The weekend’s finance minister meeting in Washington DC seems to have been quite different from its predecessors. Not only did they apparently have an ‘informal brainstorming session’ at one point, but they also found themselves confronted with two major and on-going crises:
• We have to ‘put food into hungry mouths’ commented Bob Zoellick, President of the World Bank. He added that “throughout the weekend we have heard again and again from ministers in developing countries and emerging economies that this is a priority issue.”
• At the same time, the rich countries wanted to focus on the global credit crisis. According to the New York Times, some Western finance ministers ‘appeared to be self-conscious about how much of the attention at the meeting has focused on the global credit crisis, while there was less focus on the problem of feeding the world’s poor’.
I remarked back in July that central bankers were in danger of ‘fighting their last war, rather than preparing for the next one’. And I questioned ‘their continued reluctance to recognise that higher food and energy prices are here to stay’. Equally, in a letter to the Financial Times in September, I suggested that the scale of the subprime crisis was much greater than generally accepted, and that the sums of money required to stabilise the situation would require “‘a buyer of last resort’, such as the Federal government, to emerge".
The problem is the slowness with which central bankers are waking up to these seemingly obvious truths. For this reason, one must applaud Dominique Strauss-Kahn, the new IMF MD, for pointing out the risks of further delay, even at the risk of seem to over-dramatise. He noted that ‘the food crisis posed questions about the survivability of democracy and political regimes…(and) sometimes those questions lead to war’.