Global financial governance: Need for a new approach

Revista do Serviço Público, 2015

Finance in general, and banking in particular, are probably the only areas of the economic system where there is widespread agreement on the necessity of formal governance. Most governments reserve for themselves the right to issue debt in the form of coins and currency; in addition private providers of means of payment have failed so frequently to provide a safe and secure means of payment, with disastrous consequences for the operation of the real economy that governments have sought to regulate financial to prevent financial crisis. However, in an open global economy the regulations of national governments have little impact on the operation of global financial markets which are regulated by the governments of developed countries. Thus the regulations determined in developed country markets, in particular the US are of crucial importance to the governance of finance in developing countries. This paper considers the main innovations of developed country governance in the aftermath...

International Studies Review, 2004

International Financial Governance under Stress by Geoffrey Underhill and Xiaoke Zhang is too obviously a conference volume. The seventeen chapters, plus introduction and conclusion, are uneven. Nonetheless, the volume does contain worthwhile analyses and interesting stories, accessible to those who are familiar with the major contemporary debates about international finance. The book is organized thematically but not rigorously. The sections deal respectively with (1) concepts and arguments, (2) country case studies of emerging markets during the Asian financial crisis, (3) country case studies of ''private-public interactions'' in national financial regulation, and, finally, (4) norms and global governance. An alternative organization for the volume, focusing on the kinds of questions each contributor asks, might have helped clarify the ways these essays speak to one another. This review considers, instead, the contributions offering (1) prescriptive policy advice, (2) analysis of the political sociology of financial reform, and (3) theoretical perspectives on the ''democratic deficit'' in global financial governance. The policy-oriented economists who contribute to International Financial Governance under Stress want to know what works and what does not. For example, John Williamson examines a series of policy variablesFincluding opaque public and private accounting, moral hazard in the domestic banking system, fiscal or monetary excess, the wrong exchange rate regimeFin Asian countries that faced currency and banking crises in 1997-1998. He finds that the common experience of countries that suffered crises was recent capital account liberalization. Vijay Joshi views the Indian experience through a similar lens, and both authors recommend limited capital controls. Manmohan S. Kumar and Marcus Miller evaluate the technical feasibility of various institutional alternatives proposed to compensate for the absence of a global lender of last resort. Along the way, they provide some clues to the bargaining strategies of actors including the International Monetary Fund (IMF), the US government, and private multinational lenders and investors. These user-friendly chapters are helpful and should have been grouped together. Unfortunately, they provide only a partial introduction to the several overlapping financial policy issue arenas touched on in the remaining chapters, which have a more direct political focus. For example, the Williamson and Joshi recommendations presumably apply to emerging markets only. Why did the editors omit a complementary summary of concrete policy options for advanced industrial countries afraid that financial globalization will inspire a regulatory race to the bottom or an end to the Western European social welfare state? These questions seem especially pertinent given that they clearly motivated the project as a whole. A quick

2014

This research examines the internationally coordinated, state-led response to the 2007-2008 economic and financial crisis. It addresses the construction of 'alternative narratives' which encompass a partial revision of the economic paradigm, with a particular emphasis on the role of international financial regulatory authority, its rules and institutionalization. The meta-theoretical theme at the centre of this thesis involves the manner in which severe crisis episodes provoke and also reveal the underlying tension and contestation between 'market authority' and 'state authority' in relation to the regulation of the world economy, financial system and firms, with the goal of ensuring maximization of long-term systemic stability and crisis prevention. The construction of alternative crisis-driven narratives is in part a reaction to the previous ideological hegemonic domination of laissez faire neo-liberal beliefs as applied to deregulation (i.e., of self-regulation by markets and private sector actors in the financial sector). The thesis identifies and examines a paradigm shift in response to the crisis: a move from the I would like to thank all those who have supported me during my research and the writing of this thesis, and I am very grateful for the opportunity to study again at Newcastle University and the School of Geography, Politics and Sociology. My particular thanks to my supervisors, Phil Daniels and Barry Gills. Their careful supervision, encouragement, support, and intellectual guidance, made the research process enjoyable and manageable. They are an outstanding team and it has been a pleasure work with them over the past three-plus years. I cannot name but must warmly acknowledge and thank the scores of individuals who were so generous of their time and who allowed me to interview them regarding the 2007-2008 financial crisis and G20-led intergovernmental response since then. I feel honoured to have been given the time and counsel of presidential and prime ministerial advisors, finance ministers, G20 sherpas, central bank governors and deputy governors, treasury and ministry of finance officials, numerous IMF executive directors, academics, and former senior policy makers. Without their frank insights and personal narratives of the events they experienced, often first-hand, this research would not have been possible. I must also thank my wife, Jean, for allowing me the space to complete this endeavour and for her tolerance of far too many discussions of the subject, the process, and the difficulties it presented. I would also thank my good friend and mentor, Alan Coe, for his advice and support throughout, and Diane Stamm for her careful eye as to style and presentation. I also must acknowledge the support of my employers, and in particular, of Geoffrey Bell, who wholeheartedly supported my decision to conduct the research for this thesis.

The Financial Crisis, 2011

2 The term "financial governance" often refers to shareholders' guidance of financial firms. Here this term refers to the public governance of financial institutions and markets. their own explanations for core questions about the economy: Why do banks exist? Is regulation needed? Does active fiscal policy raise welfare? Each school developed its own answers; the more influential and well-funded the school of thought, the more settled the views. So while differences of view about core economic questions have persisted over time, in the past three decades, most economists called to positions of economic-policy leadership have portrayed their own views as reflective of a sensible consensus. This suggested that economists' views vary within a narrow band, from slightly-critical-of-unregulated-markets to suspicious-of-governmentregulation. Regarding financial regulation, economists have routinely celebrated the importance of free markets and of reducing burdensome regulation. The financial-system flaws most frequently mentioned were the moral-hazard traps that arise due to bad regulatory design, about which promarket and pro-mild-regulation could readily agree. An example here is the 'consensus view' orchestrated among macroeconomists, whether they subscribed to the new Keynesian or new Classical schools of thought. Maintaining this consensus required that debate be polite: limited to empirical questions and to queries about equilibrium models with pre-agreed analytical features. Economists were certainly free to challenge the premises of this new-Classical/new-Keynesian consensus in favour of alternative ideas derived from overlooked thinkers such as Minsky and Keynes. But to challenge basic premises was to disagree impolitely; and such challenges could only be freely exercised outside the inner circles of policy influence. Nonetheless, as structural cracks and tensions began to emerge in the economy, several leading academics and policy veterans expressed their unease. John Geanakoplos of Yale, drawing on his Wall Street experience, began writing papers about 'broken promises' (1996) and 'leverage cycles' (2003) in financial markets-topics which had gone virtually unmentioned since the efficient market hypothesis became a super-orthodoxy in the 1970s. 3 In April 2005, Paul Volcker wrote an op-ed piece in the Washington Post, "Economy on thin ice," which foresaw the demise of Wall Street. Raghuram Raj, formerly head of research at the IMF, hypothesized that liberalizing financial markets could increase risk-taking and fragility, not welfare. Paul Krugman, in his public dialogue space at the New York Times, drifted steadily to the left. Then, after innumerable crises in the global South, a mega-crisis hit the global North. And the truce among economists proved fragile. Suddenly the rules of discourse wavered. The consensus that certain things were not to be spoken of was forgotten. Some economists continued to work from 'first principles', urging caution in responses to the crisis. Others set aside theoretical niceties and jumped toward pragmatic responses based on looking hard at the numbers.

Australian Journal of Corporate Law, 2010