As the ramifications and effects of the global financial crisis continue to expand and act as catalysts of further instability – particularly in the financial markets almost eight years later – the gathering of more than 5,000 legal practitioners, business leaders, regulators and government and non–government officials at The International Bar Association’s (IBA) Annual Conference in Tokyo, Japan in October of this year, provides a unique platform to assess how, and if any, legal and regulatory reform can provide remedies to these dynamic issues.
The IBA was established in 1947, and is a leading organisation of international legal practitioners, bar associations, law firms and law societies. It has influenced the development of international law reform, shaping the future of the legal profession globally, and has a membership of more than 50,000 individual lawyers, 205 bar associations and law societies spanning 170 countries, with considerable expertise in assisting the global legal community.
Grouped into two divisions – Legal Practice and Public and Professional Interest – the IBA covers all practice areas and professional interests, giving members access to leading experts, up-to-date information and unparalleled global networking opportunities. Through the committees of the divisions, IBA members interchange information and views on laws, practices and professional responsibilities relating to the practice of law globally.
IBA covers all practice areas and professional interests, giving members access to leading experts, up-to-date information and unparalleled global networking opportunities
Corporate governance and responsibility, labour and employment law, pro bono activities, the empowerment of women and vulnerable groups with the rule of law are not the mainstays of an activist agenda. Rather, they are part of what is expected every day, of business lawyers and the daily aspirations of the law for everyone.
Professor Joseph Stiglitz, the Nobel Prize-winning Economist, former Chairman of the Economic Advisors under President Bill Clinton and Former Chief Economist at the World Bank, spoke at length at the 2012 IBA Annual Conference in Dublin on the macro issues related to the GFC, informing those present: “It’s five years since the beginning of the recession, six years since the breaking of the bubble. The downturn continues with no recovery really imminent. In many of the countries – of Europe particularly – GDP is still less than it was before the crisis. The question, obviously, is asked, how long will it last?”
Stiglitz went on to suggest that the only relevant precedent was the Great Depression. “The Great Depression is usually dated as beginning in 1929…looking at this from a perspective of the US, in 1937 we hadn’t recovered and we went back into a double-dip recession. The reason? President Roosevelt was persuaded to try a dose of austerity because of fear of deficits.”
Following the wrong treatment
Assessing the situation from both a US and European perspective, Stiglitz concluded that one of the chief underlying causes of the continuing, dynamic instability – particularly in Europe – is that “the diagnosis in Europe of what went wrong was wrong and, as a result, the prescription was wrong. What one hears commonly is that the problem is excessive debt; but Europe’s debt-to-GDP ratio was actually better than the US. If Europe changed its economic framework, it could have access to credit, funds – at the same negative real interest rates that the US could. Because they misdiagnosed the problem as over-spending, the prescription has been, quite naturally, to cut back on spending: austerity.
“But one should remember austerity has almost never worked. This is an idea that’s been tried over and over again; back in 1929 Herbert Hoover tried it… The IMF has tried this experiment; in East Asia I saw it in the years that I was at the World Bank; they tried it in Latin America; each time it succeeded in converting downturns into recessions, recessions into depressions.”
The second core issue, similar but subtly different on both sides of the Atlantic – and inherent in the misdiagnosis – Stiglitz argued, is one of politics versus economics. “The fundamental problem with Europe is very simple: it’s a flawed currency arrangement. Europe, the eurozone, was not based on economics, it was based on politics. The economics was very clear. My colleague at Columbia, Robert Mundell, got a Nobel Prize for his work on what were the conditions under which a group of countries could share a common currency. And European countries did not satisfy those conditions. And I think that the European leaders knew that at the time, but the hope was that somehow, in the ensuing years, there would be a change that would make the system work.”
While Stiglitz revealed he saw “a little basis for optimism” among the emerging markets, in particular China’s focus “on quality of growth, not quantity and the belief that a slightly slower growth would lead to a higher quality of growth”, his final message was still from a position of concern. “Even in the years before the crisis, in most countries, there was growing inequality. But the economic downturn has exacerbated these problems greatly… Economic inequality leads to political inequality and for those of you in the legal profession it presents, I think, a particular challenge. There’s a risk that the promise of justice for all will become justice for those who can afford it.”
