not our welfare system that led to the debt. It was the fact we had a conservative government mismanage the economy, and a big government, for that matter, which led to the high debt. It was big government in favor of great, vested interests, and the same goes for the United States where the Bush administration stood for big government catering for the vested and big interests. It was not the Greek welfare system that caused the problem. As a matter of fact, people in Greece pay 40% for health and education out of their pockets. So if anything, it was a welfare system that was not as developed as in other countries.
In fact, the problem with Greece was a problem of governance, a problem of democratic governance. There was unfortunately corruption, patronage, networks. We’re not happy about that. We’re not proud, but we are changing that.
It was a question of governance, a question of democratic governance. It was a question of transparency. It was a question of rule of law in the interest of our citizens, not governance for the benefit of vested interests and the powerful.
And this, I think, is another dichotomy, another dilemma, where we have to take sides. Do we want to have the rule of the powerful? Especially since when there is the rule of the powerful there is bad governance? Or do we aspire to the rule of law, democratic rights and human rights?
The financial crisis in 2008 was due a lack of good governance, lack of transparency, lack of rules regulating the financial sector. The financial sector and those interests operating within the financial sector were able to hold politics captive, held democratic institutions captive and pushed their way forward so that they could do business as they pleased.
Our fight is also against excessive bureaucracy, corruption, mismanagement, so that we make sure that taxpayers’ money goes to what is needed to serve our communities and not the powerful and the few. And that explains the reasons why, even though measures are very harsh, people in Greece realize we are introducing a major change in governing our country, to the betterment of our people, as we are moving out of this crisis.
So I think that we cannot endorse a view according to which the problem of sovereign debt, in Greece or elsewhere, is the social services we are providing to our citizens, whether it’s health, schooling, safety nets for the vulnerable. This is not the real reason behind the national debt problem.
What is the reason behind the debt issue? Developed countries have, many of them do have, sovereign debts and they are much less competitive.
They are less competitive which means that they have borrowed, and quite often heavily, to preserve the standard of living, that is a higher standard of living. But of course this higher standard of living was the result of a historical process consisting of struggles, negotiations, trade unions making a social pact with employers and a welfare state so that our citizens could live a better life.
But again does that mean we are non-competitive because of the welfare state? Well, let’s look at the Nordic countries or countries like Canada and Australia that have welfare systems but are also competitive in the world market. It turns out there is a model, a model combining social justice and being competitive in the world market.
One reason why many countries are not competitive is not because they have welfare systems, but often because compared to other parts of the world there are huge inequalities–though I think we are all very happy to notice emerging markets grow as a result of the wealth channeled to these countries.
There is often competition because there are countries that have very low wages or countries that have no welfare system and don’t have to pay for welfare. There is no collective bargaining in many countries, or it’s easy to degrade the environment to ensure short-term competitiveness albeit no long-term sustainability.
Is that the model we want to emulate and aspire to? Do we want to race to the bottom to become competitive? Or is it we, socialists, social democrats, labor parties want to raise standards in the emerging and developing countries, so that local workers have a larger share of the wealth generated there, so that they have a bigger share of the redistributed wealth of their countries, and the world?
Only thus would there be a level-playing field. Then we could maintain our welfare systems, but at a global level. That’s why a race to the bottom is not the answer.
Actually, right as we speak in New York the International Trade Union Confederation is convening in Vancouver. They also are calling for similar proposals on the part of the G20. Yesterday, I actually had the chance to talk to Guy Ryder, General Secretary of the International Trade Union Confederation, while tonight I will have a video link with the congress.
We have agreed to work more closely together, the Socialist International and the world trade unions, to exert more of the pressure needed to introduce the changes we want for this world, have more jobs and growth, to facilitate a just transition to a green economy, help restructure our economies in a way which will not burden those who are the weakest, create a more competitive economic model, but also a more equitable economic model.
But certainly we have been in the forefront and continue to be in the forefront and we need to create such alliances with many others, at these times of change.
