jean - claude trichet : the growing importance of emerging economies in the globalised world and its implications for the international financial architecture speech by mr jean - claude trichet, president of the european central bank, at the tenth l k jha memorial lecture, organised by the reserve bank of india, mumbai, 26 november 2007. * i. * * introduction ladies and gentlemen, it is a great honour for me to give this lecture to pay tribute to the memory of the late shri lakshmi kant jha. l. k. jha was a man of many talents : a distinguished administrator, a diplomat and an eminent economist. he was the first chairman of the general agreement on tariffs and trade in the late 1950s and governor of the reserve bank of india in the late 1960s. he held several important positions in the government of india. in the course of his career, l. k. jha also became a respected member of the brandt commission. as some of you perhaps remember, this commission advocated a new world economic order in which the developing countries, including india, would have a more equitable share. l. k. jha sadly left us about 20 years ago. however, if he and other members of the brandt commission were to look at the world economy today, they would be probably surprised to see how much it has changed. and one of the most important of these changes is precisely the growing share of the rapidly developing economies, which we now term the emerging markets, in the global economy. india represents one striking example of this success. together with other emerging markets, india is playing a crucial role in the process of globalisation of the world we live in. some might think that this is a new phenomenon. it is not. india has been at the core of globalisation since its very outset. let us just remember how it all started. globalisation did not start 20 years ago, when capital controls around the world began to be lifted. it did not start 50 years ago, when multilateral discussions on trade were launched. nor did globalisation start 150 years ago, with the industrial revolution. nor did it start 600 years ago, with the voyage of christopher columbus to america. of course, this voyage marked the linking of two continents, europe and america. but there is one thing which we tend to forget. christopher columbus did not want to travel to america. he wanted to reach india! his ambition was not to discover a new continent. it was to open an alternative route

is changing. for instance, last year saw the launch of the first multilateral consultations, an innovative approach that aims to bring together countries with a shared responsibility for global issues. these first multilateral consultations were dedicated to one of the key risks weighing on the world economy, namely global imbalances. the consultations involved both mature and emerging economies, including the euro area, the united states, japan, china and saudi arabia, again illustrating the fact that large current imbalances are no longer an issue for mature economies only, but a truly global issue. we at the ecb welcomed these discussions as a way to foster the implementation of the agreed strategy to address global imbalances. evidently, these discussions are also of relevance to india. large current account imbalances worldwide go hand - in - hand with sizeable cross - border capital flows. india has been confronted with challenges posed by strong capital inflows. this is why addressing imbalances is in the interest of the international community as a whole. implications for the substance not only the form but also the substance of the governance of the world economy in macroeconomic and financial matters is changing. this will be my last point. the macroeconomic and financial situation in emerging economies today looks strong. but we know it was not always so. we have seen both good and bad times. this is why many initiatives have been taken to strengthen the resilience of countries ’ macroeconomic and financial performance and policies following the string of crises of the 1980s and 1990s. reforms can obviously take many forms. but there are three guiding principles which, in my view, should always be kept in mind : transparency, good practices and dialogue. allow me to take transparency first. investors, borrowers, lenders and economic agents in general cannot make proper decisions without adequate information. 17 easy access to information facilitates investment decisions, the management of risk and market discipline. this in turn gives appropriate incentives in the conduct of macroeconomic and structural see, for instance, m. skala, c. thimann and r. wolfinger'the search for columbus'egg – finding a new formula to determine quotas at the imf ', ecb occasional paper, no. 70, august 2007. for recent – more formal – treatment of the role of information and transparency see, e. g., d. kahneman, “ maps of bounded rationality : psychology for behavioral economics ”, american economic review, 2003, 93 ( 5