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Merkel challenges U.S. economic model

Paris: German Chancellor Angela Merkel on Thursday challenged the U.S. economic model saying the world should examine the massive debt accumulated by that country and other economic imbalances instead of focussing only on problems caused by financial markets. She was speaking at a conference on the future of capitalism jointly organised here by French President Nicolas Sarkozy and the former British Prime Minister, Tony Blair.

The meet brought together economists, heads of government, and leading members of civil society. India was represented by Commerce Minister Kamal Nath. Nobel Prize winning economists Amartya Sen and Joseph Stiglitz were among the speakers.

"An immoral system"

Opening the two-day conference, Mr. Sarkozy blamed financial speculators for encouraging a system fuelled on debt. He called financial capitalism based on speculation "an immoral system" that had "perverted the logic of capitalism."

"It's a system where wealth goes to the wealthy, where work is devalued, where production is devalued, where entrepreneurial spirit is devalued," he said.

The difference

Ms. Merkel singled out the American budget deficit and China's current account surplus — the difference between exports and imports — as problems upsetting the global economy. "We would be making an error if we were content to look solely at financial markets," she said.

In a severe critique of policies adopted by most governments including the U.S. and several European states — Germany has stubbornly refused to follow the British and French example of injecting massive doses of taxpayer money into expensive bailouts — she deplored huge debts that governments are accumulating to spend their way out of the present crisis. However Ms. Merkel conceded that there seemed to be "no other possibility" for the moment.

France's ambition

This conference is a reflection of France's ambition to create a new model for capitalism in the aftermath of the global financial crisis. Initially billed as a summit, the Paris meeting titled "New World: Values, Development and Regulation" was downgraded to a conference with no decision-making powers after the Czech Republic, which took over the European Union's six-month rotating presidency on January 1, expressed some irritation at continued French grandstanding. Mr. Sarkozy wants to play a continued leadership role in the eurozone. As a result of the downgrading, very few world leaders chose to attend — in addition to Mr. Sarkozy and Ms. Merkel, only Liberian President Ellen Johnson-Sirleaf was present.

"Change investment pattern"

Mr. Blair told participants that investment patterns must be changed.

"We must invest in the future," Mr. Blair said, and called for funds to be put into renewable energy, science, innovation and education.

Mr. Kamal Nath criticised subsidies offered by developed countries, especially in the agricultural sector, as a factor that prevented a just and homogeneous development of globalisation that was inclusive. He described "ensuring distributive justice" as being "one of the biggest challenges" facing India. "We have to look at globalisation as calibrated globalisation and talk about flaws in the system," Mr. Kamal Nath said.

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