The United Nations Conference on Trade and Development (UNCTAD) has strongly criticized the financial behavior of richer nations and the austerity measures they adopted after the 2008 financial crisis.

The 2011 Trade and Development Report (released September 6) clearly identifies financial deregulation, or the widespread belief that the absence of the state contributes to greater market efficiency, as a main culprit for the financial instability and collapse that followed.

The UNCTAD report had strong words for what it called the Anglo-Saxon commitment to financial liberalization which caused public sector deficits and indebtedness, noting that it is “somewhat ironic that the financial agents that caused the crisis should have become the judges of the suitability of public policies adopted to contain its damage.”

The report said that the re-regulation of financial markets is indispensible and that moves such as restructuring the banking system with public funds only serves to lessen disincentives to engage in risky market behavior.  Europe, Japan and the United States were warned against cutting government spending in order to curb debt and appease financial markets, a move the report said “is likely to backfire."

Warning that the risk of a new financial crisis is very real, UNCTAD noted that, “It took the global financial crisis to finally force a serious debate about the necessity for fundamental reforms to prevent similar crises in the future."

"The world economy as a whole is faced with serious and fundamental challenges, such as eliminating poverty and the transition to more climate-friendly patterns of production and consumption. To tackle these challenges successfully, all the other countries in the world need to participate, sooner or later, in the process of finding solutions.”