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At a lively November Forum event moderated by Graham T. Allison, Kennedy School economist Jeffrey D. Sachs and financier George Soros, founder of the Open Society Institute, agreed that the world''s financial system is failing the majority of the world''s population. Both stressed that those who have benefited most from technological and economic progress need to do much more to help those who are being left behind.
Soros, author of Open Society: Reforming Global Capitalism, focused on the need for a new international financial architecture to fix the current "crisis prone" system. He said that because of a misguided response to the Asian crisis of 1997— weakening rather than strengthening the international financial institutions (IFIs)--the next crisis in the global system would be a result of too little rather than too much investment in developing countries. Soros told the audience that old IFIs like the International Monetary Fund (IMF) are simply not suited to the task of ensuring that all countries successfully "make the transition from closed, inefficient economies to modern, open economies."
Sachs, Director of the Center for International Development, focused his remarks on the plight of the world''s poorest people, the more than one billion people who are "falling off the edge of survival." He strongly condemned the failures of the current system: "Our response has been, just pull yourself up by the bootstraps, and if you''re having any difficulties, call the IMF." He compared the IMF with British colonial institutions and said that its main purpose was to keep the world''s poorest off the backs of U.S. taxpayers. Sachs even told the audience that, if debt relief is not quickly forthcoming, he supports unilateral defaults by the world''s very poorest nations.
From this standpoint, Sachs defended his controversial role in the recent Meltzer Commission. He argued that the Commission''s attempt to focus the World Bank on poverty reduction rather than investment would do more for the world''s poorest and he maintained that the private sector is the proper vehicle for providing the investment and technology necessary for economic progress. Soros disagreed with the Commission''s recommendations, saying that proposing to scale back the IFIs was exactly the opposite of what is needed.
(David Pass contributed to this article.)