The author is one of several CIGI-sponsored Canadian university students who attended the INET conference, Crisis and Renewal: International Political Economy at the Crossroads, at Bretton Woods, NH, April 8–11, 2011. Each student was asked to write a short reflection on the conference themes.
We live in an increasingly globalized world. That this notion has grown hopelessly clichéd does not render its content less salient, nor its insights less relevant. While the origins of the most recent financial crisis cannot be attributed to economic globalization alone, this phenomenon — at the very least — structured the turbulent events that followed. While the gap between the reality of globalization and the need for more effective systems of global governance appeared evident to many before the crisis hit, the perceived inability of national governments and existing international institutions to respond adequately to the crisis has placed this paradox in stark relief. The pressing need for innovative governance solutions in the context of a volatile, deeply integrated global economy provided the overarching theme for the 2011 INET conference.
Though the conference highlighted a number of diverse viewpoints and opinions on a variety of topics, many presenters emphasized the need to strengthen key mechanisms of global cooperation. In his keynote address, former British Prime Minister Gordon Brown pointed to the prevalence of global-scale problems that necessitate global solutions. Other presenters similarly noted that the crisis had revealed significant gaps in global and regional financial architecture. Finally, there was a prominent sentiment that current global cooperative efforts remain inadequate. Discussions of the Basel III standards, for example, criticized the accord’s failure to pursue more ambitious capital requirements. More generally, discussions highlighted the problem of fragmentation and incoherence in the global financial architecture, and suggested the need for clearer international rules. Overall, there appeared to be an emerging consensus around the idea that significantly greater international cooperation — primarily expressed through the reform or creation of international institutions — is necessary to address twenty-first century economic governance challenges.
This overarching theme suggests two areas for further research and discussion. The first centres on the intersection between international cooperation, sovereignty and domestic autonomy. As noted within international legal scholarship, binding international commitments create significant “sovereignty costs” for states. State actors will therefore often be wary of establishing hard legal commitments that appear to restrict domestic policy autonomy (W. Abbott and Snidal, 2000). To the extent that presenters at the conference squarely addressed this issue, they often concluded that such costs were necessary and acceptable, provided that they effectively facilitated the realization of significant mutual gains. Indeed, some speakers expressed concern that the apparent resurgence of nationalist sentiments in the wake of the crisis would, if left unchecked, impede the realization of global-scale governance solutions. It is worth noting, however, that this position is not hegemonic within the discipline of global political economy. Scholars such as Dani Rodrik, Randall Germain and Eric Helleiner have argued for the desirability of enhancing domestic autonomy in the wake of the crisis. Moreover, serious concerns remain regarding the legitimacy of international standards. The status of many states as “rule takers” within the international system raises fundamental concerns regarding transparency, accountability and legitimacy (Hurrell, 2007: 67). Though thinkers such as Martin Wolf and Robert Skidelsky raised the issue of democratic accountability at various points throughout the conference, future discussions would likely benefit from an extended treatment of these issues. Indeed, the architects of the original Bretton Woods system sought to facilitate a productive balance between international cooperation and domestic autonomy, and the need for reconciliation between these two imperatives remains prominent.
In a similar vein, a second area of productive future research is to focus explicitly on imperatives related to institutional processes and organizational design. While the conference participants successfully identified a number of problems within the global financial architecture, solutions to these issues remain nebulous. As previously noted, attempts to rationalize and strengthen financial governance arrangements at the global level must be attentive to democratic requirements and the need to balance global harmonization and domestic autonomy. Moreover, the problem of regulatory capture emerged as a central concern for conference participants; it would be productive to consider which institutional design features are likely to mitigate this phenomenon. Mattli and Woods suggest that the ability of both public and private bodies to broadly diffuse information illustrating the costs of regulatory capture is likely to significantly affect the degree to which regulatory activity reflects the public interest (Mattli and Woods, 2009). Thus, future institutional arrangements should emphasize public transparency through both official accountability mechanisms as well as expanded permeability to civil society actors. Moreover, INET (and CIGI) itself, operating as an incipient epistemic community, may wish to consider the mechanisms through which it can draw greater public attention to capture problems (Braithwaite and Drahos, 2000: 622–623). Finally, beyond agenda setting and rule creation, discussions should focus on how to promote greater compliance with international financial standards.
The INET conference provided an excellent platform for discussing the significant problems that continue to plague both the global economy and global governance processes, and successfully generated productive debate. As many participants noted, responding to these global challenges requires greater engagement with political economy issues. Drawing on one of the conference’s underlying themes, this brief essay has posited two areas of potentially useful, synergistic research among economists, political economy scholars and policy practitioners. Overall, by facilitating a broad gathering of scholars focused on various innovative research agendas within the realm of economics and finance, INET and CIGI appear well placed to establish a foundation for new economic thinking in the twenty-first century.
For more information and videos from the INET conference, visit http://ineteconomics.org/initiatives/conferences/bretton-woods/agenda.