International Financial Governance under Stress: Global Structures versus National Imperatives

International Financial Governance under Stress: Global Structures versus National Imperatives

International Financial Governance under Stress: Global Structures versus National Imperatives

International Financial Governance under Stress: Global Structures versus National Imperatives

Excerpt

The Asian crisis was the worldeconomy’s closest shave since the Latin American debt crisis of the early 1980s and, arguably, since the Great Depression of the 1930s. A combination of currency and financial crises which erupted in east Asia during mid- and late 1997 rapidly developed into a global disturbance, engulfing not only most Asian newly industrialising economies but also Russia, South Africa and some Latin American countries. These systemic disruptions were major, but were not the only examples of financial volatility in recent years. The Asian crisis has been followed by further difficulties in Turkey and Latin America, and at time of writing it remains to be seen what the full effects of 11 September 2001 will be. Indeed, more than seventy financial and monetary crises of different proportions and characteristics have occurred in both developed and developing countries over the past two decades. Large and growing amounts of public money have been committed to tackling the financial crises and their socioeconomic consequences.

A common background to these developments is the intensifying process of global financial liberalisation and integration. Starting with the introduction of floating exchange rates and financial market deregulation from the 1970s onwards, the global monetary and financial system has undergone a radical transformation. Whereas national governments were once effective at shaping socioeconomic policies and development strategies in line with the imperatives of domestic political stability and legitimacy, there is now an increasingly market-oriented and integrated global system. The deepening integration of financial markets has imposed considerable constraints on national policy choices and generated significant strains in various domestic and international policy arenas. As financial crises have become more frequent and more severe over the past two decades, this has raised the question of whether the growing frequency and severity of crises correlate with the emergence of this liberal and transnational financial order.

The root causes of financial crises are most likely to lie in a complex mix of economic, political and social variables across the domestic and international . . .

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