Rodrik’s Plan B for global finance
"[T]he logic of global financial regulation is flawed. The world economy will be far more stable and prosperous with a thin veneer of international co-operation superimposed on strong national regulations than with attempts to construct a bold global regulatory and supervisory framework. The risk we run is that pursuing an ambitious goal will detract us from something that is more desirable and more easily attained" Extract from Dani Rodrik in The Economist
I still agree with Rodrik (although Richard Baldwin says that D.R. is attacking a 'straw man').
As Rodrik notes, the founders of the GATT shared this insight. The WTO has lost it—witness the sorry history of the Doha Agenda—and needs now to find a way back to that less 'perfected' but more plausible framework for global trade.
Brad DeLong—who isn't made of straw as far as I know—objects that "we need a hegemonic lender-of-last-resort" with the power and will to preside over a global financial system and to make it work, by force if necessary. This sort of economic-gunboat thinking is, unfortunately, still pretty common among a school of United States commentators who cling to 19th century theories of hegemonic control as if to a security blanket against times that have changed (over and over) since 1948 (GATT), 1986 (Deng recasts China's economic future), 1991 (collapse of Soviet Union), 1997 (Asian Financial Markets crisis), 2001 (China joins WTO), 2003 (WTO stumbles at Cancún), 2008 (WTO falls over in Geneva)…
Posted on 03/17 at 12:55 PM.
Your comments
Simon Lester
Hi Peter,
What’s your “plausible framework” for trade? I don’t mean to make you write a dissertation here, just thought maybe you had already set it out somewhere!
Best,
Simon
Fair question, Simon.
I mean ‘plausible’ in the sense that Dani Rodrik means it: a framework that is desirable and easily attained because it accommodates the wide differences among countries in their trade and economic policies that lie behind the failure of the ‘single-undertaking’ consensus on the Doha agenda.
Such a plausible framework need not be ‘value free’. It would favor open markets, transparency and ‘due process’ in the administration of trade regulations. It sets standards for the administration of trade policy that minimize adverse ‘spillovers’ of domestic policies in order to avoid actual conflicts between countries.
The GATT is no longer this plausible framework: services must be encompassed by the framework, and trade facilitation measures, too. But it’s not the single undertaking either. At least, not the single undertaking as legislated by the Quad countries in 1993.
It is, probably, the WTO agreements augmented by a collection of open-ended, optional, ‘critical mass’ agreements that would allow governments in some countries (or regions, they may be in the form of RTAs) to pursue deeper commitments in some product/services sectors or in some policy domains (production subsidies for agriculture) on a reciprocal basis.
I have an article on this topic, co-authored with Andrew Stoler of the Adelaide Institute of International Trade that is due to appear in a forthcoming special issue of the journal Global Governance.
Best,
Peter