The global financial crisis that has engulfed nations across the world has brought renewed focus on the oligarchy of multinational financial institutions driven by the sole objective of maximising profit without caring for the negative consequences or strong downside to their activities. Derivatives, hedge funds, financial futures, credit default swaps, and similar financial instruments emerged from the turmoil of the 1970s after the oil shock, double digit inflation in the US and the fall of 50% in the US stock market. The finance industry created these instruments as a means of managing risk. Then people started making money buying and selling these instruments on the open market in ways never seen before. As people became successful quickly these financial instruments were used not to reduce their risk but to take on more risk in order to make more money. Greed started to kick in. Corporate houses started getting into activities that were not part of their core businesses.

The most recent sub prime crisis that was the immediate cause of the global financial meltdown came about largely because of financial instruments such as securitization where banks would pool their various loans into saleable assets, thus offloading risky loans on to others. Commentators4 have described how rating agencies were paid to rate these products (could this have been a conflict of interest?) and the invariably good ratings these products received encouraged people to buy them. Banks borrowed more money to lend out so they could create more securitization. Some investment banks started buying mortgages in order to securitize them and then sell them on. Once again, securitization began as an attempt at managing risk but when greed and unethical practices took over the whole process boomeranged. At the first whiff of difficulties relating to the way in which the banks had over-extended themselves, public confidence started falling rapidly. Lending slowed, investors stopped buying, asset values plummeted, individuals wanted their money back. This led to the collapse of some of the world’s largest financial turned institutions, who then to their governments for bail outs.

According to Bloomberg US dollars 14.5 trillion, or 33% of the value of the world’s companies have been wiped out in the present global financial meltdown. It is estimated that by February 2009, US taxpayers have spent around US dollars 9.7 trillion in bailout packages and plans. The UK and other European countries have spent close to US dollars 2 trillion on similar rescue packages.

Look at the irony of the situation. To quote economist-writer Anup Shah, this is a ‘crisis so severe, those responsible (for it) are bailed out’! ‘Money is flowing to those who caused the problem, rather than to the victims’- Nobel Laureate Joseph Stiglitz. It is no less surprising to see that some senior economic advisers with the previous US Administration, under whose watch the global financial meltdown began, are continuing in various advisory capacities with the present US Administration. At the other end of the economic spectrum, however, the average individual, the common man is suffering because of unemployment and job losses, the bursting of the housing bubble, the inability to make mortgage payments, soaring commodity prices, stock market volatility and failing consumption which leads the downward spiral in economic activity. For this avoidable anguish and suffering, there is no one ready to take responsibility,* no accountability at all. To add insult to injury it is this ordinary taxpayer who has to pick up the tab for the financial bail-outs I

In this era of globalization the adverse fallout of this global financial crisis have been rapidly transmitted across frontiers and oceans to impact the lives of millions of poor people in developing countries. In today’s interconnected world nobody is immune from such consequences, no matter how poor you are and how uninvolved and distant you are from the world’s financial markets. The knock-on effects from the financial instability and uncertainty in industrialised nations that have been particularly debilitating for the poor have been higher food prices, higher fuel costs, declining market for exports, and increasing unemployment. The plunging value of many currencies has meant that the costs of essential imports including life- saving drugs and pharmaceuticals have risen inexorably.

What is worse international donor organisations are now facing the financial crunch. As a result the availability of resources for plans and strategies crafted to address global poverty, hunger, literacy, health and education, for example through the UN Millennium Development Goals, is also under threat. Developing countries remain crippled by huge debt burdens. Requests to the industrialised nations for debt relief or debt write-off have gone largely unheeded, even though in monetary terms the entire Third World debt is but a fraction of the amounts that have been made readily available for financial bail-outs over the last one year by these very same developed countries.

The ongoing global financial meltdown has already ignited fierce debates about the nature of the ‘free market’, its relationship with democratic governments, and the place and role of ethics in economic theory and practice. Economic theorists beginning with British economist John Maynard Keynes, considered to be the father of modern macroeconomics, have for long emphasised that unfettered markets cannot be self-correcting, some regulation is needed, and there is an important role for democratic governments to play in this regard, in order to avoid destructive cycles of recessions, depressions and booms. After the Great Depression of 1929 and after the Second World War Keynesian theories helped stabilise and rebuild the world economy. This worked until the first oil shock of the 1970s after which the Keynesian view of regulated markets were abandoned and the ‘free market’ system rapidly came into full play. For the next three decades the neoliberals vehemently held that unfettered markets are selfcorrecting, so governments need not intervene at all.

This belief has now been shattered. Nobel Laureate Joseph Stiglitz, describing the discussions in February 2009 at the annual World Economic Forum in Davos, noted that there was a "Striking ... loss of faith in markets. In a widely attended brainstorming session at which participants were asked what single failure accounted for the crisis, there was a resounding answer: the belief that markets were self-correcting115. Joseph Stiglitz goes on to say- ‘this crisis raises fundamental questions about globalization which was supposed to help diffuse risk. Instead, it has enabled America’s failures to spread around the word, like a contagious disease. Still, the worry at Davos was that there would be a retreat from even our flawed globalization and that poor countries would suffer the most’. Ironically, those countries that did not fully liberalise and reform their capital and financial markets, such as India and China, have been spared the major brunt of the present crisis.

The ongoing global financial crisis has led to much introspection and discussion about what is the best way forward in order to rebuild trust and bring growth back into the system. There seems to be unanimity on the need for regulatory reforms in the international banking and financial systems so-as to prevent risky financial practices and place, strong restraints on the build up of excessive risk. Inadequate competition and inadequate procedures to ensure transparency and accountability have been recognised as among the major causes of the systemic failure. Reform of the international financial institutions such as the World Bank and the IMF are being called for in order to give more voice and power to the emerging economies and the poorer countries. Worsening poverty for millions of the world’s poor is being recognised as an important impediment to the recovery of the world economy. In November 2008 when former US President Bush called for an emergency meeting to discuss the worsening global financial crisis, he invited not just the G8 group of industrialised nations but the much larger G 20, which includes the G8 and 12 emerging economies such as China, India, Saudi Arabia, South Africa, Mexico and Turkey.

The global financial meltdown has focused attention on the systemic breakdown in the world economic structures. This crisis coincides with several other major crises facing the world. There is the environmental crisis caused by global warming and degradation brought on by the irrational over-exploitation and pollution of the world’s water and other natural resources. Then there is the cultural crisis brought on by intolerance and the sharp rise in violent clashes, by the loss of traditional life-styles and value systems, and growing religious fundamentalism. There is also the crisis of security brought on by the alarming rise in extremist and terrorist activities, by the ever increasing national expenditures on armaments and the resultant control exercised by the military-industrial-complex, and the negative influence of the drugs mafia involved in the manufacture and trade of narcotics.

Is there anything that we can do, as individual citizens of our respective countries, to ameliorate and overcome these daunting challenges? The need of the hour is to go back to the man-centred economics, the village-centred approach that forms the core of the Gandhian philosophy. This means following the Gandhian ethic based on simplicity, self-sufficiency and self-reliance to be achieved through gram-rajya, sarvodaya and satyagraha, which has ahimsa as its core. Our first effort should be to imbue the younger generation with the Gandhian ethic, to convince them that there is something beyond the profit motive and the monetary incentive. Maximising Gross National Happiness should be considered as desirable an objective as maximising Gross National Product (GNP). This should be our contribution, the people’s contribution, as distinct from whatever policies the government-of-the-day in our respective countries is implementing.