Another way?
Muhammad Yunus was awarded the Nobel Peace Prize in 2006 having successfully developed microfinance to address poverty in Bangladesh. Starting with just $27 more than 30 years ago, his Grameen Bank has grown to become a multibillion enterprise lending almost exclusively to women. Also speaking at the IBA Annual Conference in Dublin in 2012, Yunus touched on similar themes to Stigltz, concurring in a sense, that many of the core issues affecting the global economy, and in turn many national economies, are so far reaching because they are inherent and systemic issues within the institutions attempting to resolve the ‘crisis’. Yunus went on to suggest that a completely different paradigm is both possible, exists already in fact, and is replicable.
“[Grameen Bank is an] unusual bank in the sense that it focuses on delivering financial services to poor women and this is a bank which is owned by poor people, poor women. So in that way it’s unique in the whole world. And it gives loans for income generating activity. The basic principle of the bank is that people should not go to the bank; the bank should go to the people. So we are not an office-based bank. Our office is not our place of work; our place of work is the doorstep of the borrowers. Grameen Bank means village bank, we work in the villages. Today we have 2,600 branches over 80,000 villages in Bangladesh so we have covered every single village in Bangladesh. And it has changed their lives, improving their income with their own power of creativity in business.
“Another feature would be it [the bank] doesn’t take any money from the government and it doesn’t take any money from international sources or anything. It generates the money inside the bank by taking deposits and then lending the money to the poor people in the area.” Asked what fundamental changes he would make to the existing institutions and frameworks, Yunus responded: “…make the institutions work for the poor to get them out of the situation they are in.
“Also, create a new legal structure, because you think, all right the bank is there, why can’t you create a bank to do that? But the law creates the bank for the rich. It’s a different kind of animal you create with those laws, it’s a bank for the rich, so you need a different kind of legal framework to create a bank for the poor. People say a bank is a bank. It’s not true: a bank is not a bank, because conventional banks – even after 35 years of micro credit all over the world – still could not open their doors to the poor because their system doesn’t allow them to open the door. So why can’t we create a separate banking system, or a separate breed of bank, which is a bank for the poor as we have done in Bangladesh. So this is why we need a separate structure for that… redesign the whole thing.”
The law, finance and human rights
A powerful report by Action Aid looked at how multinational corporations in developing countries are avoiding paying tax. The report was inspired by the IBAs Human Rights Institute setting up its own taskforce to look at the impact of tax abuses on human rights.
A second landmark report was written by the IBAs Presidential Task Force on the global financial crisis, entitled Poverty, Justice and the Rule of Law that directed its attention to the negative impacts of the financial crisis on those persons least able to manage or counteract them, and the wider social and legal issues that have resulted from, or been highlighted by, the GFC.
“Both reports look at what the global legal community can achieve beyond the perceived core purpose of ‘business and corporate law’,” says the IBAs Head of Marketing and Membership, Neil Smith. “They are about mobilising the legal profession as a whole to look at poverty issues.”
The detailed reports were published in late 2013 and are packed with ideas and solutions. They include contributions from four Nobel laureates, as well as an insight into how Argentinian lawyers fought their way back to democracy after years of dictatorship, and then weathered their own economic struggles in the early 1990s. Both reports share the aim of urging lawyers, legislators and corporate and NGO lobbyists to face the fundamental responsibility of campaigning for laws that go beyond a client’s individual interests.
By 2015 – the deadline for the world to meet the UNs millennium development goals (MDGs), which include the challenge to reduce poverty by half – the global community needs to be ready to take the next step. These reports provide the suggestions of a global tax on greenhouse gas emissions and arms imports to developing countries; an end to secret bank accounts in tax havens; and rewarding innovation in medicine by paying for the actual health impact rather than high prices up front. These are just three proposals from Professor Thomas Pogge, Director of Yale University’s global justice programme and Chair of the IBAHRI Taskforce, which compiled the report on tax abuses.
“The world has the resources but still over one billion people survive on less than $1 a day [compared to a daily $2 agricultural subsidy for every cow in the EU],” says Peter Maynard, joint editor of Poverty, Justice and the Rule of Law, and Chair of the IBA Poverty, Empowerment and the Rule of Law Working Group.
