Alternative institutional frameworks at national and supranational level
Social welfare expert, Hungary
Please cite the paper as:
László Kulin, (2018), Alternative institutional frameworks at national and supranational level, World Economics Association (WEA) Conferences, No. 2 2018, The 2008 Economic Crisis Ten Years On, 15th October to 30th November, 2018
This paper has been included in the publication
“The 2008 Crisis Ten Years On: in Retrospect, Context and Prospect Paperback”
National economies of different countries faced a set of new challenges due to global crisis. Such a significant financial problem in history like the one in 2008 occurred only in the case of Great Depression in1930. Back then President Franklin D. Roosevelt and his professional experts developed “New Deal”. It helped frozen financial markets in the USA get going. The main point of the scheme was to carry out Works Progress Administration by state orders. People managed to earn and spend money. Financial market slowly started operating again, money gained its former purchasing power. The problem is that the above mentioned system worked properly only in case of a closed economy, like the one in the USA in those years. Since then 90 years passed by, and the world has changed. We are living in the era of globalization. National economies are not separated but interoperable. Any firm can move its production, logistics, etc. into other countries. This is the reason why successful companies often establish subsidiary companies and creates jobs in other countries. It creates two problems: i) It generates tension in the voters of the motherland of the company, voters may drift apart from the political parties, ii) The system (i.e. the budget of the motherland) may not be financed. Taxpayers pour their money into a bottomless pit. Profit of the companies flow into other countries, and strengthens their economy.
To find a solution, allocation of financial assets will appear as an activity in the new economic structure. It is an important task to regain trust of the investors. Investors want to reach security with the biggest possible profit. I believe that the investor of the 3rd millennium prefers security to quick profit, as this security will be the token of future profit. In the language of the stock-market: The stock dog has to stay next to the legs of the keeper. It cannot run forward, cannot overtake the keeper. Indeed, international financial markets, even if temporarily, must be taken under a common regulation, meaning financial markets must be closed. By regulatory factors money flow can and must be controlled.
Thanks for your sharing yourd proposal about GOFAM– Global State Financing Model.
I would like: Has your proposal been partially inspired in Keynes´s ideas about the reorganization of the international economy?
The Great Depression of 1929-1933 shook the trust in the market of self-regulation. John Maynard Keynes emphasized that economic activities of a state are essential criteria for the stability of societies. His theory was successfully applied by capitalist societies.
While writing I was inspired by Keynes’s economics to a certain extent, as his theory gives answer to a crisis situation. Mine is also an answer. I presume that economic crises may return periodically (even after 90 years), only at a higher, global level.
GOFAM (Global State Financing Model) is – following Keynes’s guide – the harmonization of responsible economic activities of the nation-states, based on the principle of volunteering.