Capitalism is a whole indivisible system

The financial storm is, hopefully, to be calm. It is therefore time to guard against the possible return of events also serious. It denounced here and there the evils of financial capitalism. As if it was sufficient to remove to the virtues of a pure capitalism, capitalism of entrepreneurs. This conviction has little meaning: the distinction between the real economy and financial economics is convenient but unfounded. Capitalism is a whole, indivisible system.

Probably remember two well-established truths. The first is that an economy is developed, more important is its financial dimension. To simplify, not separable, Bank and industry go hand in hand. For a clear enough reason: a developed economy uses lots of capital and is growing at the rate of its innovations, i.e. risks taken. However he returned to the financier to meet savings and investment, to select the risks, ensuring the division and, in so doing, to provide entrepreneurs the necessary resources. This function is irreplaceable.

The second truth arises from the historical experience and reasoning. Any financial system left to itself eventually make bankruptcy. The moral is here superfluous. Be described as "greed" or "greed" desire to enrichment which is the engine of economic life does not advance the thinking of one iota. The financial system is exposed to the permanent skid temptation because receipt of interest, triggered by taking risks, precedes in time the sinister possible. The recipe comes before expenditure and this movement has been pushed to the extreme by the technique of "securitization of credits". Recklessness is rewarding, at least in the short term.

So appears the Central contradiction: a modern economy cannot do without a financial system that is both a growth belt and a deadly danger. That the financial system is public or private does not change the matter: history is rife with examples where risk taking influenced by political criteria has proved as disastrous as that inspired by the research of fast profit. In a Word, the financial system must be neither deleted, nationalized, or hope (the word is inappropriate) but regulated. I mean that the risk must there be put under control by an independent authority, whose mission would be to prevent any systemic destruction.

This need is all the more strong finance is now globalized. Cause and consequence of the globalization of the economy, the financial system covers all the planet and its main actors are global. Where a major accident occurs, damages extend everywhere. If nothing is done after the current crisis (which seems sadly possible) the next will be inevitable and, more violent again, flying too low defenses.

How to do The task is primarily conceptual. It is immense. Translate operating rules of the General principles of comprehensiveness (all Al institution risk shall be regulated), transparency (all risky portfolio must be published), validity of estimates (any rating agency must approve its methods), robustness of accounting standards, the solvency and liquidity of the system, protection of division of risk, this considerable work require time and considerable expertise. It is not with a Summit of Heads of State and two meetings of the Finance Ministers that it will be done.

We badly need a global design agency from which nothing useful will be. Today, it does not exist. How to talk of a global regulation that no one has the responsibility to draw Assign this role to the IMF, which has more today real function and where are all of the world developed or emerging countries, would be a good idea.

Establish standards accepted by all is just a first step. Then, should be their correct application is controlled by gendarmes, I want to say of the regulators. Financial activity of the world, related to its level of economic development, is concentrated in more than three-fourths in the United States and Europe. The US regulator exists, but its grip on American finance is, as the "subprime" crisis has shown, very imperfect. Non-accidental grounds: the free market has developed its excesses from solid protection ideological against the very idea of regulation. Put an end to this central disorder implies a dialogue without concession between global standards (thus the IMF), the American regulator designer and his European colleague.

But the latter does not exist. More exactly, it is embodied in many avatars as sovereign States, or twenty-seven for the only countries of the European Union. No authority together them under its umbrella, but a vague seeming coordination which stops before the narrow nationalism of place gate. Believed that also crumbled regulation can be effective Believes can negotiate to twenty-seven with America Hence the second proposal: it is urgent to establish a central European regulator to balance transatlantic dialogue and therefore the market itself.

Manufacturing standards, control of their application, these first two branches do not cover all the subject. What to do if, despite these precautions, the foundations of the financial system are undermined by some accident The provision of liquidity by the central banks is not enough, seen, to combat the mistrust. Last resort, only the public signature can return confidence disappeared. This inevitably raises the question of the report of size between large and increasingly internationalised financial institutions and their State of origin, possibly modest, which is today the only guarantor of their sustainability.

Here again, need to pool resources and signatures at the European level. I think necessary, third proposal, the creation of a Fund of intervention under the authority of the central regulator, fed by an assessment levied on all actors in the financial sphere and agreed, if necessary, by the public power.

What mess was to see Europe too long broken and helpless in the crisis, despite its common currency. Design standards, control of their integrity, sanction of their disrespect, means of public intervention, no serious regulation of financial capitalism is conceivable if these chapters are not properly written. It is time to get together.