Turbulent Waters Cross-Border Finance and International Governance

by Bryant, Ralph C.

• ISBN13: 9780815700715
• ISBN10: 0815700717
• Format: Paperback
• Copyright: 2003-05-31
• Publisher: Brookings Institution Press

Summary

Today's world is organized politically into nation states with sovereign national governments. But as Ralph C. Bryant explains in Turbulent Waters, the world's economic structure is outgrowing its political structure. The economic links among nations have increased more rapidly than economic activity itself. As economic integration has proceeded, borders have become more porous, differences among national economies have eroded, and the policy autonomy of national governments has been undermined. Collective-governance problems increasingly spill across national borders and thus grow in importance relative to problems of domestic governance. The evolving need for international cooperation and cross-border collective governance is likely to be the single most prominent feature of world politics and economics for at least the next half century.The progressive integration of the world economy, often called "globalization," has been especially dramatic for financial activity. Cross-border financial transactions facilitate saving and investment and thereby advance the well-being of individuals. But they can also generate turbulence and instability. Most individuals are unsure whether financial globalization promotes or threatens prosperity for a majority of the world's people.Bryant explains basic concepts about financial activity and collective governance, distills their international dimensions, and enables general readers to acquire a solid grasp of the key policy issues that national governments must resolve. He provides fresh insights about what is often termed the international financial architecture. But he also casts his net far wider: the book's ambitious goal is no less than to outline a pragmatically sound vision for the evolution of international governance for the world economy and financial system.

Author Biography

Ralph C. Bryant is a senior fellow and the Edward M. Bernstein Scholar in the Economic Studies program at the Brookings Institution.

Table of Contents

Foreword	xiii
Acknowledgments	xv
1 Introduction: Financial Turbulence and Financial Governance	1	(20)
Financial Activity	3	(1)
Intermediate, Messy Globalization	4	(2)
International Collective Governance	6	(3)
Pragmatic Incrementalism	9	(2)
The Policy Dilemma for Individual Nations	11	(1)
Goals for the Book	12	(3)
Companion Volumes	15	(1)
A Road Map and How to Read the Book	16	(5)
2 Saving, Investment, and Financial Activity in a Single Closed Economy	21	(40)
Basic Concepts: Investment, Saving, and Financial Activity	21	(2)
Basic Concepts: Financial Intermediation and Financial Institutions	23	(2)
Characteristics and Advantages of Financial Activity	25	(11)
Differences among Financial Contracts	36	(7)
Sticky Capital and Skittish Capital; Voice versus Exit	43	(1)
Different Financial Institutions at Different Stages of Development	44	(3)
Potential Problems within the Financial System	47	(14)
3 Collective Governance for Financial Activity	61	(36)
Collective Governance and Government	61	(2)
Market Failures and Government Failures	63	(3)
Essential Elements of Collective Governance for Financial Activity	66	(1)
Management of Financial Storms	67	(2)
Prudential Oversight and Supporting Governance Systems for Financial Activity	69	(4)
Macroeconomic Policies	73	(1)
Implementing Prudential Oversight	74	(4)
Moral Hazard: A Fundamental Observation	78	(2)
Storm Management: Further Issues	80	(13)
Which Institutions for Collective Governance?	93	(4)
4 Political Economy in a Multination, Intermediate World	97	(35)
Basic Structural Features of the World Polity	98	(1)
Increasing Pluralism and Diffusion of Power in the World Polity	99	(7)
Increasing Integration in the World Economy	106	(4)
The Economic Significance of National Borders	110	(3)
Collective-Governance Problems with Cross-Border Dimensions	113	(6)
Levels of Governance, Subsidiarity, and National Sovereignty	119	(5)
National Autonomy versus Openness to the Global Economy	124	(4)
Global Standards and a Level Playing Field	128	(2)
Prospering in an Intermediate, Multination World	130	(2)
5 The Progressive Internationalization of Finance	132	(22)
National Reservoirs in an Increasingly Integrating World	132	(2)
Geographical Variations in World Financial Activity	134	(1)
An Empirical Overview of the Last Five Decades	135	(10)
Alternative Explanations for the Growing Linkages of National Reservoirs	145	(6)
How Far Has Internationalization Progressed?	151	(3)
6 Analytical Issues in Cross-Border Finance: An Introduction	154	(49)
Potential Gains from Cross-Border Financial Intermediation	154	(5)
Additional Uncertainties in a Multination World	159	(6)
Cross-Border Capital Flows	165	(7)
Mishaps and Instability in Cross-Border Finance	172	(31)
7 International Collective Governance	203	(41)
Governance and Government in a Multination World	206	(2)
Alternative Forms and Venues for Intergovernmental Cooperation	208	(14)
Within-Nation Government and Nascent Cross-Border Governmental Functions	222	(14)
Intergovernmental Cooperation on Financial Issues: The Range of Conceivable Functions	236	(2)
Institutions Supporting Intergovernmental Financial Cooperation	238	(6)
8 International Financial Architecture	244	(37)
Monitoring and Enforcing Traffic Regulations	246	(2)
Promoting Adjustment and Catalyzing Coordination for Exchange Rates and Macroeconomic Policies	248	(3)
Lending Intermediation among National Governments: General Considerations	251	(5)
Lending Intermediation and Surveillance by the IMF	256	(3)
Prudential Oversight of Financial Activity	259	(4)
Managing Financial Crises	263	(5)
Additional Roles for International Financial Governance	268	(13)
9 Priorities for Architectural Reform: Supranational Surveillance and IMF Lending	281	(22)
Supranational Surveillance	285	(10)
IMF Lending Intermediation	295	(8)
10 Priorities for Architectural Reform: Prudential Financial Oversight, Crisis Management, and the Mandate for the IMF	303	(40)
Prudential Oversight and Financial Standards	303	(14)
Management of Financial Crises	317	(12)
Specialization of International Collective Governance?	329	(1)
What Mandate for the IMF?	330	(10)
The IMF: Whose Institution?	340	(3)
11 Single-Nation and Systemic Guidelines for Cross-Border Finance	343	(37)
Policy Choices for an Individual Nation	344	(23)
Capital Account and Prudential Oversight Policy Choices for the World Community	367	(13)
12 A Perspective on Financial Activity and Financial Turbulence	380	(10)
Benefits of Financial Intermediation	380	(1)
Financial Turbulence	381	(1)
Weighing Benefits and Hazards	382	(1)
Collective Governance for Financial Systems	383	(1)
Striking a Balance	384	(1)
Eschew Polar Views	385	(1)
A Middle Way: Steadfast Eclecticism	386	(4)
13 The Evolution of International Financial Governance	390	(29)
Collective Governance: Main Themes and Broad Principles	391	(3)
Politically Salient Dimensions of Architectural Reform	394	(4)
Political Support for International Governance	398	(5)
Governance Failures for International Organizations?	403	(7)
Halt Globalization or Shape Globalization?	410	(3)
Don't Ask Too Much Too Soon, But Don't Be Too Timid Either!	413	(6)
Appendix: The IMF and Other International Financial Institutions	419	(42)
Consultative Groups Formed by National Governments	420	(5)
The International Monetary Fund	425	(15)
The Bank for International Settlements and Related Committees	440	(4)
Other Financial Groups and Organizations	444	(8)
GATT and the World Trade Organization	452	(1)
The Organization for Economic Cooperation and Development	453	(2)
The World Bank	455	(3)
Regional Development Banks	458	(3)
References	461	(20)
Index	481