History, in the form of economic crises, does indeed repeat itself. But there are wide variations across the experiences of individual countries and across time, and the response of policy makers often determines the severity of the recessions that usually accompany financial crises of all types. This policy brief provides a brief history of short selling and its critics, and considers the question of whether a “herd-like mentality” exists during financial crises.
Refuting Hegel? Striking the Right Balance between Financing and Adjustment in International Adjustment
In 2008-2009, when confronted by the gravest global economic crisis in 80 years, G20 governments and their central banks responded promptly and appropriately by providing ample liquidity to financial markets, avoiding pro-cyclical fiscal policies and resisting protectionist trade measures that would invite retaliation.
It may be a new year, but Europe faces the same malaise that plagued it in 2011. And, with the application of the same policy prescriptions, the prognosis, sadly, is unchanged.
The Cannes G20 Summit was dominated by the 2011 euro crisis, but the summit did succeed in raising the profile of the G20 in some countries, and the national priorities of G20 leaders were reflected in their respective national media.
The Cannes G20 Summit was almost blown off course by the sovereign debt crisis, which euro zone members tried, but failed, to stem in the days preceding the summit. In spite of the economic storm, the G20 managed, on a number of important files, to reaffirm and clarify directions taken and commitments made at earlier summits. Arguably, however, the summit also represents a step back from some other aspects of the G20 economic cooperation agenda, which, while more daring and difficult, could have fostered a more dynamic response to the unfolding crisis.
On the day after the Cannes G20 summit concluded, the lead article in The Guardian stated that Cannes “showed how power has shifted to Beijing.” In Le Monde, it was reported that China will likely become the second-largest contributor to the International Monetary Fund (IMF). It would be wise to avoid the China hype. Nonetheless, the signs are that Beijing will increase its contributions to the IMF in the not-too-distant future.
The heady days of the London and Pittsburgh summits of 2009 are gone. The spectre of the advanced world entering a “lost decade” is a real prospect. Governments are withdrawing stimulus as quickly as it was introduced. Mismanagement of the euro zone has largely eroded confidence to deal with the crisis that threatens to tear apart the single currency area. We are no nearer to a resolution of the euro crisis.
The media doesn’t get it. John F. Kennedy observed that “The great enemy of the truth is very often not the lie — deliberate, contrived and dishonest — but the myth — persistent, persuasive and unrealistic.” The media perpetuates the myth that 20 political leaders can crunch long-standing issues and solve complex problems in one and a half days.
The recent “Occupy” demonstrations are indicative of a growing mistrust in the ability of governments and the G20 to respond to today’s problems. Questions are being raised about the effectiveness and credibility of the G20 as a global governance institution amid the growing uncertainty about the world economy. This collection of commentaries by CIGI experts offers policy analysis and prescriptions in advance of the Cannes G20 Summit on November 3-4, 2011, addressing some of the most critical issues facing the G20 — securing economic recovery and growth, global imbalances, food security, employment, anti-corruption, international trade, and the G20 process itself.
The background paper for the CIGI conference “An Unfinished House: Filling the Gaps in International Governance” provides a useful collection of facts and observations about the universe of global governance arrangements. It offers a preliminary description of the critical gaps and inadequacies — to assist in thinking about the principal dilemmas and research priorities.