This panel was convened at 9:00 a.m., Thursday, March 26, by its moderator, Robert Ahdieh of Emory University School of Law, who introduced the panelists: Michael Barr of the U.S. Treasury Department; Sean Hagan of the International Monetary Fund; Eric Pan of Cardozo University School of Law; Mark Weisbrot of the Center for Economic and Policy Research; and David Zaring of the University of Pennsylvania Wharton School of Business. *
As we survey the landscape spread before us in March 2009, it is evident that any immediate survey of the global financial crisis must necessarily be incomplete. Simply put, we do not know how the story will end. But even with the benefit of hindsight that one hopes we soon may enjoy, there is likely too much to the financial crisis for any single observer, or even panel of observers, to assess it fully.
Even a far narrower matrix of inquiry might seem difficult to work through. Consider the subject of our panel today: "International Aspects of the Global Financial Crisis." What issues are implicated by a discussion limited to international aspects of the crisis? Surely the genesis of the crisis in a transnational dynamic--the interaction of a savings glut in certain nations and a spending spree in the United States--would have to qualify. To similar, and related, effect might be protectionist provisions that have been included in national stimulus legislation, beggar-thy-neighbor bank bailout programs, and other external consequences of our domestic responses to the crisis. The hotly contested question of the appropriate role of the International Monetary Fund would also need to be cited. Likewise, the shifting institutional dynamics surrounding the relative role of the G-8 versus the G-20, and the contributions of an array of transnational regulatory networks in responding to the crisis, are of relevant interest. And that is to name just a few.
In engaging the wide range of international questions intertwined with the financial crisis, then, we might do well to cluster those issues into three categories:
(1) First, there is the self-evidently global nature of the financial crisis--both in its origins and its effects. As to the former, I have already noted the familiar intertwining of easy credit and over-spending, which contributed significantly to the genesis of the crisis. As to the latter, meanwhile, we do well to attend both to the ripple effects of domestic economic difficulties--here, the collapse of the U.S. housing bubble is Exhibit A--and to the aforementioned externalities generated by national-level efforts to respond to the crisis.
(2) A second cluster of issues might be seen to revolve around the role of international institutions--both existing and potential--in responding to the financial crisis. From the International Monetary Fund to the G-8, and from the European Union to the Financial Stability Forum and the Basel Committee, an alphabet soup of sometimes cooperating, and sometimes competing, international institutions have been central players in our response to the crisis.
(3) Finally, there are important questions of the constraints that international law imposes on our efforts to respond to financial crises, both by way of the limited capacities of existing international institutions and legal regimes, and even more forcefully, by way of affirmative rules of law--such as those enforced by the World Trade Organization-that limit how domestic authorities may respond.
When I was recently asked to put together a "hot topic" panel on the financial crisis, I worried about whether it would be too late to secure a group of presenters qualified to effectively address this complex of international questions surrounding the financial crisis.
Needless to say, my concerns proved to be in vain. We are lucky, thus, to have a panel that could not be more qualified to address not merely selected international dimensions of the financial crisis, but each of the clusters of issues suggested above.
In remarks by Sean Hagan and Mark Weisbrot, we will have the opportunity to delve more closely into international aspects of the origins of the crisis, and the role of varied institutional structures--including the International Monetary Fund--in responding to it. David Zaring will likewise help us to understand relevant questions of institutional design, with a particular emphasis on transnational networks, while also speaking to critical constraints imposed by international law on our response to the crisis. Michael Barr and Eric Pan, finally, will shed further light on the origins of the crisis, while focusing particularly on potential regulatory reforms prompted by it.
If one could imagine any opportunity to understand the breadth and depth of international aspects of the financial crisis, then, this panel would be it.
* Michael Barr and Eric Pan did not submit remarks for the Proceedings.
By Robert B. Ahdieh, Associate Dean of Faculty, Professor of Law, & Director, Center on Federalism & Intersystemic Governance, Emory Law School.
THE FUND'S ROLE IN THE FINANCIAL CRISIS
It is clear that the depth, breadth, and complexity of the crisis that has swept through the global economy during the past year have presented the International Monetary Fund (the "Fund") with enormous challenges. However, it has also catalyzed momentum for relatively fundamental reform in the way the Fund does business. In that context, I would like to provide an overview of the role that the Fund has played in containing the crisis over this period and the changes that it has introduced to enhance its capacity to do so.
The Fund provides financial assistance to its members in order to assist them in addressing their balance of payments problems. Before it does so, however, it must make a determination that two conditions have been met. First, since its resources are to be used to help countries resolve their balance of payments problems, it is important that the country implement policies that will address--rather than simply delay the resolution orbits balance of payments problems. Second, the Fund must ensure that "adequate safeguards" are in place to ensure that the member will be in a position to repay the Fund within the relatively short timeframe required under the Articles, generally three to five years.
"Conditionality" refers to the mechanism whereby Fund financial assistance is made conditional upon the effective implementation of a credible adjustment program, thereby ensuring, in turn, that the above conditions are in place. The adoption of appropriate adjustment policies is designed not only to give the Fund some assurance that the underlying cause of the members' balance of payments problems will be corrected, but also provides the Fund with an adequate basis to conclude that the member will have sufficient financial recourse to repay the Fund once the...