Managing the Global Economy

Managing the Global Economy

Managing the Global Economy

Managing the Global Economy

Synopsis

The demise of the post-war era of full employment has been followed by more than 20 years of global instability. The world economy enters the 21st century with the industrial world divided between the European Union, the North American Free Trade Area, and the Pacific Rim countries. This tripolar division could either form the basis for negotiation and co-operation, or else the sort of instability witnessed in the prelude to the two world wars. Managing the Global Economy describes the key trends in the world economy, and indicates what new institutional arrangements might be appropriate - but stresses that action will not be taken until the prevailing fatalistic economic ideology is discarded. It demonstrates that the global financial markets were created by financial institutions as governments freed financial markets from their control. It documents how far international co-operation has freed the markets and limited the power of governments, and indicates how these priorities could be reversed. 18 leading economists, economic commentators, practitionaers, and policy-makers contribute to a book which will make a major impact on policy debates.

Excerpt

The title Managing the Global Economy is obviously one which must not be taken too literally. Apart from anything else, in the real world there is no supernational power which can force individual countries to behave in ways which will lead to some sort of ideal world; even within individual countries, governments are far from being able to force companies, individuals, trades unions, trade associations and the like to do all the things which a 'managing' government might consider desirable, and to refrain from doing things which it considered undesirable. Moreover, different people and different political parties have different views about numerous subjects for which it might seem desirable to have agreed objectives: in particular, there are some topics (such as the working of the welfare state) on which some people would like to see action increased, but on which others would like it to be minimized.

Nevertheless I am glad that the authors of the various chapters in this book have faced up to the difficult problems of future action, as well as setting out much of what has happened in the past. The main object in this foreword is to stress the numerous interconnections between the various topics, and hence the need to consider the picture as a whole. Not only do the objectives overlap, and indeed on occasions are contradictory, but the same is also true of the measures which may be taken in an attempt to achieve the preferred set of objectives. As an example, the need to improve a country's balance of payments might call for a lower exchange rate, but the desire to reduce inflation might indicate raising the exchange rate.

It is perhaps useful to start by casting one's mind back fifty years to the Bretton Woods decisions. These were based on a 'vision' of the world economy, which covered all its main problems -- not just exchange rates, for example, but also growth, inflation, aid to the Third World countries, and so on. The proposals adopted were not necessarily the best for achieving each major objective considered separately, but they constituted a rounded package which made at least some contribution to each important problem; above all, they were put together in such a way that they could be accepted by each country as at least 'better than nothing' -- not only for the world as a whole, but also for the country in question.

In part the functioning of the Bretton Woods decisions relied on consultation between individual countries and the relevant part of 'the Bretton Woods Organization' which emerged as permanent institutions to help with 'the continued managing of the global economy'. The general principles to . . .

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