HONG KONG, March 24, 2011 – “I don't have the answer to what kind of financial system we’re going to have, but I am very clear that we are... already moving into a completely new world,” said David Mulford, Vice-Chairman International of Credit Suisse, on the the uncertain direction of world's economic system.
Speaking at the Asia Society Hong Kong Center, Mulford — former U.S. ambassador to India — said that the 2008 global financial crisis was not only a calamity in the Western banking system, but a macro-phenomenal crisis that impacted the entire world.
“I would place it in a category of importance roughly the same as the end of Second World War and the 1971 crisis with the IMF and the dollar-gold link,” he said.
Mulford claimed the crisis fundamentally changed the relationship between the developed world, including the U.S., Europe and Japan, and the developing world, namely Brazil, Russia, India and China. The crisis has given developing countries an unexpectected opportunity to grow and potentially shift the balance of global economic power.
The U.S. and Europe are faced with major problems and are no longer in a position to provide leadership to the world, said Mulford. Without Western nations taking charge, the lack of a solid framework of global leadership creates instability and uncertainty among economies.
While nations have collaborated to create global leadership networks, bodies such as the developing G5 and the industrialized G7 have since been replaced by the eclectic G20. Mulford criticized G20 as too large, rendering meaningful dialogue impossible, and that it was unable to take collective action against what he considered the world’s single biggest issue — imbalances of economic power and leadership.
“When I was in the business, I actually got to the point where I felt that if you had more then 21 people in the room, you couldn't get things done - you simply can’t,” he said.
Emerging countries such as BRIC (Brazil, Russia, India and China), were becoming bigger players in the global economy, said Mulford, but were not displaying the kind of forceful, effective world leadership needed to deal with global structural problems.
“In the present world, the new players... are not stepping into the system yet to provide or embrace leadership.”
Reported by Jeremy Kim, Asia Society Hong Kong Center