HRH Prince El Hassan bin Talal
Transparency International
Global Transparency:
Fighting Corruption For a Sustainable Future
Athens, Greece
2 November 2008
Transparency, Interest Rates
& The Adjustment of the Global Monetary System
I want to start my remarks today by quoting an intellectual giant of
our time who celebrated his 81st birthday a few weeks ago. I am speaking
of Paul Volcker. He said that we are facing a serious problem restoring
trust and confidence while in a serious recession. I agree with him that the
global financial downturn is not comparable with the great depression.
Robert Zoellick of the World Bank has mentioned the ‘r’ word –
reconstruction – an international bank for reconstruction. I would add to
reconstruction, reconciliation and religion for those of you who are
interested in an ethical approach to some of the problems we are facing
today. I think it is important to bear in mind that in mobilizing for change,
and I quote Paul Volcker, “The recitation of particular market
vulnerabilities, of supervisory lapses, of failures to close gaps or end
disagreements among regulators is not surprising… The drumbeat of
lobbying pressure has not been for more effective supervision…”1. As a
member of the ECOSOC kitchen cabinet, I have called for the division of
ECOSOC into an economic and a social council2. I think that activities
relating to social equity – and I am a member of the international
commission of the Legal Empowerment of the Poor – has not, unfortunately,
been moving to the drumbeat of economic achievement or development. In
speaking of my own part of the world, I would like to refer to a recent
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2
Remarks by Paul A. Volcker at a luncheon of the Economic Club of New York, New York, 8 April, 2008
The United Nations Millennium Development Goals as Global Common Goods, HRH Prince El Hassan bin Talal, United Nations
Millennium Development Goals Awards, United Nations, September 12, 2008.
McKinsey Report3 and my address to the Global Compact Summit in July
2007. The Global Compact, to my continuing surprise, includes
governments and the private sector but does not, other than on the fringes,
address the theme of bringing governments and the private sector together
with civil society in the context of an overarching thematic mission for
redirecting multilateralism. That is the theme I want to address.
What worries me especially about McKinsey's positive economic outlook
for the MENASA region is that we are currently seeing a sharp slowdown in
the Persian Gulf economies reverberating in the Middle East. I note that the
UAE recently injected $30 billion into its banking system in guaranteed
bank deposits – and similar injections of finance continue in every Gulf
country. Meanwhile, Prime Ministers from Gordon Brown to other Western
Prime Ministers, have been visiting the Gulf countries hoping to raise
monies to finance the global economic adjustment from the region's
Sovereign Wealth Funds. What is interesting to note in the MENASA
Report by McKinsey is that there is absolutely no reference to key elements
of what you would consider geographically to be the Middle East, North
Africa and South Asia. That is to say, the nations of Israel, the Palestinian
Territories, Bangladesh, Sri Lanka, Yemen, Syria, Sudan, Iran and Iraq,
which are geographically part of the MENASA region, are not included in
the McKinsey analysis. So presumably MENASA to McKinsey only means
those that are regarded as serious countries by the Heritage Foundation
freedom rankings. Unfortunately, my politics and those of the Heritage
Foundation do not necessarily coincide on a scale of ten.
The time has come to recognize the basis of our problem. Different
perspectives would be acceptable in a democratic context, but the basis of
our problem is, in my humble opinion, that we face four simultaneous
macroeconomic shocks all relating to human dignity deficits:
 The International Energy Agency estimates that the energy sector
needs $22,000 billion over the next two decades to meet the rising
demand for energy
 The Stern Review says that we must spend $14,000 billion over the
next twenty years to cut carbon emissions
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Perspective on the Middle East, North Africa and South Asia (MENASA) region, McKinsey & Company, July 2008
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 Thousands of analysts claim that we need an immediate capitalization
of the global banking system on the order of $1000 billion, and
probably far more during the next two decades
 The United Nations indicates that the Millennium Development Goals
require $1100 billion in promised foreign aid and another $1100
billion in newly generated funds to end poverty and related problems
over the next seven years, and then much more after 2015
Presumably all of this is going to come from the milch cow of our
traditional sources of funds. We, the people of the region, live in the
hinterland of oil, so when you speak about the Extractive Industries
Transparency Initiative, what is important to me is not only the pipelines,
but the people living in the neighbourhood of the pipelines. Presumably, all
the recent political fuss about Darfur is not only related to poverty. I was
working with lepers in Darfur in 1986 when nobody had heard of Darfur. I
assume that this new attention to Darfur is also related to the fact that when
we are all vaporized by a nuclear confrontation in the region, thanks to this
marvellous pipeline, oil will still flow from the Horn of Africa to the
Atlantic coast.
