The System Worked: Global Economic Governance during the Great Recession

2013 ◽  
Vol 66 (1) ◽  
pp. 123-164 ◽  
Author(s):  
Daniel W. Drezner
Keyword(s):  
Financial Crisis ◽  
Great Recession ◽  
The United States ◽  
Governance Structures ◽  
Economic Governance ◽  
Economic Policies ◽  
Informal Governance ◽  
The Great Recession ◽  
Optimistic Picture ◽  
Global Economic Governance

Prior to 2008, numerous international relations scholars had predicted a looming crisis in global economic governance. Policy analysts have only reinforced this perception since the financial crisis, declaring that we live in a “G-Zero” world. This article takes a closer look at the global response to the financial crisis and reveals a more optimistic picture. Despite initial shocks that were more severe than the 1929 financial crisis, global economic governance structures responded quickly and robustly. Whether one measures results by outcomes, outputs, or process, formal and informal governance structures displayed surprising resiliency. Multilateral economic institutions performed well in crisis situations to reinforce open economic policies, especially in contrast to the 1930s. While there are areas where governance has either faltered or failed, on the whole, the system has worked. Misperceptions about global economic governance persist because the Great Recession has disproportionately affected the core economies; analysts have conflated national with global governance; and the efficacy of past periods of global economic governance has been badly overestimated. Why the system has worked better than expected remains an open question, but we can tentatively conclude that both the power of the United States and the resilience of neoliberal economic ideas were underestimated.

The ongoing aftermath to the financial crisis and the Great Recession

2019 ◽  
Vol 34 (5) ◽  
pp. 560-570
Author(s):  
Gerardo del Cerro Santamaría
Keyword(s):  
Financial Crisis ◽  
Great Recession ◽  
Liberal Democracy ◽  
The United States ◽  
Historical Period ◽  
Current Crisis ◽  
The West ◽  
The Great Recession ◽  
Contemporary World ◽  
The World

This article discusses the consequences of the financial crisis that started in 2008 in the West, and particularly in the United States, as a manifestation of neoliberal capitalism’s multiple failures. In doing so, it focuses on the scholarly contributions of Manuel Castells and his colleagues in two important books: Aftermath: The Cultures of the Economic Crisis (2012) and Another Economy is Possible (2017). Both books are collective works led and edited by Castells. Also included in the review is a third book by Castells, Rupture: The Crisis of Liberal Democracy (2018), which can be read as a statement on some of the political consequences of the 2008 financial crisis and a report on the current crisis of liberal democracy. The contention is that Castells et al. make an important contribution to the socio-economic literature on the financial crisis, its consequences, and the interpretation of the societal changes that ensued and are key to understand our contemporary world. Such contribution, as observed in the three books under review, can be summarized as follows: (1) Castells and colleagues provide cases and examples from around the world in a broad comparative fashion, thus expanding our understanding of a crisis that was essentially a crisis of the West with ramifications in other countries but never a truly global crisis. (2) The approach of Castells and his colleagues is interdisciplinary and goes beyond purely economic arguments to include sociological, political and cultural ideas and insights that help us understand the complexity of the historical period under analysis; readers develop an awareness of the systemic character of the crisis, where all events were closely interrelated; in particular, both micro and macro processes leading to the crisis converged into a mutually dialectical and reinforcing relationship that warrants the contention by the authors that ‘economies’ are ‘cultures.’ (3) The authors in both Aftermath and Another Economy is Possible focus on the (long) aftermath of the crisis, which is still ongoing as of September 2019 around the world; in fact, one of Castells’ main points is that the financial crisis brought about irreversible societal change, ongoing and clearly visible today, as it triggered a significant restructuring of global informational capitalism. (4) The authors provide a focus on one of the reactive consequences of the crisis: alternative economic practices developing in the aftermath of the crisis, under the premise that we might be witnessing the rise of a new economic model based on new, alternative values. (5) Castells provides a discussion (in Rupture) of aspects of the contemporary political landscape a decade after the outset of the financial crisis and the Great Recession.

scholarly journals Why Does the Economy Fall to Pieces after a Financial Crisis?

2010 ◽  
Vol 24 (4) ◽  
pp. 3-20 ◽  
Author(s):  
Robert E Hall
Keyword(s):  
United States ◽  
Financial Crisis ◽  
Great Recession ◽  
Financial Frictions ◽  
The United States ◽  
The Great Recession ◽  
The Great Depression ◽  
Real Gdp ◽  
History Of ◽  
Low Levels

The worst financial crisis in the history of the United States and many other countries started in 1929. The Great Depression followed. The second-worst struck in the fall of 2008 and the Great Recession followed. Commentators have dwelt endlessly on the causes of these and other deep financial collapses. This article pursues modern answers to a different question: why does output and employment collapse after a financial crisis and remain at low levels for several or many years after the crisis. It focuses on events in the United States since 2008. Existing macroeconomic models account successfully for the immediate effects of a financial crisis on output and employment. I will lay out a simple macro model that captures the most important features of modern models and show that realistic increases in financial frictions that occurred in the crisis of late 2008 will generate declines in real GDP and employment of the magnitude that occurred. But this model cannot explain why GDP and employment failed to recover once the financial crisis subsided—the model implies a recovery as soon as financial frictions return to normal. At the end of the article, I will mention some ideas that are in play to explain the persistent adverse effects of temporary crises, but have yet to be incorporated into the mainstream model.

scholarly journals Income inequality: Implications and relevant economic policies

2016 ◽  
Vol 63 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Philip Arestis ◽  
Ana Gonzalez-Martinez
Keyword(s):  
Economic Policy ◽  
Financial Crisis ◽  
Income Inequality ◽  
Great Recession ◽  
Wealth Inequality ◽  
Economic Policies ◽  
Equal Distribution ◽  
Policy Initiatives ◽  
The Great Recession ◽  
International Financial Crisis

The aim of this contribution is to discuss closely the implications of income inequality and the economic policies to tackle it, especially so in view of inequality being one of the main causes of the 2007/2008 international financial crisis and the ?great recession? that subsequently emerged. Wealth inequality is also important in this respect, but the focus is on income inequality. Ever since the financial crisis and the subsequent ?great recession?, inequality of income, and wealth, has increased and the demand for economic policy initiatives to produce a more equal distribution of income and wealth has become more urgent. Such reduction would help to increase the level of economic activity as has been demonstrated again more recently. A number of economic policy initiatives for this purpose will be the focus of this contribution.

