Greek politician and economist Professor Dr Louka T Kateseli has recommended Bangladesh to diversify its economy beyond textiles through pursuing active industrial policies to avert economic crisis like Greece.
She also stressed on undertaking governance and institutional reforms and building public-private sector partnerships for development, mobilising development assistance, trade and domestic taxes to finance infrastructure and other specific enablers.
“Developing countries, including Bangladesh and even many emerging economies are in a better position to reap low labour cost competitive advantages,” she told a function in Dhaka yesterday.
Dr Katseli was addressing the CPD Anniversary Lecture 2014 on “Recent Fiscal and Labour Market Adjustment Experiences in Europe and Lessons for the Low-Income Countries” with CPD Chairman Professor Rehman Sobhan presiding.
She served as member and vice president of UN’s Committee for Development Policy and currently leads the Social Pact Party and has held positions such as Greece’s Minister of Labour and Social Security and Minister of Economy, Competitiveness and Shipping.
She was invited to share her reflections on the salient features of the financial crisis in the context of globalising economies, her assessment about the way the crisis was managed, and her insights on lessons that we can draw for our own policy making.
Dr Kateseli called for building partnership among least development countries to push for major reforms in the global agenda for inclusive growth. “I think LDCs should raise strong voice and collective action for pushing the UN in changing global agenda.”
She said some of us in the OECDs share same concern for inclusive growth. “So, it is a call for action,” said Dr Kateseli, who is an expert on international economics and development policy and served as Director, OECD Development Centre.
However, she expressed concern over the alliances by the LDCs and, on the other hand, the segregation of voices of the developed countries. “Each country is trying to resolve its own issue and to become more loyal to the large institutions in the prevailing order.”
Dr Katseli, professor of economics at the National Kapodistrian University of Athens, said the present global financial system is clearly not fit for the purpose.
“Financial crisis such as the one that hit both the US, Europe or East Asia in the past will continue to occur as long as commercial and investment activities of global financial institutions are not kept apart,” she said.
She expressed concern that there are no clear rules of conduct, standards or effective oversight to mitigate collusive practices, speculative attacks or manipulation of currency and interest rates. “That’s why we should all join forces to push for a major reform agenda in this area.”
In response to a question, she said the exchange rate is not such a powerful tool of adjustment as we normally think. “If we have not joined in the Europe yet, we would have had the exchange rate as important tool and probably the market would have adjusted earlier devaluing currency.”
Referring to the Greek economic crisis, Dr Katseli noted that concerted action by few financial speculators can produce an unprecedented crisis for a national government. In the times of crises, policymaking is shaped by the interests of a global financial system which, in the absence of regulation, appropriate incentives or effective oversight, and caters to its narrow financial interests as opposed to the national interest.
Pointing at the unemployment scenario in the Euro zone, she noted that combination of credit crunch and austerity policies resulted in dramatic reduction of aggregate demand, firm closure and surge in unemployment.
Dr Katseli said self-employment is increasing, this is probably not the outcome of the crisis, it would not be sustainable, what we need to think of how we can increase productivity by enhancing employment generation.
“We need to convert unemployment benefits into the active jobs even in social sector, this trend is tremendous potential right now in African countries where social entrepreneurship is on the rise,” she said
She said social entrepreneurship fund needs to be formulated for young people to start small business. “We need to convert unemployment benefit into active jobs in municipalities and most communities need.”