The way in which nations design their economic policies is woefully inadequate to prevent financial and economic crises, according to this report copublished by CIGI and Chatham House following a nine-month research project involving consultations with finance and foreign affairs ministries, multilateral institutions and research institutes in Europe, Asia and North America. Governments need to grasp the international implications of their domestic policies, recognizing that their decisions can cause ripples across an integrated world economy.
Co-author Paola Subacchi, research director of the International Economics Research Area at Chatham House, says: “Nations need to upgrade their domestic policy to recognize the effect on other countries and on the wider economic system. Ignoring these effects will only help perpetuate international economic instability and increase national exposure to global economic shocks.”
CIGI Distinguished Fellow Paul Jenkins, former senior deputy governor of the Bank of Canada co-authored the report. “International policy cooperation should be the new modus operandi of policy making,” Mr. Jenkins concludes. “In 2011, the G20 needs to look beyond its roots as a crisis steering committee to build a new framework for cooperation structured around an understanding of what ties us together and a common diagnosis of the challenges we face, individually and collectively.”
To sustain cooperative efforts, the report proposes a new “framework for G20 policy cooperation” and includes eight specific recommendations for the G20. In addition, an ambitious schedule of targets for policy cooperation set out in the report include credible action to reduce current account imbalances and dampen commodity market volatility within five years, and moving the dollar to a more stable multi-currency monetary system within 15 years.
The report emphasizes the importance of leadership and vision at both national and international levels to achieve the sustained cooperation necessary to avoid crises and support economic growth.
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