I was reading today on debt crises and rescue packages and thought--most of what we have had written in the past has been about debt crises in developing countries, or as they are more congenially known these days--emerging markets. Two of those I've been reading today are 'The political economy of the Bretton Woods institutions', by C. Randall Henning and another of his works: The Exchange Stabilization Fund: slush fund or war chest? The first provides a nice history of how the IMF and World Bank developed and changed alongside private finance. As part of that history, you'll get to read how debt crises arose in Mexico particularly, and were dealt with periodically by the American government and the two Bretton Woods institutions. You'll also get to read how, after those crises, the bulk of finance to Latin America shifted from investment in bonds to investment in stock markets, and direct investment. Bond holding shifted elsewhere, particularly Europe, which is why someone ought to write about how those two eras are different.
One obvious difference is the absence of a US Government interest in funding a rescue plan. That's something one can understand, too. The United States has enough problems of its own, and money is funnelled much more easily through the IMF these days from the countries that have it.
The second work looks at the degree of discretion that the President of the United States has to spend money on stabilising the exchange rate and the international monetary system. There are some clues there to constructing a mechanism within Europe to distribute money where its needed, because it looks at the relationship between the executive branch and Congress, of how accountability could be infused into a European mechanism for sorting its internal financial affairs.
The fact that Europe now falls into a literature applied to less prosperous countries underlines a few lessons for international political economy, and comparative politics as well. The first is that advanced and emerging market countries are plagued these days by much the same problems, and should not be treated separately. That's arrogant and presuming and passe.
The second is that it should renew our interest, if it's not already sparked, in long-term decline of advanced economy countries, and the responses to that threat. There is a history of such writing on the United States and the United Kingdom in the 1980s that emphasised strong states as exacerbating decline and strong markets as reversing it. Those messages are already being reversed in contemporary analysis that looks at the crisis generally, but how does the return of the state translate into analysing Europe's choices during the current crisis? How strongly do state intervention, (neo)Keynesian economics and international cooperation factor in giving Europe a chance to deleverage without destroying the economy? Does Europe possess sufficient political coherence and direction to construct a rescue package that compensates for the lack of a European government? Is Europe's economic constitution preventing Europe from recovering?
These are questions that affect us all, and the answers look unfavourable unless Europe changes course.
One obvious difference is the absence of a US Government interest in funding a rescue plan. That's something one can understand, too. The United States has enough problems of its own, and money is funnelled much more easily through the IMF these days from the countries that have it.
The second work looks at the degree of discretion that the President of the United States has to spend money on stabilising the exchange rate and the international monetary system. There are some clues there to constructing a mechanism within Europe to distribute money where its needed, because it looks at the relationship between the executive branch and Congress, of how accountability could be infused into a European mechanism for sorting its internal financial affairs.
The fact that Europe now falls into a literature applied to less prosperous countries underlines a few lessons for international political economy, and comparative politics as well. The first is that advanced and emerging market countries are plagued these days by much the same problems, and should not be treated separately. That's arrogant and presuming and passe.
The second is that it should renew our interest, if it's not already sparked, in long-term decline of advanced economy countries, and the responses to that threat. There is a history of such writing on the United States and the United Kingdom in the 1980s that emphasised strong states as exacerbating decline and strong markets as reversing it. Those messages are already being reversed in contemporary analysis that looks at the crisis generally, but how does the return of the state translate into analysing Europe's choices during the current crisis? How strongly do state intervention, (neo)Keynesian economics and international cooperation factor in giving Europe a chance to deleverage without destroying the economy? Does Europe possess sufficient political coherence and direction to construct a rescue package that compensates for the lack of a European government? Is Europe's economic constitution preventing Europe from recovering?
These are questions that affect us all, and the answers look unfavourable unless Europe changes course.
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