The world is greatly in need of new revenue streams to fund our
massive deficits. None of this financing will be possible without a major
global macroeconomic adjustment which includes an intra-regional
conversation – intra-regional, ladies and gentlemen. Our region has an Arab
League and an Organisation of Islamic Conferences which meet once a year,
if that, to discuss everything and nothing. We have a UN Economic and
Social Commission for Western Asia which is somewhere between Beirut
and Vienna when it isn’t being bombed, and apart from that I don’t think my
region really has any quarterly meetings at all. If we fail to take on this
macro-economic adjustment on the basis of intra-regional governance – that
is to say we end the season of Dumbarton Knox and Bretton Woods and
begin a new season for ministers to meet and greet in Washington and New
York and also encourage them to meet in the Middle East region – then
presumably, we will start to generate authentic policies. But the bright side
is that this crisis provides the world with an opportunity to redefine the
relationships between energy, the environment, monetary policy and poverty
and maybe to undertake a total recalibration of our system.
The degree to which energy is related to monetary values is seldom
realized. Because oil is priced primarily in dollars across the world and has
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more direct influence on the value of currency than any other factor, the US
dollar is fundamentally linked to global crude oil as its de facto reserve base.
This has broad implications. Many people are now acknowledging the need
to internalize the external costs of environmental degradation and climate
change into the market system by setting a real price on carbon emissions.
The idea is that as consumers and businesses are forced to adjust their
practices and lifestyles by reducing their oil consumption, and businesses
find that investing in efficiency or alternative energy is cost-effective, they
will absorb most of the new environmental costs through higher prices.
William Polk wrote a splendid article4 the other day suggesting that as
the English were once called a nation of shopkeepers, we have all become
shopkeepers but jointly in terms of our consumption patterns. I would like
to add to that, as a promoter of DESERTEC5, a project for solar energy from
the Gulf across North Africa to Europe, it is almost impossible to talk about
greening that part of the world, which would mean, for example, a solar
energy power plant on the Egyptian side of the Gaza Strip. You can mend a
solar panel, but you can’t mend a hydro-carbon station. In connection with
the question of greening, I would like to mention that Juan Somovia of the
International Labour Organization recently wrote to the G8 calling for the
creation of green jobs in the region.
Let's say we begin today to decarbonize the global economy and
increase the price of carbon-based energy by curbing our appetite for oil,
developing alternative fuels and achieving energy efficiency through
technological advances. Even if every person and every business in the
world were to adopt clean and renewable sources of energy right at this
moment, petroleum will remain the most important ingredient of economic
growth and the profit and wage incentives in these ‘green’ businesses will
still be denominated in dollar values linked directly to oil. So there are two
lobbies working directly against the greening solution.
The ‘triple bottom line’ strategy made popular by a growing coalition
of environmentalists, politicians and business leaders (simplified by the
slogan, ‘people, profit, planet’) proposes that tackling our social, ecological
and energy problems will create a massive stimulus for business and jobs.
While this formula gives primacy to the economic signals of the
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5
Talk at Bennington College, William R. Polk, 15 September, 2008.
DESERTEC, www.DESERTEC.com
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marketplace, it largely ignores the independent monetary driver of energy
reserves, currency values and interest rates.
We have to face the fact that a money system based on debt and
issued at compound interest requires a level of exponential economic growth
that tests the physical limits of its resource reserve – which in our present
system is fossil fuels. Any major shift by governments to price carbon
emissions in market terms will result in a dramatic increase in oil prices,
creating widespread inflation, a significant increase in interest rates, large
fluctuations of exchange rates, upheavals in global capital markets,
disruptions in access to credit, and major monetary disorder – not to mention
the stimulation of the parallel grey economies which we have in our
countries anyway and, for that matter, the continued financing of extremists,
who, through our inability to reach out to people, are filling the vacuum.
