The global capitalist system has produced a very uneven playing field. The gap between rich and poor is getting wider. This is dangerous, because a system that does not offer some hope and benefit to the losers is liable to be disrupted by acts of desperation. By contrast, if we offer economic incentives to countries that are eager to take advantage of them we create a powerful tool for crisis prevention. Unfortunately, the global financial architecture that prevails today offers practically no support to those who are less fortunate.
Current trends go in the opposite direction.
After the recent financial crisis, the aim has been to impose greater market discipline. Now that we have global financial markets we also need a global central bank and some other international financial institutions whose explicit mission is to keep financial markets on an even keel. But any lender of last resort activity engenders some moral hazard, and the current battle-cry of market fundamentalists is to eliminate moral hazard. Congress recommends that the World Bank be converted from a lending agency to a grant-giving agency aimed at the poorest countries of the world. That is a splendid idea, but the way that the Meltzer Commission would go about it is by downsizing the World Bank and returning the unused capital to the shareholders in a major resource transfer from the poor to the rich.