More extensive government regulation would not prevent a recurrence of the financial crisis that has struck the world over the past year, the leader of the Czech Republic told the General Assembly today, urging policy-makers to be cautious about increasing global governance of the economy.
“It would be a tragic mistake to fundamentally impair economic freedom in favour of state or supra-state regulation just now,” President Václav Klaus told the opening day of the high-level segment of the Assembly, which is being held at United Nations Headquarters in New York.
Mr. Klaus said long-term experience indicated that the current material progress enjoyed by peoples around the world was due to free markets and entrepreneurship.
“When looking for an appropriate reaction to the problems connected with the current crisis, we should build on the idea that the crisis was basically a failure of governments, not markets,” he stressed.
“The manipulation of monetary policy in an attempt to artificially prolong the period of growth, the irrational subsidization of demand in the housing sector and the failures of financial market regulation contributed substantially to the crisis.
“Let us not delude ourselves that the economic cycle and its consequences can be prevented by the more extensive government regulation or by aiming at global governance of the world economy.”
Mr. Klaus said that, during the crisis, the UN and its various institutions “have become an important global platform for discussing alternative steps and policies which could – hopefully – help to overcome the crisis and diminish its impact.”
He noted that the world had been able to avoid “the repetition of a massive protectionist reaction to the crisis,” adding that there were now “the first signals” that the crisis had either reached its bottom or come close.