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The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis

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The fact that our global economy is broken may be widely accepted, but what precisely needs to be fixed has become the subject of enormous controversy. In 2008, the president of the United Nations General Assembly convened an international panel, chaired by Nobel Prizewinning economist Joseph Stiglitz and including twenty leading international experts on the international The fact that our global economy is broken may be widely accepted, but what precisely needs to be fixed has become the subject of enormous controversy. In 2008, the president of the United Nations General Assembly convened an international panel, chaired by Nobel Prize–winning economist Joseph Stiglitz and including twenty leading international experts on the international monetary system, to address this crucial issue. The Stiglitz Report, released by the committee in late 2009, sees the recent financial crisis as the latest and most damaging of several concurrent crises—of food, water, energy, and sustainability—that are tightly interrelated. The analysis and recommendations in the report cover the gamut from short-term mitigation to deep structural changes, from crisis response to reform of the global, economic, and financial architecture. The report establishes a bold agenda for policy change, that is sure to be the gold standard for understanding and contending with the international economy for many years to come. The Stiglitz Report is essential reading for anyone concerned about a secure and prosperous world.


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The fact that our global economy is broken may be widely accepted, but what precisely needs to be fixed has become the subject of enormous controversy. In 2008, the president of the United Nations General Assembly convened an international panel, chaired by Nobel Prizewinning economist Joseph Stiglitz and including twenty leading international experts on the international The fact that our global economy is broken may be widely accepted, but what precisely needs to be fixed has become the subject of enormous controversy. In 2008, the president of the United Nations General Assembly convened an international panel, chaired by Nobel Prize–winning economist Joseph Stiglitz and including twenty leading international experts on the international monetary system, to address this crucial issue. The Stiglitz Report, released by the committee in late 2009, sees the recent financial crisis as the latest and most damaging of several concurrent crises—of food, water, energy, and sustainability—that are tightly interrelated. The analysis and recommendations in the report cover the gamut from short-term mitigation to deep structural changes, from crisis response to reform of the global, economic, and financial architecture. The report establishes a bold agenda for policy change, that is sure to be the gold standard for understanding and contending with the international economy for many years to come. The Stiglitz Report is essential reading for anyone concerned about a secure and prosperous world.