Disruptive Soft Law and Post-Crisis US Reform

2018 ◽  
Author(s):  
Abraham L. Newman ◽  
Elliot Posner
Keyword(s):  
Financial Markets ◽  
Great Recession ◽  
Regulatory Reform ◽  
The United States ◽  
Soft Law ◽  
Long Term Effects ◽  
The Great Recession ◽  
The Us ◽  
International Interaction

Chapter 6 examines the long-term effects of international soft law on policy in the United States since 2008. The extent and type of post-crisis US cooperation with foreign jurisdictions have varied considerably with far-reaching ramifications for international financial markets. Focusing on the international interaction of reforms in banking and derivatives, the chapter uses the book’s approach to understand US regulation in the wake of the Great Recession. The authors attribute seemingly random variation in the US relationship to foreign regulation and markets to differences in pre-crisis international soft law. Here, the existence (or absence) of robust soft law and standard-creating institutions determines the resources available to policy entrepreneurs as well as their orientation and attitudes toward international cooperation. Soft law plays a central role in the evolution of US regulatory reform and its interface with the rest of the world.

The Great Financial Crisis: an Ethical Rejoinder

2012 ◽  
Vol 33 (01) ◽  
pp. 19-32 ◽  
Author(s):  
David Charles Merrill
Keyword(s):  
Financial Crisis ◽  
Market Economy ◽  
Great Recession ◽  
Ethical Question ◽  
Heterodox Economics ◽  
Ethical Philosophy ◽  
The Great Recession ◽  
The Past ◽  
Modern Economy ◽  
Radical Reconstruction

The Great Financial Crisis that broke in 2008 and the Great Recession that followed has led many to question the very structure of contemporary economies. Some argue that the economic model of the past forty years is now broken. Criticism has also been directed at the orthodoxies of economics. For example, neoclassical equilibrium economics, the mainstream economics of the day, is accused of failing to understand some of the most basic aspects of the modern economy (debt and money), of supporting policies that have led to the economic breakdown (deregulation), and of failing to see the crisis coming (Bezemer 2012, Keen 2011). Consequently, heterodox thinking in economics is getting a hearing as never before. Heterodox economics offers itself as the requisite radical reconstruction of the science of economics and also proposes policies for the radical reconstruction of the major economics.Yet to talk of the reconstruction of the modern market economy is at the same time to raise the ethical question: what shape ought the market economy to take? Heterodox economics may acutely analyse the inadequacies of real economies and propose plausible reforms, but as an essentially descriptive science there will be limits on its ability to state what ought to be. Rather, what is required seems to be a systematic prescriptive ethics. In other words, recent events in the world of economics have provided an opening for what ethical philosophy should be best at providing. Determining whether a specific ethical philosophy, to be identified shortly, has the capacity to address the questions raised by heterodox economics is the task of this paper.

Are Busy Directors Harmful or Helpful? Evidence from the Great Recession

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Pradit Withisuphakorn ◽  
Pornsit Jiraporn
Keyword(s):  
Standard Deviation ◽  
Financial Crisis ◽  
Great Recession ◽  
Firm Value ◽  
Costs And Benefits ◽  
Governance Mechanisms ◽  
Great Caution ◽  
Crisis Period ◽  
The Great Recession

Abstract We contribute to the debate on the costs and benefits of busy directors by investigating the effect of busy directors on firm value during a stressful time, i. e. during the Great Recession. Our results show that busy directors improve firm value significantly during the financial crisis. In particular, a rise in directors’ busyness by one standard deviation results in an improvement in Tobin’s q by 6.41 %. Directors with multiple board seats appear to help firms navigate the crisis more successfully, supporting the notion that multiple board seats signal higher quality. Outside the crisis period, however, we find that busy directors reduce firm value, consistent with many prior studies. Our results are crucial as they show that governance mechanisms function differently during stressful times than they do during normal times. Firms should exercise great caution before imposing limits on outside board seats on their directors.

scholarly journals Financial shocks and inflation dynamics

2021 ◽  
pp. 1-29
Author(s):  
Angela Abbate ◽  
Sandra Eickmeier ◽  
Esteban Prieto
Keyword(s):  
Financial Crisis ◽  
Great Recession ◽  
Policy Implication ◽  
Vector Autoregressive Model ◽  
Financial Shocks ◽  
Trade Off ◽  
Vector Autoregressive ◽  
The Great Recession ◽  
Short Run ◽  
Dual Mandate

Abstract We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the “missing disinflation” during the Great Recession. We apply a Bayesian vector autoregressive model to US data and identify financial shocks through a combination of narrative and short-run sign restrictions. Our main finding is that contractionary financial shocks temporarily increase inflation. This result withstands a large battery of robustness checks. Negative financial shocks help therefore to explain why inflation did not drop more sharply in the aftermath of the financial crisis. Our analysis suggests that higher borrowing costs after negative financial shocks can account for the modest decrease in inflation after the financial crisis. A policy implication is that financial shocks act as supply-type shocks, moving output and inflation in opposite directions, thereby worsening the trade-off for a central bank with a dual mandate.

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