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One World, One Bank
The Global Bank
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Mohammad Kazem, Senior Economic Expert |
Capital has always been viewed as the main support for production and a
requisite for economic growth and development of countries. On the other hand,
capital aggregation, as a sign of economic prosperity and the driving force
behind economic and social development, has always been a concern of economic
policymakers.
One of the main characteristics of globalization is growth and development of
financial and credit markets to boost capital flow in the international
market.
This has led to qualitative and quantitative enhancement of financial and
credit systems throughout the world to increase international economic
potentials and pave the way for mobility of capitals and formation of free
capital markets as a support for economic development and prosperity.
Although globalization of financial and credit systems started in 1913 with
the advent of financial and credit markets and institutes, the current of
liberalizing capital in the international market gained new strength in the
concluding years of the 20th century after elimination of certain impediments
including improvement of the structure of financial and credit markets. So
that more than one trillion dollars worth of securities were sold outside
national borders and in international markets during 2003 alone.
Although efforts have been made by developing countries to attract foreign
investments through establishing specialized banks, taking advantage of modern
management methods and drawing up laws and regulations for the expansion of
financial and credit markets, there are still challenges that cause their
markets to be way behind existing economic realities of the modern world.
The first impediment is existence of big production and industrial
corporations that have taken unlimited loans for implementing their projects
from credit institutes and due to disruption of industrial mechanisms and
especially due to lack of competition in such corporations, they are not
capable of repaying those loans.
This has reduced trust of credit institutes in the return of their granted
facilities so that intensification of regulations has failed to end irregular
transfer of such capitals in developing countries. This phenomenon has also
led to increasing unwillingness on the part of foreign investors to invest in
such countries because in a free market economy, economic corporations would
have to attune themselves to international standards to win the trust of
investors.
The second challenge is related to limitations of foreign exchange dealings
inside the country. Enforcing forex rate unification policies and limiting
international capitals to stabilize domestic financial and credit markets
which are practiced in developing countries, are incompatible with the main
goal of globalization of financial and credit markets which is nothing but
establishment of free capital flow in the market.
This has led to imbalance between exports and imports. On the other hand,
changes in forex rate have caused fluctuations in forex interactions with the
outside world. On the opposite, a floating forex rate in developed countries
has provided suitable grounds for establishing trade balance.
The third challenge is related to banking systems in developing countries,
which is responsible for shaping part of the monetary market and plays a
pivotal role in the domestic economy. Such banks, most of which are state-run,
lack balance among themselves and if faced with any problem, they would use
the reserves of the central bank or would be supported by other banks. This
method compared to financial and credit structures of developed countries,
which support free capital flow, has been abandoned long ago and is considered
as an important hurdle to improvement of banking systems that prevents banks
from being competitive. Experience has proven that even if there were private
banks in such countries, they were subjected to the main pressures from the
central banks.
To eliminate such hurdles, economic experts followed suit with John Kins’ idea
to propose establishment of an International Central Bank. The bank would have
its own money like a federal bank, and would keep that money in the central
banks of other countries. That money could then be exchanged with all
currencies throughout the world at a fixed interest rate.
The International Central Bank can make up for the difference between
currencies and financial and credit institutes would be able to receive their
disbursed money in the form of a creditable global currency. One of the main
advantages of this plan is supervision over liquidity turnover that can ensure
the success of any project in its preliminary stages. This will lead to
attraction of foreign investments to developing countries despite the shortage
of forex resources and will help them move toward industrialization especially
taking into account that the developing countries are currently in dire need
of attracting foreign investments to attune their economies to a globalized
economy. |
