Regional approach to global integration a good alternative - Nobel Laureate Robert Mundell

ASTANA. March 25. KAZINFORM /Karina Worku/ The 2nd Astana Economic Forum provided the platform for hosting some of the most eminent scholars and figures of the international political and economic arena. Nobel Prize Winner, Robert A. MUNDELL was no exception. he was awarded the Global Economics Prize World Economics Institute in Kiel, 1999, Germany and was made a Cavaliere di Gran Croce del Reale Ordine del Merito sotto il Titolo di San Ludovico by Principe Don Carlo Ugo di Borbone Parma in 2005.

Currently R. Mundell is Professor of economics at Columbia University, USA, well known for his work on Optimum Currency Areas, operation of the gold standard and for his contributions to the birth of the Euro. Below, Professor Mundell answers some of the questions of Kazinform correspondent. Professor Mundell, what should be the principal objectives of the 2nd Economic Forum in your opinion? The main objectives should be establishment of the Forum as an important voice from Central Asia, development of policy ideas for Kazakhstan and Central Asia and the World Economy. Moreover, it helps to spread information about policies and problems in Kazakhstan to the residents and the world and provision of assistance to the government in evaluating alternative policy ideas and gaining support for those directions it is moving in. This forum will also provide knowledge to the transition countries of the successes and problems faced by Kazakhstan and will bring to light Kazakhstan?s policies and intentions. Can you give your comments on the anti-recessionary measures implemented by the Kazakhstan?s government, more specifically, provision of assistance to large banks, devaluation of the Kazakh tenge? Indeed the anti-recessionary measures of Kazakh government look quite impressive. I believe that the decisions to assist banks made for sound reasons. They fitted a coherent model. As far as the decision to devalue the Tenge curtailed what would otherwise have been a more serious downturn in financial markets and commodity prices. Among your major contributions to the field of economics are the development of the euro and your theoretical work on Optimum Currency Areas, which resulted in you being awarded the 1999 Nobel Prize. In connection with this, what do you think about President Nazarbayev?s recently reiterated call for the creation of a Eurasian Union? I wish I had known more on this particular proposal, but it is important that smaller economies try to form larger currency areas to defend themselves more readily against the stormy seas of drastically fluctuating exchange rates among the major currencies. A regional approach to global integration is a good approach if the goal of an international currency has to be abandoned. The important political element in a monetary union is that it be a security area, i.e., a war-free zone, and therefore is constituted among allies. I do agree with President Nazarbayev?s statements about his project for the world currency and I believe I am right on track with what he said. The proposal was made to discuss this idea at the G20 meeting of the developed and developing economies and I think it would be a good idea to take up this issue in London. At the same time, it would be unrealistic to think that there will be a single currency. Mainly for political reasons, it is possible to get all nations to abandon their currency and accept the single currency. The most likely scenario is that countries will still use their own bank notes domestically and the single currency will be used on an international level. What are the main ideas or recommendations that you will be propagating during this summit? What significance does this forum hold for transition countries? In reply to the latter question I must say that this forum provides knowledge to the transition countries of the successes and problems faced by Kazakhstan and its neighbours and, especially, it provides necessary insight into Kazakh policies and intentions. It also gives an opportunity to exchange experts? opinions and views on how to get out from current economic crisis. The main recommendations to be propagating are proposals for the path to recovery and the re-creation of an international monetary system with a global unit of account. The proposals include a reduction in corporation taxes to 15%; a dated spending voucher allocation to increased effective demand if necessary; a stabilization of the dollar and euro and yen exchange rates; and the creation of a global currency backed by the major currencies and possibly gold. Robert Mundell (born 1932) after studying at M.I.T. and the London School of Economics, he received his Ph.D. from M.I.T. in 1956, and was the Post-Doctoral Fellow in Political Economy at the University of Chicago in 1956-57. He taught at Stanford University and The Johns Hopkins Bologna Center of Advanced International Studies before joining the staff of the International Monetary Fund. He was a Professor of Economics at the University of Chicago and Editor of the journal of Political Economy. Professor Mundell has been an adviser to a number of international organizations including the United Nations, the IMF, the World Bank, the European Commission, and several governments in Latin America and Europe, the Federal Reserve Board, the US Treasury and the Government of Canada. He was a pioneer of the theory of the monetary and fiscal policy mix, the theory of inflation and interest and growth, the monetary approach to the balance of payments, and the co-founder of supply-side economics. Mundell's writings include over a hundred articles in the scientific journals and the following books: The International Monetary System: Conflict and Reform (1965); Man and Economics and International Economics (1968); Monetary Theory: Interest, Inflation and Growth in the World Economy 1971; and co-edited A Monetary Agenda for the World Economy (1983); Global Disequilibrium (1990); Debts, Deficits and Economic Performance (1991); Building the New Europe (1992); Inflation and Growth in China (1996).