Monday, February 9, 2009 at 9:05AM | in Governance Where is the global policy response?
Chamonix, FranceAt the Reuters blog, Ian Goldin throws down the gauntlet in front of timid policy-makers (full disclosure: I'm his research assistant):
As the global economy staggers from one crisis to another, states are desperately pouring more funds into their economies to keep them from collapsing. However, the weakness of the global policy response is even more alarming than the shortage of credit. There is widespread agreement on the need for reform in financial management, but the ideas currently being mooted are too modest to halt a continuing spiral of crises....
The existing set of national regulations and global institutions are no longer adequate to formulate a coherent global policy response to current or future financial crises. A 21st Century response is required for the first 21st Century systemic crisis.
Ian highlights a huge gap in the current debates around the global economic/financial crisis: why are we talking about national crises when their sources are international? Dani Rodrik, development economist superhero at Harvard, asks the same question:
The best minds talking about stimulus are excessively focused on the domestic situation and not thinking enough about the international connection.
The question, then, is: international economic regulation or domestic regulation? Dani says keep it at home, Kenneth Rogoff says we should beef up institutions like the IMF (or create a global financial regulator).
Maybe it's just me, but it seems that the direction of history is towards global integration.
Monday, February 9, 2009 at 9:05AM | in Governance 
Reader Comments (1)
Yes, the direction is definitely towards global integration. Paradoxically, well executed and administered integration may provide a safe framework for greater local diversity, experimentation and learning.
As far as international institutions are concerned, circumstances will no doubt bring some of the existing ones down and allow new institutions, better fitted to the needs of 21st century, to grow.
Think about this: the League of Nations grew out of the First World War. It was not the first multi-lateral organization, but its development was motivated by a desire to try to establish an institution that did not merely reflect the 'realpolitik' of the time. It failed.
But that was not the end of the story. The principle of multi-lateralism had been established as an essential framework for international relations.
The UN emerged from the 2nd World War. Will it fail? It may do. (In fact, some believe it is already failing.)
Do we give up on the attempt? Or do we try something with a bolder vision? Something that actually transcends notions of 'inter-national' and 'multi-lateral'. Time to see ourselves as one human race and to develop institutions that reflect that oneness and establish a supreme global authority, a world government, rather than a club of nations.
So, my answer is that both domestic regulation and the current kind of international regulation have failed. We need a new vision and a new global framework.