As the world struggles with a financial crisis, leaders have called for a fundamental rethinking of global institutions. At an American Enterprise Institute (AEI) event two panels discussed the economic institutions and offered suggestions as to what to do about the current economic crisis. The academic panel included Marc Busch, the Karl F. Landegger Professor of International Business Diplomacy at the School of Foreign Service and associate professor in the government department at Georgetown University, Brink Lindsey, the director of the Center for Trade policy Studies at the CATO Institute and T.N. Srinivasan, the Samuel C. Park Jr. Professor of Economics and professor in international and area studies at Yale .
To answer the question “do we have the international tools to fight the global economic crisis?” Lindsey replied, “no and the existence of tools is a fantasy.” He continued, “we need new institutions to fix the economy.” Lindsey said “there has been a misreading of history and a misleading role of institutions.” To elaborate on his first point of misreading history Lindsey said “the Bretton Woods Conference was better than the chaos of the depression but it’s not a good model to go by.”
The Bretton Woods Conference took place in 1944 in Bretton Woods, New Hampshire to regulate the international and financial order after World War II. The 1944 agreement said “nations should consult and agree on international monetary changes which affect each other. They should outlaw practices which are agreed to be harmful to world prosperity, and they should assist each other to overcome short-term exchange difficulties.”
Lindsey also explained his idea of the misleading role of institutions. He said “people think institutions are running the show.” He continued, “institutions imply someone is at the top and is in charge of everything.” As to what to do about the current economic crisis Lindsey said “there is no possibility of international coordination because there is no consensus on what went wrong and there is no consensus on what to do.”
Srinivasan was the next panelist to offer his view on the issue and said “the current crisis is more delicate than the great slump of 1930 in Keynes.” He believes we need an analysis of possible contributions to the current crisis in order to develop reform proposals. He said that “temptation of short term reform should be resisted because they have the potential to increase crisis.” Srinivasan doesn’t believe global institutions should be closed but believes the “World Bank should be scaled down to focus on to focus on countries that need development.”
Busch was the last panelist to give his views on reforming global governance. Busch said “the World Trade Organization is successful because it knows its limits, the International Monetary Fund gives developing countries more of a voice and should be a lender of very last resort, and World Bank should limit the U.S. role and focus lending on least developing countries.” Busch said the institutions should work together on trade and invest in a national capacity.
The other panel included Anne Krueger, professor of international economics at the Johns Hopkins School of Advanced International Studies (SAIS), Kenneth Dam, member of the board of the Brookings Institute and Grant Aldonas, senior adviser at the Center for Strategic and International Studies.
Krueger said that “we need to know how the economic crisis happened and why.” She also said that “international institutions should be supportive.” She said the situation has two parts: it’s financial and it’s real. Krueger believes the situation is financial because of the housing market collapse and is real because of the consequences that everyone is facing.
< Dam said “the G20 should just record and not negotiate.” The G20 is a group of twenty finance ministers and central bank governors from 20 economies. It is a forum for cooperation and consultation on matters pertaining to the international financial system. Dam also said “the International Monetary Fund is a potential source for lending and may issue bonds like World Bank.”
Grant was the last panelist to state his view on global institutions and he said that “there is a need for an economic political narrative and a need to articulate why we need change.” He also said the Trade Agreement Act in the stimulus will not solve the problem and we need to develop policy. He said “the TAA is not a sufficient step to get us where we need to be trade wise.”