Does France's Sarkozy Seek 'State Capitalism'?

Is a second Bretton Woods coming? Mr. Sarkozy, the French president, met with President Bush over the weekend. They agreed to a series of summit meetings in the next few months to discuss common strategy for the global economy, but don't kid yourself: behind that innocuous goal, Mr. Sarkozy is clearly pushing for a change in the way capitalism is practiced.

"Those who led us to where we are today should not be allowed to so once again," Mr. Sarkozy told Mr. Bush. "This sort of capitalism is a betrayal of the sort of capitalism we believe in," he also said.

What kind of capitalism does he believe in? A highly regulated state capitalism — and now he will be pushing for new international bodies to regulate financial institutions.

This is likely to take two forms:

1) a new global fund that will invest directly in financial institutions in exchange for preferred stock; and

2) a global, likely Brussels-based regulator for all international banks, including U.S.-based.

Proponents say that ad hoc national solutions have not worked, that in an era of globalism we need global regulation.

Opponents say that national regulators were not effective, why would global ones be? Why not strengthen existing national regulation, in coordination with other nations?

But the most important point is that we are now going in the other direction: having erred on the part of diffuse or too little regulation, we are now getting to the other extreme.

Mr. Bush agreed to a series of summits, which will apparently start in November. No word on what the exact dates are, but they are likely to involve most developed and many developing countries.

For those of you with bad memories: Bretton Woods was the 1944 meeting held in Bretton Woods, New Hampshire, that established the economic face of the post-World War II world. It set up the General Agreement on Tariffs and Trade (GATT) (later replaced by the World Trade Organization) and the International Monetary Fund, as well as the International Bank for Reconstruction and Development (IBRD).

Out of these agreements came, among many thing, convertible currencies and the espousal of open markets, specifically lowering barriers to trade and the movement of capital.

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