China and Russia blame capitalism for economic crisis

30th January 2009, Comments 0 comments

Chinese premier Wen said that the "blind pursuit of profit" has led to the worst recession since the Great Depression.

DAVOS – Chinese and Russian leaders Wen Jiabao and Vladimir Putin struck out at American capitalist excesses for sparking the economic crisis, as the Davos World Economic Forum made its gloomy start.

Chinese premier Wen said that the "blind pursuit of profit" has led to the worst recession since the Great Depression, as he opened the summit late Wednesday.

"This pyramid of expectations would have collapsed sooner or later,” Putin said. “In fact it is happening right before our eyes.”

Wen blamed "inappropriate” macroeconomic policies of some economies and "prolonged low savings and high consumption," in a barely veiled attack on the United States.

The "excessive expansion of financial institutions in blind pursuit of profit and the lack of self-discipline among financial institutions and ratings agencies" led to this crisis, Wen said. He also said the "failure" of regulators had allowed the spread of toxic derivatives.

The Chinese leader called for faster reform of international financial institutions and for a "new world order" for the economy.

The Russian prime minister followed him to the podium and said the crisis had been a "perfect storm." He also took aim at capitalist excesses.

"Although the crisis was simply hanging in the air, the majority strove to get their share of the pie, be it one dollar or one billion, and did not want to notice the rising wave," he said.

Putin insisted he would not criticize the United States, but added: "I just want to remind you that just a year ago, American delegates speaking from this rostrum emphasized the US economy's fundamental stability and its cloudless prospects."

Condoleezza Rice, when US secretary of state, gave a speech in Davos last year saying the US economy was safe.

"Today investment banks, the pride of Wall Street, have virtually ceased to exist,” said Putin. “In just 12 months they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism. The existing financial system has failed. Substandard regulation has contributed to the crisis, failing to duly heed tremendous risks."

Wen said the crisis had posed "severe challenges" for China and that it needed 8.0 percent growth in 2009 to maintain social stability while the International Monetary Fund predicted 6.7 percent for this year.

Both Wen and Putin called for greater cooperation from new American President Barack Obama in international affairs. But both spoke out against protectionism and said excessive government intervention would harm recovery prospects.

US tensions with China have been raised in recent days with new US Treasury Secretary Timothy Geithner saying Obama believes China manipulates its currency to gain an edge in trade.

"In meeting the international financial crisis, it is imperative for the two countries to enhance cooperation, that is my message to the US administration," Wen said.

Germany's Chancellor Angela Merkel and the British and Japanese prime ministers, Gordon Brown and Taro Aso, were also among about 40 heads of state or government who will speak this week. Both Brown and Aso have spent hundreds of billions of dollars battling the crisis.

But with much attention on Obama's efforts to get a 825 billion dollar (621 billion euro) stimulus package through Congress and grim new IMF predictions for the world economy, the forum has been a dark affair.

There were plenty of critics among the record attendance at Davos of the measures against the crisis taken so far.

South Africa's Finance Minister Trevor Manuel said wealthy nations appeared to be adopting a "lemming-like approach, trying to get to the precipice without knowing what their money would buy."

"The crisis is getting worse," said News Corp media tycoon Rupert Murdoch. "It's going to take drastic action to turn it around, if it can be turned around quickly. Personally, I believe it will take some time."

The economic turmoil has overshadowed efforts to highlight other key issues at the conference, including climate change, conflicts around the world and poverty alleviation campaigns.

UN Secretary General Ban Ki-moon spoke about the Gaza conflict on Thursday.


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