Robert B. Ahdieh, Introductionafter the Fall: Financial Crisis and the International Order

• Citation: Vol. 24 No. 1
• Publication year: 2010

INTRODUCTION

AFTER THE FALL:

FINANCIAL CRISIS AND THE INTERNATIONAL ORDER

Robert B. Ahdieh^*

Recent years have challenged the international order to a degree not seen since World War II-and perhaps the Great Depression. As the U.S. housing crisis metastasized into a financial and economic crisis of grave proportions, and spread to nearly every corner of the globe, the strength of our international institutions-the International Monetary Fund, the World Trade Organization, the Group of Twenty, the Basel Committee on Banking Supervision, and others-was tested as never before. Likewise tested, were the limits of our national commitment to those institutions, to our international obligations, and to global engagement more generally.

The Symposium published in this issue of the Emory International Law Review speaks to one critical dimension of these challenges. Even before the crisis, the commitment of the industrialized states of the global "North" to the developing and least developed economies of the global "South" might fairly have been questioned. The limited progress of the supposedly development- oriented Doha Round of multilateral trade negotiations might be cited to argue as much.¹In the face of a broadly rising tide, however, all boats were rising- even if less consistently than an equitable distribution of wealth might have counseled.²

With the onset of the crisis, however, such gains could no longer be assured. Even more worrisome, if the crisis were to trigger a substantial contraction in foreign aid or increased trade barriers, significant backsliding might be expected to occur. But in the midst of great crisis-as counseled by the theme of this Symposium-one may sometimes find great opportunity. In the face of the reassessments prompted-even demanded-by the crisis, there emerges the possibility of a more foundational change in approach, by which the strength and vitality of the international order might not merely be preserved, but actually enhanced.

The challenge of allocating the benefits and burdens of social and economic development both equitably and efficiently was not, of course, created by the financial crisis. Considering only the most immediate agenda items facing the international community-issues of climate change, public health, and international terrorism have all contributed as well. With the crisis, however, questions of development, distribution, and equity have come to a head.

The Emory International Law Review has secured a fascinating set of contributions directed to these questions, addressing a broad array of issues and offering distinct new perspectives on them. The articles most directly concerned with the financial crisis, to begin, offer institutional analyses-and concrete proposals-that will add greatly to debates over the crisis and its implications. Duncan Alford, for example, outlines the increasingly important role of supervisory colleges, even as he highlights the continuing need for an institutional framework to wind down insolvent banks.³To similar effect is Raj

Bhala's critique of the international trade regime's shift from its Doha Round focus on poverty reduction and the discouragement of Islamic extremism to more mundane aspirations,⁴and Ross Buckley's critique of the International Monetary Fund's capacity to play a meaningful role in international finance.⁵

More broadly, Yesha Yadav's account of the complexity of international financial regulation and proposed framing of relevant regulation around systemic risk oversight, standard-setting, and the articulation of relevant principles for international finance also adds greatly to the debate.⁶Scott

Harshbarger and Goutam Jois likewise speak to the institutions of financial regulation, proposing the creation of a systemic risk regulator, but one framed within a new analytical framework for the reconciliation of market and regulatory power, built on a regime of accountability and citizen empowerment.⁷Together, these contributions-along with fascinating papers by Peter Crofton and Joanna Stettner, speaking respectively to critical questions of transnational environmental regulation and public health⁸-offer a rich trove of material for better understanding the financial crisis, the distribution of global wealth and responsibility, and the future of the international economic, political, and legal order.

By way of introduction, I offer another take on the theme of the Symposium, drawing on both strands of the Symposium articles and broader evidence as well. I highlight, in particular, the striking fact that the financial crisis has not proven nearly as damaging to the vibrancy and vitality of the international economic, political, and legal order as might have been predicted-and even expected, given the logical precedent of the Great Depression. Minimally, the international order has held up well in the face of the crisis; arguably, it has thrived.

I. PAST AS PROLOGUE?

In the face of grave crises, some instinct of self-preservation might be expected to encourage heightened insularity, and even isolationism, among relevant states. Some of this tendency might be explained by a desire to exercise heightened control in circumstances of heightened uncertainty. A more acute sense of self-interest-given increased scarcity and seemingly greater costs of failure-might be expected to contribute to this pattern.

As states respond to these individual pressures toward insularity, however, there emerges a vicious cycle. Whatever the initial trigger, increased isolation by any given nation prompts a reciprocal response by others. These responses, in turn, drive the initial movers to isolate themselves further, initiating the cycle anew.

The United States's response to crises over the last century-both financial and otherwise-largely confirms these expectations. In the case of each world war, the United States long resisted engagement.⁹In the aftermath of World

War I, in turn, the United States drew back into its shell-refusing to join the League of Nations, adopting the Neutrality Acts of 1935 through 1937, and refusing membership in the Permanent Court of International Justice.¹⁰Even after World War II, selected strands of isolationism again took hold in the U.S. psyche, and even government policy.¹¹

Most instructive as to the "Great Recession" we have endured of late, however, is the cautionary tale of the Great Depression. Famously, the United States responded to the stock market crash of 1929 with the Smoot-Hawley Tariff Act of 1930 ("Tariff Act of 1930").¹²Motivated by a desire to protect

American workers and farmers from foreign competition, the Tariff Act of

1930 was emblematic of the pattern suggested above.¹³At base, it sought to insulate the U.S. economy from the rest of the world. Its result, however, was a vicious cycle of tariff rate increases (and currency devaluations) that ultimately drove the global economy into the Great Depression.¹⁴

II. THE GREAT RECESSION AND THE INTERNATIONAL ORDER

Comparing events of the last...