by Alex Evans | Sep 1, 2010 | Economics and development, Global system
On the fight brewing between the US and Europe over IMF board seats that I wrote about last week, David Bosco at Foreign Policy has been talking to Ted Truman, a former US Treasury official now at the Institute for International Economics. Truman’s take:
First, he argues that the American gambit was not sudden but is a response to what he characterizes as longstanding European intransigence. He believes that Europe has failed repeatedly to respond to American signals of discontent over the past five years. “In 2008 and 2009, they basically said that this issue was not on the table,” he recalls. In that context, the new U.S. position is “an aggressive move in the context of a pretty aggressive defense.”
He also emphasizes the oddity of current European policymaking in a body like the IMF. It’s not as if each of the European seats offers a unique policy perspective. Through the EU, individual member states coordinate their positions in advance. “They just get eight to ten voices every time an issue comes up,” he says. Truman contends that it might actually be better to revert to a smaller board, not least for reasons of cost. IMF executive directors and their staffs are relatively expensive, and in today’s environment of budget-slimming there could be some non-trivial savings for the Fund in a pared-down board.
On this issue, Washington is aligned with India, China and Brazil in an effort to tame traditional European prerogatives. If that trend continues, it could spell trouble for Europe in the world of multilateral institutions.
by David Steven | Mar 31, 2010 | Economics and development, Global Dashboard, Global system
[youtube]http://www.youtube.com/watch?v=AA0mFjJbNH8[/youtube]
It’s commonplace to describe the financial crisis as a once-in-a-century event, but I question whether that is the case. Perhaps we’re not in the midst of a short-lived financial shock, but a long crisis that stretches back into the 1990s.
Here’s Paul Blustein on Alan Greenspan:
The Fed chief told the G-7 that in almost fifty years of watching the U.S. economy, he had never witnessed anything like the drying up of markets in the previous days and weeks.
Greenspan wasn’t speaking in Autumn 2008 when Lehman’s collapsed, however, but ten years’ earlier in the wake of the spectacular blow-up of Long-Term Capital Management, which lost $4.5 billion almost overnight in what the fund’s principals post-rationalised as a 100-year flood.
Long-Term (with its superbly hubristic name) was brought low by derivatives, just as Lehman’s would be a decade later.
(Robert Rubin, Clinton’s Treasury Secretary, was one of those left picking up the pieces – part of ‘the committee to save the world’, with Greenspan and Larry Summers. Rubin went on to preside over Citigroup as it needed a succession of massively expensive bailouts, when its derivatives tanked in the subprime crisis.)
The proximate cause of Long-Term’s failure was Russia’s Rouble crisis, when the country defaulted on its debt after the IMF refused to mount a second bailout.
The Russian crisis itself came in the midst of a long series of dramatic economic failures that hits the world between 1997 and 1999, mostly in East Asia (Thailand, South Korea, Indonesia etc), but which also battered Brazil and would devastate Argentina in 2002. Blustein again:
Time and again, panics in financial markets proved impervious to the ministrations of the people responsible for global economic policymaking.
IMF bailouts fell flat in one crisis-stricken country after another, with the announcements of enormous international loan packages followed by crashes in currencies and sever economic setbacks that the rescues were supposed to avert.
(more…)
by Michael Harvey | Sep 24, 2009 | Cooperation and coherence, Economics and development, Global system
As the spotlight shifts from the UN General Assembly and world leaders converge on Pittsburgh for the G20, there’s been much debate about the prospects for success and the competing agendas of member countries.
– The core negotiations seem set to finalise agreement over a “framework for balanced and sustainable growth” – particularly critical from US and Chinese perspectives – that seeks to give the IMF a greater reporting role in policing global imbalances. The FT’s Money Supply blog offers a sceptical comparison of the leaked draft agreement with the IMF’s current role.
– As to the Europeans: Gordon Brown seems to be adopting a broader focus, calling in an NYT op-ed for “a new system of governance” to form the “next common economic goal”. (He also announced that UK Business Minister Shriti Vadera would be going on secondment to the South Korean government to help develop proposals on global financial architecture ahead of their G20 presidency next year.) For Angela Merkel, the “most important subject” is financial regulation; she argues that “we must not search for substitute issues”; and for Sarkozy too, the top priorities look to be bankers’ bonuses and agreement over capital requirements for banks.
– Trade and protectionism are sure to form another important aspect of negotiations, particularly for China and India. VoxEU takes an interesting look at trends in world trade since the November 2008 Washington Summit, highlighting how G20 states’ oft-proclaimed commitment against protectionism has been broken by member governments approximately once every three days since last year’s commitments. “No other statistic”, Simon Evenett argues, “better demonstrates the paucity of global leadership on contemporary protectionism”.
