Financial Crisis: An Eye Opener

1. The devastating impact of the financial crises in the last decade on the world's most vulnerable populations has really been a concern shared by governments and citizens all over the world. The impact of the crisis only shows how globalized and closely interdependent our world today is. Indeed, the dark shadow of these crises is likely to frustrate efforts made so far to help reduce poverty and only add to the skyrocketing numbers living in extreme poverty.
   
   
2. The current debt crisis in Greece is seen by many as another looming problem for world markets. As Greece inches closer to the brink of financial collapse, fear that the crisis will spread is engulfing the world once more, particularly with apparently similar problems in Spain and Portugal where their debt relative to GDP has reached a critical level. Indeed, predicting where and when the next ripple will be felt is an inexact science. During the Asian crisis in 1997, Russia’s debt default took the world by surprise. Though the scale of the impact of the Greece crisis might not be as widespread as many expected, it nevertheless can still disrupt the on-going recovery process of many countries from the 2008 US financial crisis.
   
   
3. A crisis sometimes brings with it “good things”. A blessing in disguise which is needed to help us reveal who we actually are and what have gone wrong with what we have done so far. But most often, a crisis can also give birth to all kind of unwanted events, such as internal conflicts, misunderstandings, injustices, protectionism, war, deeper poverty, etc.
   
   
4. The worldwide financial breakdown has, as we know, demonstrated the fragility of the present economic system and the institutions linked to it. It has also shown the error of the assumption that the market is capable of regulating itself, apart from public intervention and the support of internalized moral standards. This erroneous assumption is based on an "impoverished notion of economic life as a sort of self-calibrating mechanism driven by self-interest and profit-seeking.
   
   
5. Crisis after crisis the world has experienced for the past decades has undoubtedly shown the bad side of economic globalization, which virtually affects the daily lives of peoples from different walks of life.
   
   Globalization: Is It Bad or Good?
   
   
6. However, the dynamics of globalization often remain difficult to understand. For example, are economic inequalities between various countries and regions caused by globalization, or are they due to the poorer nations not entering sufficiently into the globalized world? Thus, an understanding of globalization is rendered difficult in part because of our being caught up in a process that is still developing, and whose outcome is unclear.
   
   
7. Globalization in itself is neither good nor bad, but that its impact will depend on decisions made by us. Globalization must be seen as a process, not as an end, to attain global prosperity based on justice and equality. Therefore, governing economic globalization calls for wisdom, not just empirical data of economic growth and fundamentals.
   
   
8. Furthermore, economics has an essentially ethical nature as “an activity of and for human beings.” Rather than a spiral of production and consumption in view of narrowly-defined human needs, economic life should properly be seen as an exercise of human responsibility, intrinsically oriented towards the promotion of the dignity of the person, the pursuit of the common good and the integral development – political, cultural and spiritual – of individuals, families and societies.
   
   
9. A common ethical foundation to guide economic globalization, therefore, would be based on our universal human nature. In the face of globalization we must be reminded of the globality of human nature and of the need for a universal solidarity between all peoples.
   
   Economic and Social Dimension of Globalization
   
   
10. From the perspective of many developing economies, such as Indonesia, globalization must not only focus narrowly on the economic aspects of current global interconnections, which have been broadening and deepening, particularly in the areas of trade and finance. Markets, which are opened up and “freed” from barriers that have been standing in the way of market efficiency – such as the recent ASEAN-China FTA – have been relied upon to produce gains in material welfare.
    
    
11. Globalization should not be equated with a market economy ideology that insists on markets as “the only factor to consider in structuring lives and institutions”. It should not look at the world moving forward only if it is molded in the image of market practices drawn from the world of business, which leaves little scope for any dimension other than the purely economic. A more comprehensive concern for social issues, such as “human security and development” must be given stress through cooperation and the promotion of social justice.
    
    
12. We should not forget that the same world that could find, within a few weeks, trillions of dollars to rescue banks and financial investment institutions, has not yet managed to find 1% of that amount for the needs of the hungry – starting with the $3 billion needed to provide meals to school children who are hungry or the $5 billion needed to support the emergency food fund of the World Food Program.
    
    
13. We have also had clear reminders from financial markets in recent years, such as a crisis in the US financial system in 2008, that there is more to a market competitive system than these narrow, strictly economic values and principles.
    
    Wealth vs. Virtue in Globalization
    
    
14. Indeed, at the bottom of any market competitive system are money and credit, both of which are based essentially on faith and trust. But, these flourish in the final analysis only within an ethical culture, which calls for virtue, and among others, the golden mean and a system, whether formal or informal, of checks and balances. Thus, self-interest is balanced by the common interest, and the invisible hand of markets by the more visible hand of a public regulatory authority.
    