What I'm saying is that greening all of the world’s businesses through
the economic signals of the marketplace will not change the energy base of
civilization from fossil fuel to solar or other renewable energies as long as
the reserve standard of the dominant global currency remains tied to fossil
fuels.
Ultimately, the external costs of global poverty, climate change and
geopolitical security must be adjusted not only through global market prices
and alternative sources of finance (such as global commons transaction taxes
and an expansion of the Special Drawing Rights of the IMF), but also
through an adjustment of the world reserve currency system. Ultimately,
global currency value should be determined by the priority and sustainability
of global energy resources as monetary reserves – not by their price in the
marketplace based on economic productivity and growth.
May I also
suggest to you that the question is basically, when we look at oil, are we
interested in protecting oil in situ? Are we interested in protecting the
hinterland? Are we interested in protecting the strategic waterways and the
commons? In that regard if we are going to talk about the protection of oil,
are we interested in the displaced persons, internally displaced persons,
stateless persons, refugees, and the mass migration of people that has caused
a real upheaval in our part of the world? If that is our interest, when are we
going to create a cohesion fund, as Paul Volcker has suggested, for
asymmetric empowerment of the poor? If we are interested in cultural
solutions, I am happy to say that the Sheikh of the Azhar has issued a fatwa,
a legal injunction, calling for a percentage of the profits of oil (rakaz) to be
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spent on the empowerment of the poor (zakat). That would certainly change
the nature of the war on terror to a struggle for human dignity. I think we
have done enough fighting against this and that. Walter Sisulu from one
hemisphere and Yehudi Menuhin from another, both asked why don’t we
work for something. You have the opportunity on 15 November to make
your voices heard at the Summit Meeting of Finance Ministers in
Washington, DC, and I hope Joseph Stiglitz will help edit the input of 600
NGOs in response to that conference. But even Joseph Stiglitz is not a
miracle worker.
To face our problems head-on, we must all realize the extent to which
we are borrowing from the natural world without paying it back. When we
don't take steps to replenish our resources, we ignore nature's vital role in
producing the food, the water, the oil, gas and minerals, the fibers in our
clothing, the materials of our houses and the medicines for our health that
are so essential to our lives.
We are all constrained – consciously or not – by our expected rates of
economic growth and the degree to which the interest rate benefits us or not.
This crooked way of thinking not only yields reckless competition and
greed; it also generates our widening social disparities and the oft-forgotten
human dignity deficit, in which some persons are deemed more valuable
than others, leading to extremism and hatred. Ladies and gentlemen, in all
honesty, how can we worry about our anticipated earnings when the very
system that supports us is under assault from climate change, resource
degradation and mass poverty?
The commons – our environmental, social, cultural, genetic and
intellectual resources – is the stock from which all wealth grows. If we
extract resources at a rate beyond the level of replenishment, our commons
will collapse. It's really that simple. The macroeconomic realignment we
need to make is to stop following the interest rate and start tracking the
resource replenishment rate.
We have a responsibility as world citizens to oversee this adjustment
of our monetary system. It requires a Global Social Charter – a legal
covenant for the just distribution of resources and human security. As part
of this Global Social Charter, we call for the creation of three new agencies:
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 A Global Water, Energy and Clean Air Authority to ensure the
availability of sufficient and affordable flows of water and energy and
to curb carbon emissions
 A Global Monetary Council to oversee capital markets through public
consent, generating capital formation with the goal of economic
growth and development rather than trading for its own sake
 A Global Transparency Agency that generates fees from the sale of
the rights to commons resources and ensures that they are spent for
the common good
The lesson we are learning from the financial crisis is that we cannot
borrow ourselves into wealth. Forget money and forget the rules; but ask
yourself, how do our resources best serve our people to improve their quality
of life and enhance their personal dignity? That is the only way we are
going to have the perspective needed to make the great adjustment from
energy dependence to energy intra-dependence, from a fossil fuel
civilization to a solar energy civilization, from a deficit-based economy to an
asset-based system yielding new forms of natural and social equity, and
from a world of poverty to a world of prosperity and peace. To me, this is
the true meaning of transparency and human security.
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