– Robert Zoellick, President of the World Bank, calls for the summit to focus on the world’s developing economies, highlighting the positive contribution they can make to the health of the global economy. Pittsburgh, he argues, can mark the advent of a more “responsible globalisation” founded on “multiple poles of growth”. Brazilian President, Luiz Inácio Lula da Silva, meanwhile, presents his take on the G20 grouping in the LA Times.
– Around the think tanks, finally: Brookings has an in-depth report focusing on some of the broader implications of the G20 agenda, from the protectionism issue to African and Latin American perspectives, as well as assessing the G20’s approach to climate change. The Carnegie Endowment, meanwhile, has an interesting take on Saudi Arabia’s approach to the summit, given its increasing exposure to instability in the financial markets and vulnerability to shifts in oil and food prices.
Elsewhere, Chatham House has analysis of some of the key short-term economic indicators, as well as long-term GDP forecasts – arguing that it is still to early too be coordinating exit strategies. The Canadian-based Centre for International Governance Innovation, meanwhile, takes a comprehensive look at some of the challenges facing the G20 as a forum for global economic governance, with contributions from policymakers and academics alike.
by Michael Harvey | Sep 15, 2009 | Economics and development, Europe and Central Asia, Global system, North America, UK
– With the anniversary of Lehman Brother’s demise, the FT recalls the events of that fateful weekend last September. The NYT has reflections of three former Lehman employees, while a Guardian roundtable asks what lessons, if any, we’ve learned from the bank’s fall. Niall Ferguson, meanwhile, rails against those who argue “if only Lehman had been saved”. He suggests:
Like the executed British admiral in Voltaire’s famous phrase, Lehman had to die pour encourager les autres – to convince the other banks that they needed injections of public capital, and to convince the legislature to approve them.
– Sticking with matters financial and economic, Der Spiegel has an interview with the head of the IMF, Dominique Strauss-Kahn, on the Fund’s actions during the crisis and the potential for a new role for the institution going forward. Former MPC member, David Blanchflower, meanwhile, offers a telling insight into the inner workings of the Bank of England’s decision-making as financial meltdown ensued.
– Elsewhere, the WSJ reports on President Sarkozy’s call to broaden indicators of economic performance and social progress beyond traditional GDP, following the findings of the Stiglitz Commission. Richard Layard, expert on the economics of happiness, offers his take here, arguing that “[w]e desparately need a social norm in which the good of others figures more prominently in our personal goals”.
– Wolfgang Münchau, meanwhile, assesses the implications of an Irish “No” vote in the upcoming referendum on the Lisbon Treaty. “There is an intrinsic problem for the Yes campaign in Ireland”, he suggests, “which is that the core of the treaty was negotiated seven years ago. This is a pre-crisis treaty for a post-crisis world… If we had to reinvent the treaty from scratch, we would probably produce a very different text”.
– Finally, last week saw the German Marshall Fund of the US publish its Transatlantic Trends survey for 2009. Unsurprisingly, a majority of Europeans (77%) support Barack Obama’s foreign policy compared to the 2008 finding for George W. Bush (19%); though the “Obama bounce” was less keenly felt in Central and Eastern Europe than Western Europe. A multitude of other interesting stats – on attitudes to Russia, Afghanistan, Iran, the economic crisis, and climate change – can be found here (pdf).
by David Steven | Jun 16, 2009 | Global system, North America
A few weeks ago, I nearly blogged about growing opposition to IMF funding in the US, but thought it was something of a fringe position. I was wrong. House Republicans are so enraged by Obama’s G20 commitment to the IMF that they are voting to block a $106bn war-spending bill because an additional $5bn for the IMF has been included.
According to House Republican, Mike Pence:
Once the American people learn that the Democrats are using a war-funding bill for a global bailout, they’ll know what to do. We’ll take the message to the floor and to the American people, and I expect we’ll win this fight.
John Boehner, House Minority Leader, agrees. According to his spokesman:
It is the Democratic leadership that is playing politics with our troops by insisting on using them as leverage to pass over $100 billion in global bailout money for the IMF.
Republicans are inching close to advocating complete US disengagement from the global system – UN, World Bank, IMF and all. It’s a worrying trend.
Update: Politico notes how Boehner’s position has hardened over the years.
Boehner now derides the inclusion of IMF cash in the bill, calling it a “global bailout,” despite President Obama’s request that Congress make a down payment on the $100 billion he’s committed to keeping the financial crisis from swamping developing countries, including Pakistan.
That wasn’t Boehner’s tune in 1998, when the Clinton administration requested $18 billion in IMF funding to ameliorate the effects of the Asian financial crisis.
“I have been as critical about the IMF as many, but given the crisis we have around the world, the U.S. needs to provide leadership,” the Ohio Republican told the [Newark, N.J.] Star Ledger in Oct. 1998. “The only real avenue is the IMF.”
His trajectory, it seems, is typical of the whole of his party.