30 review for The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis

  1. 4 out of 5

    Matt

    The objective of this book is to provide recommendations for reforms to be undertaken by the international community in order to prevent another crisis as damaging as the one that started in 2008. The book admits again and again that the IMF has historically been pushing the wrong kind of policies. The goal should be anti-cyclical policies: "In the past, those developing countries that have accessed IMF financing have been constrained by international financial institutions to adopt restrictive The objective of this book is to provide recommendations for reforms to be undertaken by the international community in order to prevent another crisis as damaging as the one that started in 2008. The book admits again and again that the IMF has historically been pushing the wrong kind of policies. The goal should be anti-cyclical policies: "In the past, those developing countries that have accessed IMF financing have been constrained by international financial institutions to adopt restrictive policies in times of slow growth or even recession. Such pro-cyclical policies are counterproductive, since one of the purposes of assistance should be to enable developing countries to stabilize their economies. But in the current global crisis it is not just the developing countries that are forced to adopt such policies that suffer; the entire global eonomy suffers. International responses require all countries to engage in expansionary policies -- including developing countries. The purpose of IMF assistance should be, in part, to enable the developing countries to participate in this global effort. Even without these artificially imposed constraints, the natural market constraints referred to earlier may impede developing countries, even those receiving assistance, from having counter-cyclical poclicies as strong as would be desirable." (p. 16) The book introduces the idea of a Global Reserve Currency System. The new system is justified like so: each country wants to protect itself from another liquidity crisis and so should build up surpluses and hoard foreign reserves. This behavior, though rational, impairs the recovery by decreasing global aggregate demand. Again and again, the book makes the point that the global crisis requires a global response. "Indeed, unless there is a coordinated policy response to this crisis that supports global demand, it's possible that the problem of global imbalances may be exacerbated. Which country is facing the threat of high volatility and export earnings and global financial flows, it is rational for countries to increase precautionary savings to protect against future potential calamity. While it is rational for individual countries to ensure against another crisis through the buildup of external surpluses and foreign reserves, doing so weakens global aggregate demand. The absence of alternative means for self protection may not only impair a robust and sustainable recovery, but also lead, in the long run, to further instability. The implication is that a reform of the global reserve currency system that provides an acceptable means of risk mitigation is imperative." (p. 27) The book spends some time on companies that are too-big-to-fail. Mentioning also companies that are too-big-to-be-resolved. Both of these should be avoided as the implicit guarantee that these companies will be bailed out by their national government in times of crisis distorts the markets. It is an implicit subsidy: "Certain policy measures taken by developed countries have exacerbated these problems further. Credit guarantees have contributed to the reversal of capital flows even if developing countries believed it was desirable and appropriate for governments to provide guarantees of the depth and breadth provided by some advanced industrial countries, their guarantees would be less credible. Symmetric policies can have asymmetric effects. Credit guarantees are clearly a violation of the spirit of the "level playing field" in international trade that the international community has attempted to construct over the past half-century. Most countries providing such extended guarantees have made no attempt to ensure that those receiving these guarantees pay for them on actuarially fair basis. In the absence of such full payment, such guarantees represent a major subsidy." (p. 45) So the big companies need to be regulated and restricted in size: "Standard antitrust policies should be implemented, but the usual metrics for excessive economic concentration (share of the top four firms in the market, or the ability to determine market prices) may not be totally adequate in the context of financial markets. These criteria need to be supplemented by an assessment of whether the financial institution is at risk of being too big to fail or to be to be financially restructured. Such large institutions should be broken up and limited in size so that they are not too big to fail and certainly not too big to be financially resolved. There is little evidence of significant economies of scale or scope, at least of sufficient magnitude, to warrant the risks imposed on the economy and the public finances. But such measures need to be supplemented by financial sector regulatory measures. Any large bank that is not broken up should have stronger capital and equity requirements and other banks and face more stringent restrictions in each of the areas discussed so far (e.g., on the invisible set of incentive structures, on transparency, and on the kinds of risks that they can undertake, such as lower leverage). Because of the greater cost to government of problems in these institutions, they should also face increased premiums for deposit insurance." (p. 97) Repeatedly, the book mentions that policies of the past were erroneous. That neoliberalism failed. The market failures will not self-correct without regulation. "While one cannot ascertain the presence of a speculative bubble with certainty, there are indicators that suggest the likelihood of its presence. But nothing in economics is certain. If policy decisions were restricted to those actions with certain consequences, no decision would ever be taken. Economic policy is always conducted with uncertainty, and part of the art and science of policymaking is to assess and balance the risks. It's clear that many central banks erred due to their adherence to erroneous economic creeds which held that misallocation of resources would automatically self correct with minimal dislocations for the economy." (p. 41) Clearly then, regulation brings stability and we need to go back to a more regulated market: "Because of the pervasive and persistent failure of financial institutions to perform their essential role, they are regulated by governments. A quarter century for World War II is noteworthy for its absence of financial crises, and this is almost surely the result of the more stringent regulatory regime of the New Deal and similar regulations in the rest of the world that were imposed in the aftermath the Great Depression." (p. 59) The report makes the point that free trade agreements and bilateral investment treaties can actually be harmful to developing countries: "For example I is a developing country decides to nationalize some service such as banking, this can require compensation if the sector has been liberalized under the WTO GATS Financial Services Agreements (FSA) or BIT. When these agreements and commitments are enforced developing countries have to pay compensation or suffer the imposition of tariffs on their exports to the complainant if did they do not or cannot comply." (p. 45) The report is not pushing for protectionism however. Protectionism is not the solution. The creation of a truly even playing field is a better option: "The global crisis has been marked by by precipitous declines in world trade. The dangers of trade contraction represent a far more serious risk to the global economy than in the Great Depression because trade today is so much more important for many economies. Those low income countries that are heavily dependent on exports will suffer severely from trade contraction, and commodity exporters will suffer doubly as a result of the collapse of many commodity prices. The inevitable consequences of a global contraction of trade have been augmented by protectionism. Throughout the world, protectionism has increased. In its initial communiqué, the G-20 warned of these dangers, and the members committed themselves not to engage in protectionism. Yet, pressures for protectionism have been difficult to resist. Trade restrictions, subsidies, guaranteed, and domestic restrictions on government procurement contained in some stimulus packages and recovery programs distort world markets. Although international agreements contain the same rules for each country, due to very different economic and social points of departure, seemingly "symmetric" provisions and have markedly asymmetric effects. For instance, government procurement provisions under the financial stimulus packages sometimes heavily distort competition at the expense of developing countries, since the signatories of the WTO to plurilateral agreements on government procurement are mainly industrialized countries. Subsidies, implicit and explicit, can be just as (or even more) distorting to open and fair trade as tariffs. (...) As has been recognized, subsidies can create an uneven playing field just as tariffs do, but these are even more unfair, since only rich countries can afford subsidy. Firms in developing countries simply can't compete against those in the more developed countries that receive massive assistance from their governments, whether in the form of open subsidies (including bailouts) or less transparent subsidies (guarantees and access to government or central bank lending). While the domestic imperatives that give rise to domestic subsidies are understandable, efforts need to be made to finance additional support to developing countries to mitigate the impact of the crisis as well as of both open and hidden subsidies in order to avoid further distortions." (p. 145-146) All in all, The Stiglitz Report is a good medium-sized text about the recent financial crisis. It was a little over my head when it comes to macro-economic concepts but it was still very readable.

