|From Dialogue on Globalization No. 42 - April 2009|
Re-Defining the Global Economy
Cover - Table of Contents
The editor on why Adam Smith’s market never stood alone
From Adam Smith’s single reference to the “invisible hand” in The Wealth of
Nations, one would be hard pressed—even delusional—to derive a theory of the selfsufficiency
of the market economy. Quite the contrary. As the headline of a
commentary by Harvard economist/philosopher Amartya Sen proclaimed in the
Financial Times on 11 March 2009, “Adam Smith’s market never stood alone”.
Indeed by understanding that the self-interested individual may sometimes be “led
by an invisible hand to promote an end which was no part of his intention”1, the
founder of modern economics laid open the possibility that the invisible hand could
yield either positive or negative, unintended results.
A Social Democratic Response
There is by now a consensus that the current global financial crisis may well be the
worst since the Great Depression. As solutions are proposed, there is strong
pressure from Wall Street to make sure that their way of doing business is protected.
They don’t want to see finance suffer from too much regulation.
In times of crisis, we all have to pull together; sacrifices are asked of us all. But in a
democracy, that does not mean silent ascension to whatever is proposed. The voices
of Social Democrats and those who reject the free market mantra of the US, should
be listened to as the debate about how to proceed moves forward. We must be
allowed to help formulate the government responses to the crisis. There are stark
differences of opinion as to the best way to proceed.
The response of the US should have focused more on helping the millions of
Americans who were losing their homes, ensuring that the economy not go into the
predictable (and predicted) recession into which it has been sinking, and minimizing
the inevitable resulting hardship. The US has one of the worst unemployment
schemes in the advanced industrial countries. The US is one of the few countries
that does not recognize access to medicine as a basic human right; and when
Americans lose their jobs, they lose their health insurance. This says something
about priorities and values.
José Antonio Ocampo
A 7-Point Plan for Development-Friendly Reform
The financial crisis has shown how dysfunctional the current global financial
architecture is for managing today’s global economy. The need to govern
globalization has never been clearer, but at the same time the present institutional
arrangements have never been so impotent. Calls for deep reforms and even for a
second Bretton Woods Conference are, therefore most welcome. Similar calls for
reform were made after the Asian and Russian crises, which engulfed most of the
developing world in deep recessions, but they led at best to marginal reforms. The
fact that this time the industrial countries are at the center of the storm may lead
them into action, but it also creates the risk that measures of direct interest to
developing countries will be marginalized from the agenda.
Eric Helleiner and Tony Porte r
Making Transnational Networks More Accountable
There is widespread agreement that the current global financial crisis has
highlighted a number of problems of accountability. Much attention has been
focused on the accountability of various private actors, ranging from mortgage
lenders and investment bankers to credit rating agencies and chief executive
officers. In our view, more attention needs to be paid to that of the transnational
networks of financial officials which oversee the coordination of financial regulation
at the international level. The crisis, after all, was generated not just by market
actors but also by a failure of international regulation which was developed in these
networks. Moreover, these same networks are now taking the lead role in
international initiatives to reform financial regulation.
A Way Forward: Formal and Informal Aspects of Economic Governance
Public Sector Credit Rating Agencies = More Stable Financial Architecture
The Future of International Financial Regulation
What Role for Central Banks?
Country-Based vs. Global Regulation: Failures of the Present Framework
Dear Prudence: Regulation Needs to be More Macro and More National
Creating Political Space for Effective Financial Regulation
Democratizing Global Financial Regulation: Labour’s Perspective
Food Security and Finance in the World Economy