    
15. The ugly consequences of focusing (rather narrowly) human development on real GDP growth, personal welfare on efficiency gains, international relations on the economic dimensions of free and open trade as well as of financial flows have given globalization a bad name. Rather than to bank upon the “genius of the and” (complementation and cooperation), it has allowed the world to be hemmed in by the “tyranny of the or”. It is either the rich developed economies or the poor developing ones that benefit.
    
    Imperative of Justice and Equality in Globalization
    
    
16.  Experience has shown that market forces, for all their efficiency, can be blind, particularly to the broader dimensions of human welfare and personal security. They also lack sensitivity to the demands of social justice and equality, thereby widening the cleavage and increasing the disparity between income classes and social groups. Let alone on itself, market will not be able to self-regulate. It still needs the present of government and other regulatory agencies.
    
    
17. A new globalization requires a new culture that can orient the changes. This "new culture" consists both in discerning the positive cultural elements already in existence, and in proposing new cultural elements. Discernment is needed in order to avoid accepting a vision of globalization that sees itself as part of a postmodern process in which liberty is given an absolute value and a place for tradition and moral principles is denied.
    
    
18. As part of re-discovering a new culture for a new globalization, the current crisis obliges us to re-plan our journey, to set ourselves new rules and to discover new forms of commitment. Re-planning the journey also means looking to comprehensive and objective standards against which to judge the structures, institutions and concrete decisions which guide and direct economic life.
    
    
19. These principles have an ultimate source in a universal natural law. And thus, "the principles of this ethical order, inscribed in creation itself, are accessible to human reason and, as such, must be adopted as the basis for practical choices. As part of the great heritage of human wisdom, the natural moral law serves as a beacon guiding the efforts of individuals and communities to pursue good and to avoid evil, while directing their commitment to building an authentically just and humane society.
    
    
20. On this premise, first, we need to propose a culture based on the fundamental principles, such as the universal destiny of earthly goods and the common good, grounded in respect for the dignity of the human person and acknowledged as the primary goal of production and trade systems, political institutions and social welfare.
    
    
    Humanizing Globalization: Solidarity and Subsidiarity
    
    
21. It has become increasingly evident that the common good embraces responsibility towards future generations. An essential aspect on globalization is, therefore, the promotion of the principle of solidarity. A global solidarity that must be recognized as a basic ethical criterion for judging any social system and will ensure all peoples can benefit from the economic globalization. Solidarity consists in making ourselves responsible for the welfare of others. It is more than compassion or sentiments, as it calls for a full reciprocity in human relationships.
    
    
22. These realities point to the urgency of strengthening the governance procedures of the global economy, albeit with due respect for the principle of subsidiarity. This means avoiding an excessive concentration of power at higher levels, such as the government, and allowing institutions such as the family, local communities, NGOs, and ethnic groups sufficient autonomy to carry out their functions in the process of globalization.
    
    
23. Globalization, therefore, needs to be a process guided by respect for human liberty. A globalization thus oriented by these two principles will result in a harmonious unity of the human family. The government has the responsibility to promote and safeguard the implementation of these two principles.
    
    The Role of Religion in Globalization
    
    
24. On this premise, Indonesia – regarded as the third largest democratic country after the US and India – has been quite successful in safeguarding the human liberty or freedom in its early life of democracy. Being also a country with the largest Moslem population, it is an opportunity for Indonesia to demonstrate to the world that Islam – being the source of morality, and democracy that respects human liberty are compatible and complementary.
    
    
25. When we talked about Islam we cannot avoid of talking about religion that carries a universal moral law needed to guide the process of globalization. Therefore, Indonesia can offer a unique solution to the many problems of globalization by actively proposing the common universal values of the world religions as a foundation and source for a more human-friendly globalization.
    
    
26. In our increasingly globalised world, we do have the economic values and principles that underlie a market competitive system on the ascendancy. Self-interest, an invisible hand, efficiency and effectiveness, focus on the bottom line, and the valuation of market capitalization are a few of the many cherished principles that have been preached from the citadels of market capitalism. And the main value has been to multiply income and wealth in record time, if not for everyone, at least for those at the entrepreneurial cutting edge of high-flying corporations.
    
    
27. Being ethical sometimes boils down to an ability to manage the tension between self-interest and what is good for the group or community in which we live or work. More broadly, being ethical means having to manage tensions between right and wrong, between good and bad, between what is laudable and reprehensible. It is here, where we as a global community need to have an agreed code of ethics that should probably not only cover the economic and financial facets of a competitive market system, but also address and strengthen the infrastructure of faith and trust so fundamental to any society.
    
    
28. It is in this context, the role of – and the compatibility of – religion and politics, faith and democracy, virtues and wealth in Indonesian society becomes very relevant to be the model of a new globalization framework. The spiritual dimension is very fundamental to convert a very secular globalization model into a new globalization with a human face.