We have created committees on the economic crisis, green, sustainable development, and poverty. We are in the forefront of women’s rights, non-proliferation of weapons of mass destruction, peaceful conflict resolution in places such as the Middle East.
We also need to be in the forefront as the G20 and others are discussing a new architecture of the world, to make sure that we do regulate the financial markets and it is not the other way around; to make sure that indeed we create the necessary institutions to objectively assess developments around the world such what is happening with the rating agencies, another example I‘d like to touch on drawing from my experience.
Rating agencies are more of a follower than leaders. When there was the bubble, they gave banks triple-A ratings. When governments were trying to make changes, they downgraded them; after they had made changes, they would just go on with their business. So they are simply following the crowd. That’s not what we want. We want to create policies where we can change, we can encourage and introduce change, we can guide change towards our collective goals.
So our message to the G20 is that we wish for commitment, we want decisions, we want action now. We want to have reforms implemented. And this is something which both we and the International Trade Union Confederation will be working for together.
We need to prioritize development assistance, not compromise the Millennium Development Goals, and we will be here in September, as many of us will be fighting for this in our respective capacities.
As for fundamental principles of equity: there will be, for example, a lot of discussion about the fact that large segments of the world population do not have access to formal financial services. But while this is very significant, let us not forget that there are even larger segments of the world’s population that do not have access to health care services, basic education, clean water, sanitation.
Let us not forget that groups, such as women, migrants and refugees, are denied access to fundamental rights. Let us not forget that we need a fairer and wider burden-sharing in this time of crisis, and that the goal to finalize the so-called replenishment talks by the end of the year should be achieved.
Let us also not blink when we have to deal with some of the world’s big interests; when we have to take on, if you like, the great vested interests that very often remain non-transparent, such as tax havens and speculators. There is a lot of money. This is one thing we were taught through the 2008 crisis. There is a lot of money circulating around the world. We forgot about the millions; we started talking about billions, and then discussed in terms of trillions.
There is a lot of money in the world but it is stashed in tax havens or hidden behind opaque financial services. We need to set up more transparent institutions, but we also need to make sure that money coming out of the productive work of our nations and our peoples is being taxed. We have, indeed many of us do have, debts, some in developed countries, others in developing countries.
But we need to tax money that does exist, the huge amounts of wealth moving around the globe, often too quickly, changing economies, still not being taxed.
This is why we socialists also advocated a Tobin tax –which is currently called a ‘financial transaction tax’. It was initially thought of by J. Tobin and was meant as a tax against speculation, but now it is also considered as an important source of possible new revenue.
This new source of revenue, if imposed within the confines of the European Union alone, where we discussed this issue only a few days ago, would signify a small tax of 0.05% on transactions providing Europe with approximately 200 billion euros a year.
This money could go to growth, not only for Europe, as we are implementing more austere programs at the national level; it could also go into changing Europe and the world and turning to the green economy. It could also go into sustaining or stimulating the economy, helping the developing world change into green economies or protect fundamental rights such as health, education and welfare.
We in the European Union have also been talking about green bonds or Eurobonds and possibly establishing a European monetary fund. These are new institutions and proposals which we believe could be helpful, so that we can intervene in the markets and we can be more effective in creating a more just world.
So our challenge today is whether we, our movement, can actively shape this new world. Let us choose to be guided by our common values and a common set of principles. Let us choose democratic institutions over populism, fundamentalism, and xenophobic policies. Or even over markets, for we want markets to serve our people and not people to serve the markets; we want to make globalization more humane.
Let us choose long-term sustainability over short-term profit. Let us empower our people to be actively involved in governance rather than passively accept. And the opportunity presents itself now, as around the world there is a common consciousness and understanding of the problems we have in common, be they environmental, employment or energy related. We all, in our respective fields, have similar, if not identical, agendas.
Moreover, we sense we are lacking in empowerment in dealing with those global issues. But that is where our movement has a role to play as our movement is global too.
That is the added value, the crucial added value of our movement at this historical point in time as we can turn these national, local or regional agendas into global agendas in this quest for global solutions and a different, more humane world. That is a challenge I believe we can live up to.
Thank you very much.