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U.S. economic model challenged

Paris: German Chancellor Angela Merkel has challenged the U.S. economic model saying the world should examine the massive debt accumulated by the U.S. and other economic imbalances instead of focusing only on problems caused by financial markets.

She was speaking at a conference on the future of capitalism organised jointly in Paris by French President Nicolas Sarkozy and the former British Prime Minister, Tony Blair, and which 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.

Mr. Sarkozy, opening the two-day conference, blamed financial speculators for encouraging a system fuelled on debt. He called financial capitalism based on speculation “an immoral system” that has “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.

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. 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 entitled ‘New World: Values, Development and Regulation’ was downgraded to a conference with no decision-making powers after the Czech Republic, which took over the EU’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 — only Liberian President Ellen Johnson-Sirleaf was present on Thursday.

India’s Commerce Minister 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,” said Mr. Kamal Nath.

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