Liberalism in Crisis?

Liberalism in Crisis?

European Economic Governance in the Age of Turbulence

Edited by Carlo Secchi and Antonio Villafranca

During the current economic crisis recurring questions on the validity of the liberal economic system have resurfaced concerning the role of the state and the free market, the proactive use of fiscal policies, economic nationalism, and environmental sustainability. However, due to the depth and scope of the crisis new emphasis is being placed on these issues. This book attaches great importance to the specific consequences for the European Union by addressing critical themes surrounding its role in the new era of global economic governance. These include the coherence of common monetary policy with national fiscal policies, new financial regulation and supervision, and the future sustainability of national rescue plans and their compatibility with ambitious targets, such as those addressing climate change.

Chapter 1: Shaping a New World Economic Governance: A Challenge for America and Europe

Jacques Mistral

Subjects: economics and finance, international economics

Extract

Jacques Mistral Globalization has been the driving force of the world economy for two decades. Economic growth, expansion of trade and capital flows, a broad diffusion of wealth, tens of millions of people lifted out of poverty – these are testimonies of its impressive success. The fall of the Berlin Wall marked the dawn of a new era based on an unprecedented combination of free market and political democracy. For a decade – to risk oversimplification – we relied on the visions of Francis Fukuyama (1992) and Thomas Friedman (2005). The political economy of globalization looked as simple as that: Democracy + Market = Peace + Prosperity The results in 2009 are not exactly those which were expected. The world economy has certainly grown much richer, but it is not as homogeneous as it was once expected to become. The success of emerging powers means that we are entering an era of competition among different forms of capitalism. A backlash against globalization is simmering in many quarters. The financial crisis highlights a dramatic shift in the contours and the promises of the global economy. What a difference a year makes! When G8 leaders met in June 2007 in Heiligendamm, they had no clue about the impending financial crisis, skyrocketing oil prices, global food shortage or mass lay-offs. One year later, facing a much more difficult economic environment, the question of how much power the G8 wielded was explicitly raised after its meeting in Hokkaido: How could they discuss, in 2008, food without India or...

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