– Tribune parue dans le South China Morning Post –
The Big Three rating agencies have largely failed in their ability to appropriately assess risk worldwide.
The consequences of this failure stem from their having a predominantly US-centric perspective of the global economy.
But a new financial order is in the making, one in which the West is now losing its privileges.
The United States acquired its power after the second world war by becoming a net creditor internationally. It was able to dominate the old European powers, impoverished by successive wars.
The first of these privileges has been the control of currency.
When the US abandoned the gold standard, the US dollar became the world’s de facto means of exchange. Those with the power to decide the value of the dollar have taken full advantage of it – and have used its global ubiquity to fund the accumulation of vast amounts of debt.
The US is now the world’s largest debtor and its citizens the world’s consumers of last resort.
The West’s second historical privilege has been its control of the rules in financial markets, despite often reckless deregulation.
It is much easier to win a game when you are deciding the rules. It is even easier if you can change the rules during the game and according to your needs.
The Opium Wars, the break-up of China, the British Raj and the continent of Africa torn between European countries in the late 1800s are all good examples of historical privilege taken to excess.
The third privilege has been risk.
The West invented risk and controls risk. It decides what is risky and what is not. To a large extent, it has also been the sole arbiter of where money should go and where it should not.
Funds have, in fact, been directed towards projects in the West by undervaluing the risk of default there and then exaggerating those same risks in places such as China, India, Brazil and elsewhere.
There is a reason for this.
With about 95 per cent of all credit ratings under their control, the three major agencies are not only concentrated in the US, but also imposing an unrealistic template – culturally and ideologically – on the rest of the world.
But the world has changed in many respects.
The US and Europe are net debtors and the Asia-Pacific a net creditor. More than ever, we need to find a new imperative for responsible financial governance.
For the West, this means putting its fiscal house in order. For emerging economies, it means creating new tools to both shape and legitimise decision-making.
The illumination of information is essential and credit ratings bring invaluable perspectives about where money is being lent and what the chances are of it being paid back on time and in full. Investors do not like to work in the dark. But who can they trust? Those who say we have to live without light? Or those who say: « Why don’t we light a lamp somewhere and take a closer look? »
This pressing need to provide the market with more competition where investors require it is precisely the reason to create a new global credit ratings agency in Asia, with new and innovative tools, including broader and more finely nuanced ratings criteria designed to be more rigorous and more detailed than those offered by the Big Three.
Despite the failings of the incumbents, rating agencies play an essential role in the world’s financial architecture. The more credit assessment there is, the greater the transparency, depth and liquidity of capital markets.
And that is especially true in regions of the world where the development of new industries and infrastructure projects are most needed and their funding and risk assessment required.
Let the Big Three continue to offer their largely US-centric view of the world. But give investors the freedom to seek other opinions: to increase transparency, to provide a counter-point to Wall Street prejudices, and to create a new dimension in the constant search for capital allocation.
In summary, the financial crisis has marked the beginning of a worldwide revolution that will ultimately see the end of unwarranted economic privilege.
28 octobre 2013, South China Morning Post