France's Sarkozy calls for fundamental change

Davos Capitalism needs its values and morals restored, and new regulations need to ensure the economy works for the benefit of mankind, and is not an end in itself, said French President Nicolas Sarkozy.

His appeal for fundamental change in the way economies work was made in a passionate speech to the opening session of the World Economic Forum in Davos, where many initially sceptical delegates were won over by his thinking, as he spoke of unfettered economic gain as doing harm to society at large.

His obvious passion had an electrifying effect on the meeting, which welcomed his solid support for capitalism, and was also able to accept his unflinching condemnation of excess and the requirement for new laws.

"Our vision of the world revealed its failings and we need to change. There can be no prosperity without an efficient financial system, without the free circulation of goods and services, without situational revenues being called into question by competition.

"But finance, free trade and competition are only means, not ends. From the moment that we accepted that the markets are totally right, and no other opposing factors need to be taken into account, we went wrong and globalisation skidded out of control," Sarkozy said.

Imbalances

"The root of the problem was that imbalances in the world economy fed the growth of global finance. It gave rise to a world in which everything was given to financial capital and almost nothing to labour. In which the entrepreneur gave way to the speculator, in which those who lived on unearned income left the workers far behind."

"We have to re-evaluate what we do with our capitalism. We will force our economies to run risks far greater than they can bear, we will encourage speculation and we will sacrifice our future, unless we change the regulation of our banking system and the rules for accounting and prudential oversight," he said.

"We will never be able to end hunger and poverty unless we succeed in stabilising the process of raw materials. Market forces need to be offset by counterbalances. By over-mutualising ownership and risk, we have diluted our responsibility. By placing free trade over everything else we have handed over our democracy to the markets.

"We need to find how we can return the economy to the service of mankind. The globalisation that we dreamed of was where each of us would base development on social progress, increased purchasing power, reduced inequality, improved standards of living health and education."

The crisis is a crisis of skewed capitalism which lost its way. Capitalism needs to be corrected, to have its moral dimension restored. It has always been inseparable from a system of values, a concept of civilization, the idea of mankind, he said.

Sarkozy attacked "indecent" pay packages that do not reflect the work done. He said that "that those who create jobs and wealth may earn a lot of money is not shocking," but he condemned those who destroyed jobs and wealth but also earned large pay packages.

"In the future there will be much greater demand for income to better reflect social utility and merit, and there will be a greater demand for justice," he said.

"We need to ask, what do banks do in the world? The answer is they are not there to speculate. Their purpose is to assess risk and finance growth. I agree with Barack Obama when he says banks must be dissuaded from engaging in proprietary speculation of financing speculative funds. But this debate cannot be defined in one country. It should be settled in the G20.

Sarkozy savagely condemned countries which agreed to impose regulations and then failed to implement them.

Accountability

"We all need to follow the same standards and answer to the public. We have to implement what we say we are going to do, and we need to be held accountable that we have actually done what we decided to do.

Sarkozy's plan to enforce this accountability is to launch new international bodies like the World Trade Organisation to cover environment, labour and health law.

Sarkozy promised France will put monetary reform on the agenda when it chairs the G8 and G20 in 2011.