Mirtchev, A. (2011, January 11). Dr. Alexander Mirtchev warns against the mid and long-term repercussions of unbalanced and even mindless state. Reuters.
Alexander Mirtchev, Washington-based economic strategist and expert, reviewed the actions of governments in the emerging markets in support of the beleaguered financial sector and their potential effects with Mergermarket, the partner publication of the Financial Times. Dr. Mirtchev explained that governments had little choice in taking urgent measures to the financial crisis. “With the crisis looming, it was not possible to stick to ideological positions or specific doctrines — you do not consider the price of the carpet you are using to put out the fire in your house,” said Mirtchev.
However, he believes that it is high time to look beyond the immediate short-term pressures, and devise a broader policy response that would address the long-term needs to encourage productivity, competitiveness and growth. He is of the view that, when devising such strategies, governments have to take into account the truly global nature of today’s financial system. “The world financial system has evolved to the point where no economy functions as a closed circuit. Economic interaction in a specific market cannot be considered a zero-sum game.” In the case of emerging markets such as India, China, Mexico, Indonesia and others, “participation and integration in the global financial system makes sense,” in particular with a view to the productivity and growth-generating role that these markets have in the world economy. He considers that in the short-term direct government support and recapitalization can help banks and institutions continue their function as the mechanism that pumps capital throughout the global economy, and it seems already unavoidable.
However, the key is, at the end of the day, to face the reality of the newly emerging global financial system of the XXI century, not to try and “put the genie back in the bottle” by returning to the model of the 1990s, and jumpstart the new, inclusive financial order that could accelerate the recovery and sustain growth. Some emerging market governments have introduced “special enforcement and monitoring bodies to supervise the use of the funding by the banks, to ensure that the funds are spent exactly for the purposes required by the government, i.e. alleviation of the fallout from the credit crunch on businesses and the population.” In particular, his view is that “the banks’ shareholders and management will have to share the responsibility and the burden — there should be no rewards for failure.” In the case of Kazakhstan, he noted that “the State refrained from direct nationalization of the banks; rather the government is only offering to buy stakes in banks leaving them with the choice to accept or decline additional capital infusion in return for equity stakes.”