Take a very large step back and what do you discover? Things are not getting better. Things are getting worse.
Once a year the Centre for International Governance Innovation (CIGI) polls its own ranks — distinguished, senior, visiting and research fellows associated with the think tank based in Waterloo, Ontario — on the state of the global economy, the banking system, trade and global warming. The 2014 results were released today as a CIGI policy brief and also as an interactive website.
The report paints a bleak picture of a planet struggling to emerge from a downturn that now equals the Great Depression in longevity, if not in scope.
Six years after Lehman Brothers filed for bankruptcy, launching the worst financial crisis in what is for most of us living memory, the 21 experts surveyed gave the global economic situation a score of 39 percent, on a scale that ranks 80 per cent or better as “major progress,” 40 per cent to 60 per cent “minimal progress” and 20 per cent to 39 per cent “some regression.”
Last year’s score was 30 per cent, so at least the experts aren’t quite as fearful as they were 12 months ago that things are getting worse. But they are still pretty fearful.
What’s gone wrong? A lot. Yes, governments and central bankers acted swiftly and well in 2008 and 2009 to prevent the financial crisis from spiraling from recession into depression. But the damage was enormous, revealing deep weaknesses in how we regulate a global economy that has not been properly repaired.
You know about the cascading crises in Europe and the deep sluggishness of an American economy that always appears on the brink of sustained recovery, without actually recovering.
But there are bigger problems. Perhaps the biggest is that national governments are unable or unwilling to sink their differences over how the International Monetary Fund and other institutions should prevent or respond to another major financial crisis.
As a result, halfway through this dismal decade we still don’t have firewalls in place to prevent another decade-defining catastrophe from happening again.
If Europe’s financial woes slide from chronic to critical, perhaps brought on by confrontation with Russia, the world could head back into crisis, this time with governments that are much weaker than they were before and without proper safeguards to limit the damage.
CIGI’s experts are happy with new rules that force banks to improve capital buffers, among other things. The lack of those buffers helped bring on the debacle of 2008–09. But the rise of shadow banking, in which lending occurs outside the traditional banking system and beyond the watchful eye of regulators, threatens the regime known as Basel III. And again, national governments refuse to surrender a measure of sovereignty for the sake of global financial security.
Progress toward freer trade, the best long-term guarantor of growth, is also threatented. The World Trade Organization, having failed miserably at securing agreement during the Doha round of trade talks, is now failing miserably at securing agreement over the much more modest Bali Package. Some countries are talking about agreeing to the limited Bali reforms among themselves, even if it means freezing out other members, especially obstructionist India.
The Trans Pacific Partnership talks are stalled at least temporarily over — you guessed it — agriculture subsidies, and CIGI fellows wonder whether it’s a good idea in any case for coalitions of the willing to sign free trade agreements amongst themselves that leave out some of the world’s most important actors — especially China and India — and some of its most vulnerable, especially Africa.
Finally, the CIGI fellows despaired over the lack of progress in combating climate change, though they did note that subnational governments are stepping in where national governments fear to tread. In Canada, think of the B.C. carbon tax and Ontario’s decision to phase out coal-fired generators.
The brief concludes that all of this backsliding in governance, financial regulation, trade and the environment warrants “sustained attention from policy makers and innovative solutions from analysts, academics and think-tank scholars.” Here I must part company with my colleagues.
One problem facing policy makers, analysts, academics and think tank scholars is that they struggle to find solutions to pressing global challenges by engaging policy makers, analysts, academics and think tank scholars. Yet, as the policy brief reveals over and over again, progress founders on the reluctance of governments to surrender even a soupcon of sovereignty for the collective good.
Democratic governments are elected by the people. If policy makers, analysts, academics and think tank scholars really want to end the drift, they need to talk to the people, not each other.