The global economy is strongly integrated, and domestic economic policies are strongly… well, domestic.
A landmark report by Chatham House and the Centre for International Governance Innovation (CIGI) argues that the way in which nations design their economic policies is woefully inadequate to prevent financial and economic crises.
Entitled “Preventing Crises and Promoting Economic Growth: A Framework for International Policy Cooperation“, the report is the outcome of a nine-month international research project. Authors Paola Subacchi and Paul Jenkins consulted with finance and foreign affairs ministries, multilateral institutions and research institutes in Europe, Asia and North America.
They call for national policy-makers to recognize the spillover effects of their policies on other countries as well on the wider economic system. In practice, this would mean accompanying internationally relevant domestic policies by “international impact assessments”.
The report also proposes a new framework for G20 policy cooperation. Indeed, cooperation tends to be “only feasible when interdependencies are made clear by incidents of instability and volatility as happens during crises, i.e. when the costs of non-cooperation are painfully evident“.
The authors recommend the following measures:
- Developing adjustment paths to unwind current account imbalances
- Implementing measures to reduce commodity market volatility within five years
- Moving beyond the dollar to a more stable multi-currency monetary system within 15 years
Several of the ISN’s partner institutions have also been publishing papers about the role of the G20 in governing the global economy, or about reforming financial governance more generally. For example:
- The Global Governance Agenda and the Role of the G20, by the Elcano Royal Institute of International and Strategic Studies
- A New World Economic Order: Overhauling the Global Economic Governance as a Result of the Financial Crisis, 2008-2009, by the Finnish Institute of International Affairs
- Lessons (Not) Learned: A Critical Review of the “Blame-it-on-the-State” Account of the Financial Crisis and its Implications for the Reform of Financial Regulation, by the Hellenic Foundation for European and Foreign Policy
- Evolving Global Economic Architecture: Will We Have a New Bretton Woods?, by the S. Rajaratnam School of International Studies
- The Danger of Divergence: Transatlantic Cooperation on Financial Reform, by the Atlantic Council of the United States