2008 has been a year full of challenges and turning points. Economies and powers have been put at stake. And I’m particularly happy to be here, in this country where History is being written. The Olympic Games have shown the world China was willing to find a new role in the world. The economic crisis may result in a new role in the world’s economy.

In the last twenty years, China has changed dramatically. But the world has also changed. It’s more interdependent than ever. There are no local conflicts without global repercussions. The situations in Irak, in Iran, in Lebanon need the whole world’s intervention to find a solution. This is also true of the actual financial crisis. That’s why we have to try to see the whole picture. That’s the fantastic opportunity we have here, to exchange points of views and conceptions.

Today, we are experiencing a radical transformation, not only of the economies. The balance of the world is swinging. The western globalization cycle that begun five hundred years ago with the discovery of the world and the invention of capitalism is coming to an end.

Why has it been centered on the West ? China had the power to do so too. The great sea expeditions of Zhang He’s treasure fleet are proof enough. But after a few years, the adventure was over. China withdrew on its inner threats.

This setback led to a one-sided globalization for the five following centuries. It led to the Opium War and the Unequal Treaties. Today we may invent together a globalization walking on its two feet, East and West.

We’re in the middle of the storm. We can’t know yet what the future will look like. No doubt, all nations will be deeply shaken. The first consequences are already being felt, even here in China. Still, the outcome of the crisis will probably assign a new importance to Asian powers in the world’s economy. It will also transform the rules and tools of globalization. That’s why it’s so important to anticipate changes. This we can only do by taking the full scale of this crisis.

It’s a total crisis.

It’s a global crisis.

It’s a structural crisis of the relations between states and economies.

1. First, this is a total crisis
Indeed, we are facing several interdependent crises of an unheard of intensity. I mean by total crisis a crisis that affects the whole of men’s needs, activities, lives. In America, the whole way of life is put at stake : easy credit, a central role for cars, the dream of home-ownership. All this has been fragilized at once in the last months. But it is true for the whole industrial model of the world. Three different crises are joining their effects on different time scales.

1.1. In the short term, the financial crisis is dissolving the fundamentals of trust.
Since the subprime crisis broke out on the stock markets in the summer of 2007, distrust between banks has grown. Modern finance had piled up massive threats. The financial flows have become huge. In 2004, on the world exchange market, 1,2 millions of billion dollars have circulated. Well, it’s about twenty times the worlds total output ! At the same time, securitization has made the evaluation of losses and risks almost impossible.

Choices have become binary. Either you trust, either you distrust. This has been the effect the neoconservative cycle that begun under President Ronald Reagan. States were accused of unbalancing the economies, regulations were thought to impede exchanges. At the same time, the U.S.A. promoted unilateral solutions and a very one-sided view of the world. The conflicts about the extension of NATO have shown it.

The financial situation is not fully under control yet. Strong action has been taken and a greater cooperation has been sought, as was necessary. Still, new storms may be preparing : the hedge funds, the outstanding credit card debt may send new shockwaves through the banking system. Sinking oil prices may put near-eastern capitals in difficulty. The stress on the interbank exchanges remains high.

The credit crunch is real in all sectors of the economy. Businesses are closing. The recession is a fact now in many countries. What we now discuss is the possibility of a long depression, in the way the Japanese experienced in the 1990’es.

1.2. Still, the commodities crisis remains a threat for the coming years.
Oil prices may be sinking now, as irrationally or excessively as they soared up last year. The price of the barrel is only one third of what it was in last july. The countershock is both stronger and faster as in 1986 ! The copper, aluminum, steal or iron markets have known the same bear trend as oil.

This may be true in the following years. Still, the fundamentals are unchanged. Indian and Chinese demand for commodities is still bound to rise, even on a slower pace. The commodities crisis of the last spring is only a foreboding of crises to come.

There are political and strategical implications to this logic of scarcity of resources. The struggle between nations to supply their industries with the necessary commodities will be harder. It has already changed in Africa for example, where competition is visible. The conflicts in Eastern Congo as well as in Darfur partly find their origin in the sharing of resources. Let’s take the example of Iran. Its international position as well as its inner stability depend upon the oil prices.

1.3. In the long term, the climate crisis asks for a radical change of our conceptions of economy.
2008 has been the hottest year in climatic records. The average temperature over the past half century has risen by 0,65° Celsius. The existence of a climate change has now become a wide consensus. Our growth isn’t sustainable. It could be overlooked while only a little part of the world was enjoying such a growth. It’s now an immediate danger. The Sterns report has evaluated costs in case nothing is done to 5000 billion dollars.

This should not mean that the wealthy countries could claim to impoze virtue to emerging countries when they built up themselves their economies on the smogs of Manchester or wasted energies. The Kyoto protocol has already acknowledged the double moral claim to emerging growth and to sustainability. The new discussion round in Copenhagen, in the framework of the Bali process, should reinforce this cooperation model between industrialized, emerging and developing countries so as to set common goals for the safeguard of the planet.

At the same time, it’s not only about restrictions. Sustainable development is also a new model of economic growth, and a promising one, with investment opportunities and new rising sectors. « Green jobs » will grow in the coming decades, in industrialized as well as in emerging countries. 

These crises affect all our existences. We’re facing the world’s greatest challenges since the middle of the 20th century, economic, political, social, environmental challenges.