Governed by the gutless?

Alan Beattie’s new book­let “Who’s in Charge Here” (Ama­zon) is an amus­ing, accu­rate, acces­si­ble account of the cur­rent mess in glob­al finan­cial and trade “gov­er­nance.” Well worth the $3 price. But he draws a “les­son” from his lit­tle his­to­ry of the crises of 2008–2011 that I find un-sat­is­fy­ing.

Who’s in Charge Here is a valu­able retelling — if, like me, you find some details are start­ing already to blur — of a tale that, had this not been jour­nal­ism, might have been Eve­lyn Waugh fic­tion.

Beattie’s sol­id skills as an ana­lyst and as the FT’s inter­na­tion­al eco­nom­ics edi­tor equip him to craft a coher­ent account of a series of often inept pol­i­cy lurch­es and fre­quent­ly overblown — some­times direct­ly mis­lead­ing — rhetoric from both west­ern and “emerg­ing” gov­ern­ments in response to the eco­nom­ic man­age­ment chal­lenges of the past four years.

Along the way, he gives us an excel­lent, pithy his­to­ry of glob­al eco­nom­ic gov­er­nance since the mid-20th cen­tu­ry. I’ve set the third Chap­ter (“How many divi­sions has the Pope got?”) on the impo­tence of the for­mer Bret­ton Woods insti­tu­tions for my Mas­ters’ stu­dents in Trade Pol­i­cy.

But I found his final chap­ter less com­pelling. What is to be done begins with an hilar­i­ous mock press-release that Beat­tie draft­ed in 2008, pos­si­bly while he wait­ed for yet anoth­er drib­ble of infor­ma­tion from exhaust­ed, anx­ious and dispir­it­ed nego­tia­tors behind the dark oak doors of the WTO’s Gen­er­al Coun­cil room in Gene­va.

An inef­fec­tu­al inter­na­tion­al orga­ni­za­tion yes­ter­day issued a stark warn­ing about a sit­u­a­tion it has absolute­ly no pow­er to change, the lat­est in a series of self-serv­ing inter­ven­tions by tooth­less inter­gov­ern­men­tal bod­ies…

Beat­tie cor­rect­ly blames Mem­ber gov­ern­ments for the hap­less, incon­clu­sive, mealy-mouthed efforts of organ­i­sa­tions such as WTO to open glob­al mar­kets to greater com­pe­ti­tion or to ensure nec­es­sary mar­ket reg­u­la­tion is effec­tive, fair and trans­par­ent. They have not been will­ing to step-up when the time came to put their own mar­ket reg­u­la­tions to the test, or to accept the bur­dens of col­lab­o­ra­tion in the inter­ests of a good glob­al out­come were at stake.

But Beat­tie does not, at least in this book, attempt to explain why gov­ern­ments appear to have shirked their col­lec­tive respon­si­bil­i­ty. Although that, sure­ly, is the nub of the mat­ter. His analy­sis at this point is brief and, I think, a bit under-cooked:

The pri­ma­ry les­son of the glob­al finan­cial cri­sis since 2008 is not that the polit­i­cal struc­tures are wrong or the glob­al mon­e­tary or trad­ing sys­tems need fun­da­men­tal change. It is that through polit­i­cal weak­ness and mis­guid­ed eco­nom­ic analy­sis, coun­tries both indi­vid­u­al­ly and col­lec­tive­ly are mak­ing the wrong deci­sions and are lack­ing in polit­i­cal will.

Indi­vid­u­al­ly and col­lec­tive­ly… wrong deci­sions?” I’m always glad when an ana­lyst is forth­right. But I think AB needs to mount a stronger case than he does in this book to win that case. In what sense was the USA “wrong” to pass-up the over-com­pli­cat­ed final deal in the Doha round (see Paul Blustein’s skep­ti­cal but accu­rate account in The Mis­ad­ven­tures of the Most Favored Nations (Ama­zon); espe­cial­ly the chap­ter enti­tled “Los­ing it”) when Chi­na declined to pull its weight and India sim­ply walked away? Chi­na nev­er gave the Doha objec­tives much sup­port. But Bei­jing would not have been “wrong” to assess that its cur­rent lev­el of mar­ket open­ness was already about aver­age (even good) for a devel­op­ing econ­o­my. Nor would I like to argue that Chi­nese lead­ers were “wrong” to judge that open­ing their food mar­kets in line with Doha ambi­tions would, for now at least, be a step too far giv­en a widen­ing spread in rur­al-urban incomes.

Or, to step out of the inter­na­tion­al trade are­na; why was it “wrong” of Chi­na to reject alle­ga­tions of “cur­ren­cy manip­u­la­tion” and to choose it’s own sched­ule for hard­en­ing of the Ren­min­bi exchange rate? And in what sense were Chi­na, India, the USA, Cana­da and a host of oth­ers “wrong” to decline the half-baked ambi­tions of the UN at the Copen­hagen Cli­mate Con­fer­ence in 2009?

As for Beattie’s claim that the present dol­drums in glob­al “gov­er­nance” are due to a lack of “polit­i­cal will”… I don’t know what that means. “Gut­less”? Or mere­ly, “Not what I would do if in charge”? Isn’t it pos­si­ble that indi­rec­tion and lack of col­lec­tive pur­pose reflects not some sort of moral fail­ing on the part of gov­ern­ments — as AB implies — but some real dilem­mas posed by present­ly mis­aligned (but real) eco­nom­ic incen­tives? Isn’t it pos­si­ble that gov­ern­ments are not sim­ply feck­less or ill-advised but are mak­ing ratio­nal — always con­strained — choic­es that don’t favour extend­ing col­lab­o­ra­tion on “glob­al gov­er­nance”, but that avoid actu­al defec­tion from the cur­rent norms of glob­al insti­tu­tions such as the WTO and IMF?

It seems to me that there might be more plau­si­ble, inter­est­ing expla­na­tions in that direc­tion rather than in alle­ga­tions about a deficit of “polit­i­cal will”. Fur­ther­more, if such mis­align­ments do sug­gest ratio­nal­i­ty on the part of West­ern and Emerg­ing gov­ern­ments then I think I’d have to dis­agree, too, with the fist part of Beattie’s “pri­ma­ry les­son” (above). It may be a very good idea to revise the struc­tures and scope of the “gov­er­nance” organ­i­sa­tions with a view to accom­mo­dat­ing the mis­align­ments before the habits of glob­al col­lab­o­ra­tion dete­ri­o­rate.

I, for one, would like to see AB have anoth­er go at answer­ing these ques­tions.  Per­haps in a sequel?

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