The Irony of Global Economic Governance: The System Worked – Council on Foreign Relations

A little positive news from the global economy?  We’ll take it:

The 2008 financial crisis posed the biggest challenge to the global economy since the Great Depression and provided a severe “stress test” for global economic governance. States rely on a bevy of institutions—the International Monetary Fund, World Trade Organization, and the Group of Twenty—to coordinate action on the global scale. Since the Great Recession began, there has been no shortage of scorn for the state of global economic governance among pundits and scholars. However, in this International Institutions and Global Governance program Working Paper, Daniel Drezner concludes that, despite initial shocks that were more severe than the 1929 financial crisis, the evidence suggests that these structures responded to the financial crisis robustly.

via The Irony of Global Economic Governance: The System Worked – Council on Foreign Relations.


4 thoughts on “The Irony of Global Economic Governance: The System Worked – Council on Foreign Relations”

  1. In reading other views of the global economic situation, it seems as though the views of the Council on Foreign Relations is not shared by many. On Tuesday, leaders of global financial bodies met in Berlin to assess the global economic situation and formulate methods to repair the economy namely in the western world.

    “The chief of the International Monetary Fund, Christine Lagarde described the economic growth in recent years as “tepid” and recovery from the financial crisis as “laborious.” She urged the world’s major economies to continue with consolidation.”

    The key to recovery in joint action carefully planned and executed. Without effort and cooperation internationally, the economy will easily remain stagnant. For example, Greece has now planned an agreement with other international leaders which includes $1 billion in spending cuts and governmental reforms. Although the plan has not yet shown success, its prematurity now will hopefully results in reparations to grow Greece to the economic state it was in the past. If this plan is approved by parliament, another $40 billion will be secured in bailout funding. Nations, despite being less indebted as Greece, can make similar plans by forming agreements with others internationally to aid their economic issues, helping not only themselves, but other nations who also currently suffer.

  2. I think both of the stipulations are correct. It is important to note that the goal of such provisions was not to guarantee economic growth and prosperity indefinitely; rather, their purpose was to preempt and avoid an economic crisis of equal or greater magnitude as seen in the 1930s. The article simply asserts that these provisions worked. We’ve successfully averted a global economic crisis that threatened to be more devastating than the Great Depression. Economic growth is undoubtedly “tepid” right now, but that does not mean that the IMF, WTO, and G20 have failed in fulfilling their purpose.

  3. Andy makes a good point that the purpose of many of these organizations, especially the WTO, is to provide a framework for international growth but not to provide the actual growth. The financial crisis was a major problem and these international institutions held strong. One of the main problems during the 1930’s was the lack of these institutions. Instead of working to solve the problems, governments gave in to protectionist pressures. During the recent financial crisis, these institutions prevented governments from making the crisis worse than it already was. However, some of these organizations are trying to create growth and so I don’t think they have been tested completely. The real test for these institutions will be what happens with the European debt crisis and how governments around the world react. This crisis is already threatening to hurt current international trade.

  4. I think the headline for this article is kind of funny. Claiming that the current system “worked” when so many Americans are still out of work and the economy is still in the hole seems a little over the top to me. Granted, more jobs are being created, and we have GDP growth, but that doesn’t mean that we’ve dug ourselves out of the mess that we’ve been in for the last several years, and it doesn’t mean that things can’t get worse in a hurry. This article
    argues that the economy could still go into a depression without an increase in ‘demand.’ We should also be concerned about the national debt and the effects that it may have on our economy and economic relations.

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