The world has been in a state of economic turmoil since 2008, and there's a good chance that things will get worse. Germany's economic slowdown is generating new doubt about Europe's already troubled efforts to deal with its debt crisis. And if Europe's crisis spirals, a devastating global downturn may follow.
COMMENTS (13)
More...
The burgeoning emergency will have all sorts of political implications, but some of the most consequential may be for the architecture of global governance. Perhaps surprisingly, the global economic crisis has to this point strengthened key international institutions. The most obvious beneficiaries are the International Monetary Fund (IMF) and European institutions, including the European Central Bank and the new European Financial Stability Facility.
The IMF received billions of dollars in the wake of the 2008 financial crisis and now occupies a place in international deliberations that its leaders could only have dreamed of in 2006. Leading voices are arguing that IMF instruments could serve as a new global reserve currency. Meanwhile, Europe appears likely to grant some of its institutions more power over member states' budgetary and fiscal policy. This week, French President Nicolas Sarkozy and German Chancellor Angela Merkel advocated "real economic government for the euro zone," with much more central control of member-state budgets.
It's not intuitive that severe turbulence would empower rather than weaken international organizations. Crises have, in the past, shattered institutions. Most obviously, the Great Depression and the outbreak of World War II effectively put an end to the League of Nations. The consensus and goodwill that the league relied on dried up quickly in the face of international turmoil. Similarly, the nearly constant crises of the Cold War often neutered the United Nations and rendered other key institutions, including the International Court of Justice, mostly ineffective.
So why has the brutal economic crisis empowered rather than eviscerated instruments like the EU and the IMF? Part of the answer may be that leaders are casting about for solutions in all directions. They're pulling every policy lever they have, including multilateral ones.
But it's also possible that we have reached the point at which the world is more centripetal than centrifugal. The messy, halting, and fragmented project of global governance may have advanced far enough now that conflict, crisis, and the intense pressure of events lead not to the flying apart or hollowing out of existing institutions but to their consolidation. When crises hit, policymakers are pulled toward more international governance rather than less -- sometimes in spite of themselves. The reality of interdependence may finally have insinuated itself into the instincts of policymakers.
This centripetal dynamic, it's important to acknowledge, does not reflect particularly strong performances by existing institutions. As its own internal evaluation acknowledges, the IMF mostly failed to anticipate the 2008 financial crisis. Similarly, the European Union does not receive high marks for its actions during the ongoing debt crisis. European policymakers working through EU institutions have consistently opted for piecemeal solutions that delay -- but never resolve -- the underlying problem.
SUBJECTS:
(13)
HIDE COMMENTS LOGIN OR REGISTER REPORT ABUSE