The long view on the global economy
My latest Project Syndicate piece argues that the world economy has handled the financial shock rather well so far, but that the real test for globalization is yet to come.
History teaches that global economic order is difficult to establish and maintain in the absence of a dominant economic power. The interwar period, which suffered from a similar crisis of leadership, produced not only a collapse of globalization, but a devastating armed conflict on a global scale.
So the stakes in righting the world economy could not be higher. Mismanage the process, and the consequences could be unimaginable.
Unfortunately, many of the solutions on offer are either too timid or demand too much of a global leadership that is in short supply.
The conundrum of global reform is that the proposals that go far enough, such as establishing a global financial regulator, are wildly unrealistic, while those that are realistic, such as reform of the IMF, fall far short of what is needed.
What we need is a vision of globalization that is fully cognizant of its limits. We can start with a simple principle: We should strive not for maximum openness in trade and finance, but for levels of openness that leave ample room for the pursuit of domestic social and economic objectives in rich and poor countries alike. In effect, the best way to save globalization is to not push it too far.
The column offers some hints about what I have in mind, but those who are curious about the details will have to show up at LSE on Tuesday.