  2. 4 out of 5

    Raymond

    This review has been hidden because it contains spoilers. To view it, click here. A small book but packed with contents on the topic of global socioeconomic with the background of most recent Great Depression in 2008 as the background. The book is in fact a report completed by a panel of experts assembled by the U.N. General Assembly. The commission consists of a more accommodative representation of countries from developed countries, developing countries as well as underdeveloped countries. The commission is tasked to understand and brainstorm as well as lead the planning of A small book but packed with contents on the topic of global socioeconomic with the background of most recent Great Depression in 2008 as the background. The book is in fact a report completed by a panel of experts assembled by the U.N. General Assembly. The commission consists of a more accommodative representation of countries from developed countries, developing countries as well as underdeveloped countries. The commission is tasked to understand and brainstorm as well as lead the planning of a more balanced global financial structure. The main theme of this report is G-192 is the only way to go in such a globalized market, and risks that were failed to be managed, it was even worsened and accelerated as shown in the 2008 financial crisis. The way I see it, this report is about “super”macroeconomic, it's the scale of the whole world, and coordination of any financial and economic policies have to be available and planned out. The report also discussed highly on the failure of some of the economic theories such as the market fundamentalism and deregulation of markets which have caused most of the crises in the past 50 years. On top of that, a surprising note that I personally found in the report is the negative effect of having huge trade surpluses that leads to reserve accumulation, as the East Asian countries have been doing ever since the 1998 Asian Financial Crisis. In addition, the panel of experts greatly concern the pro-cyclical market policies which would create a serious boom bust cycle for developing countries. The current global financial aid organization such as IMF, which is having a biased representative model, doesn't enable the countries that are most affected (developing countries) to introduce any counter-cyclical policies. All in all, this report is worth the read, as it introduces the reader into the mind of global economics and financial policies maker as well as what is to come(covered in one of the chapter), and how should the whole world work together in a model of G-192, instead of those G-8, or G-20 which doesn't carry a balanced opinions from other countries, which happens to be those that need the most help from everyone else.

  3. 4 out of 5

    Doug Shera

    Easy to read overview of the causes of the most recent financial crisis that has resulted in worldwide economic recession. Dominant economic theories of the past 20 years, claiming markets are self-regulating, and that less regulation accompanied by the unfettered movement of capital across the globe would provide growth and stability for developed and emerging economies were flawed. In the past twenty years the business cycle has become shorter and more volatile - look at events starting with Easy to read overview of the causes of the most recent financial crisis that has resulted in worldwide economic recession. Dominant economic theories of the past 20 years, claiming markets are self-regulating, and that less regulation accompanied by the unfettered movement of capital across the globe would provide growth and stability for developed and emerging economies were flawed. In the past twenty years the business cycle has become shorter and more volatile - look at events starting with the saving and loan debacle, the dot.com bubble, the Asian financial crisis, and now the mortgage crisis. The author suggests that not only more transparency and regulation are needed, but similar regulations must be adopted worldwide and cooperation and inputs from more nations than the G8 or G27 is necessary. An attitudinal change is needed in how corporations are managed, and executives are compensated. Stock option plans and lucrative cash bonuses for short term results are not necessarily aligned with long term growth and stability. "To big to fail" is a problem. A few giant financial firms providing credit to business worldwide presents a challenge of catastrophic proportions when one of the institutions gets in trouble. A financial system that allows "shadow banking", off-balance sheet items, clouds transparency and invites investor panic when an economic downturn occurs. Achieving the global cooperation the author suggest necessary to smooth out the business cycle is a pipe dream. Look at the EU. A common currency was adopted which helped Greece and other lesser developed EU nations. However there weren't regulations or viable enforcement options to guarantee governments would act responsible. Instead governments allowed debt to increase to unsustainable levels.

  4. 5 out of 5

    Indradeep Ghosh

    A rather brief overview of the nature of the 2008 financial crisis, and the myriad real and imagined solutions to it. A large number of the topics discussed here are presented more carefully and exhaustively in Stiglitz's other book "Freefall."

  5. 5 out of 5

    Jenny

    Interesting for the portion I completed before giving it away as a gift...

  6. 4 out of 5

    Cameron Mitchell

  7. 4 out of 5

    John

  8. 4 out of 5

    Stockfish

  9. 5 out of 5

    Gabriel Run

  10. 5 out of 5

    Alexandre Millette

  11. 5 out of 5

    Juan

  12. 4 out of 5

    Susan Mumpower-spriggs

  13. 5 out of 5

    Ryan

  14. 4 out of 5

    Richard Hardy

  15. 4 out of 5

    Danilo

  16. 4 out of 5

    Alibey Tuncer

  17. 4 out of 5

    Mary-ann Pex

  18. 5 out of 5

    Katherine Urbaez

  19. 5 out of 5

    Justin McKinney

  20. 5 out of 5

    William

  21. 5 out of 5

    Ina Cawl

  22. 5 out of 5

    Dio Mavroyannis

  23. 5 out of 5

    Chuck Chua

  24. 5 out of 5

    Bill

  25. 4 out of 5

    Zwelethu Jolobe

  26. 5 out of 5

    Jeff

  27. 4 out of 5

    Jamie Wood

  28. 4 out of 5

    Jim

  29. 5 out of 5

    Matt Roes

  30. 4 out of 5

    Oleksandr Hlushchenko

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