New Global Economic Architecture
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New Global Economic Architecture

The Asian Perspective

Edited by Masahiro Kawai, Peter J. Morgan and Pradumna B. Rana

The global financial crisis of 2007-2009 exposed flaws and shortcomings in the global economic architecture, and has sparked an international debate about possible remedies for them. The postwar global architecture was essentially guided by the major developed economies, and was centered around the IMF, the GATT – the predecessor of the WTO – and the World Bank. Today, however, the balance of economic and financial power is shifting toward the emerging economies, especially those in Asia, and both global governance and economic policy thinking are beginning to reflect this shift. This book addresses the important question of how a regional architecture, particularly one in Asia, can induce a supply of regional public goods that can complement and strengthen the global public goods supplied through the global architecture. These public goods include institutions to help maintain financial stability, support more open trading regimes and promote sustainable economic development.
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Chapter 1: Asian perspectives on the evolving global architecture

Masahiro Kawai, Peter J. Morgan and Pradumna B. Rana


The global economic architecture which evolved out of the historic 1944 Bretton Woods Conference comprised various international economic institutions (IEIs): the International Monetary Fund (IMF) established to promote macroeconomic stability; the General Agreement on Tariffs and Trade (GATT) – the predecessor of the World Trade Organization (WTO) – to ensure an open trading system; and the World Bank, to provide development finance for poverty reduction. The G7/G8 was established in the mid-1970s to oversee the IEIs and subsequently the Financial Stability Forum (FSF) was established in 1999 in response to the Asian Financial Crisis to promote financial stability and develop best practices for financial regulation and supervision. This relatively simple architecture, which worked well for a few decades, has now come under severe strain. One important reason is that the governance system of the old architecture does not reflect the move from a uni-polar to a multi-polar world. This process accelerated after the global financial crisis (GFC) of 2008–09, most notably the increased economic power of Asia, especially the People’s Republic of China (PRC) and India. Another is that policies of IEIs (e.g. charters, quotas and voting rights) were designed in the interests of the like-minded members in 1944 and are strongly protected by the original members. Third, the context in which the IEIs operate has also changed dramatically, particularly in the area of globalization of finance. Finally, many observers argued that the current architecture actually contributed to the development of the GFC.

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