Strategic Panorama 2009 - 2010 - IEEE

Eduardo Serra Rexach
painful, lesson to the international community: that governments’ wellmeaning
attempts to protect employment and counter the fall in activity
actually resulted in greater unemployment and poverty, which were an
excellent breeding ground for nationalism and the world war that ensued.
This underlines the very positive effects of the WTO’s efforts, as does the
fact that it is precisely the non-member states which are most hampering
the proper working of the organisation.
There are other players beside the WTO involved in the current struggle
to keep protectionism at bay. Globalisation itself has acted effectively
against it: multinationals which import intermediate products, for which a
rise in tariffs signifies greater costs, have acted as pressure groups against
protectionist measures. Steinberg is thus strongly in favour of concluding
the Doha round.
The author goes on to discuss the debates which have arisen as a
result of the economic crisis and basically studies three:
1) The first involves exit strategies, that is, how and when to withdraw
the huge monetary and fiscal stimuli put in place to offset the fall in
private demand. The problem is that if these stimuli are withdrawn
too soon, it is possible (as occurred after the crisis of 1929) that the
global economy could again collapse; the risk is the opposite if the
stimuli are maintained for too long, as this would cause public deficit
and debt to rise to stiflingly high levels leading to a new asset
price bubble. There is a certain amount of agreement that they
should not be withdrawn until the middle of 2010, although the difficulty
of pinpointing the most appropriate moment is recognised.
The other question is which stimuli to withdraw first, fiscal or monetary.
Steinberg is in favour of starting with fiscal stimulus as a rise
in interest rates would hamper recovery. Basically, we need to start
«handing over» to the private sector, but maintaining credit facilities
for a time.
2) The second debate is partly linked to the previous one as it refers
to the gaping hole the measures to overcome the crisis have left in
public coffers. The author, with good judgement, holds that uncontrolled
growth of debt is always very dangerous but will be even
more so in the coming years as the post-second-world war babyboom
generation begins to retire. He believes that this requires
action on two fronts:
a) Institutional reforms to ensure fiscal consolidation by guaranteeing
high budgetary surpluses during an expansive period.
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