Managing Financial Globalization

Managing the global financial economy, or, rather, the failure to manage the global economy, was one of the key drivers for the creation of the Global Redesign Initiative. In modern history, international crises have spurred these kinds of discussions. During WWII, the US and UK governments began to focus attention on how to stabilize the post-World War II international economic system given the consequences of the Great Depression. These negotiations lead to the creation of the World Bank, the IMF, and GATT (now the WTO), and they almost lead to establishment of the International Trade Organizations based on the Havana Charter. Now, as then, monetary, trade, and economic relationships remain central to international relations, second only perhaps to military force and related interventions in international politics.

This section of the Readers' Guide looks at the structure of the existing official arrangements of financial institutions, the de facto informal arrangements of international financial governance, and the proposals advanced by the GRI to re-align these arrangements. It also looks at some of the key elements of international financial architecture that have not been included in GRI’s recommendations.

The current official system for managing financial globalization consists of:

  1. A special global bank which, amongst other things, can provide loans to nation-states and issue a global currency (the IMF);
  2. Ad hoc alliances between national/regional central banks (e.g. the Federal Reserve,  the Bank of England,  the European Central Bank,  the Bank of Japan);
  3. International monetary and financial policy coordination bodies centered in Basel, Switzerland ( e.g. the Financial Stability Board, Bank for International Settlements, International Association of Insurance SupervisorsInternational Organization of Securities Commissions);
  4. A coordination and policy forum for heads of ‘major’ governments, their ministers of finance, and central bankers (e.g. G20);
  5. Regional bodies with a monetary and/or a financing ambit; and
  6. Periodic meetings at the United Nations (the Financing for Development Dialogue,  special panels convened by the President of the General Assembly, and the Annual ECOSOC Dialogue with the BWIs, WTO, and UNCTAD).

The de facto informal governance system for managing financial globalization consists of:

  1. A network of global, full-service banking institutions and specialty, niche financing institutions;
  2. A semi-private network to move assets between these private banking institutions (i.e. check clearing service, stock and currency exchanges in major financial capitals);
  3. A network of large investment houses including global mutual funds, venture capital funds and sovereign wealth funds;
  4. A network of firms that specialize in trading currencies, commodities, futures, credit default swaps, and similar financial instruments;
  5. A small network of firms that establish financial price indexes and standards (e.g. British Banking Association (LIBOR),  Standard & Poor’s); and
  6. Financial news services (e.g. BloombergCNN BusinessBBC Financial).


Section continues with Options for the Future. 

Related Ideas: Reconciliation; Emergency liquidities; Financial risk watchdog; Risk management; Financial risk repository; Bribery

The Readers' Guide welcomes commentary – critical or otherwise – of the categorization and descriptions above as well as the identification of related issues and case studies.


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