Summary:
Philip Stevens argues that once the financial storm has settled, politicians will need to consider what the crisis tells us about the nature of the world we live in. One thing it revealed is that governments have been left with responsibility without power. The grip of individual states on the levers of economic management decisively weakened, but the loss of control has not been matched by any corresponding diminution of responsibility. Tensions like this, resulting from globalization, are not restricted to just the economy. Voters want the ease of movement across national borders that comes with cheap travel, but they also want governments to control immigration and cross-border crime. They want to buy cheap electronics from China, but they blame politicians when global supply chains threaten job security at home. If the politicians want the liberal market system to work, they will have to make multilateralism work. We need global governance, and a set of credible international rules. (Published: 18/09/08)
Notes:
- once the storm abates the task for politicians will be to ask some bigger questions
- Putting aside the technicalities of collateralised debt obligations, capital ratios and the rest, what does the crisis tell us about the nature of the world in which we now live?
- growing tension between global integration and a shortage of credible international governance
- governments have been left with responsibility without power
- tensions as a result of globalization
- grip of individual states on the levers of economic management decisively weakened
- few political leaders outside the US were even vaguely aware of the degree to which their own banking systems were held hostage to the subprime loans made to American homeowners
- but: loss of control has not been matched by any corresponding diminution of responsibility
- voters still hold their own politicians to account for the insecurities that flow from interdependence
- blaming someone else offers insufficient answer to the homeowners trapped in negative equity or to depositors or creditors in a failing bank
- voters want the ease of movement across national borders that comes with cheap travel
- but they also want governments to control immigration and cross-border crime
- voters want to buy cheap electronics from China
- but they blame politicians when global supply chains threaten job security at home
- tensions are not susceptible to neat solutions
- but: all point in the same direction
- interdependence is no longer an abstract noun
- governments need to find ways to reclaim some of the sovereignty lost to globalisation
- means more global governance: credible international rules
- consequences of financial shocks
- capitalism will survive
- but: risk of a retreat to economic nationalism
- if the politicians want the liberal market system to work, they will have to make multilateralism work
