Category Archives: International Policy

Global Financial Reform in the Wake of the Financial Crisis of 2008

by: Anthony Elson 

            In the five-year period since the outbreak of the global financial crisis, much attention has been given to the financial reforms that are needed at the national and global levels to minimize the risks of such crises in the future.  The discussions on global financial reform have been coordinated mainly by the G20 major advanced and emerging market economies, and have focused on improvements in what is known as the international financial architecture (IFA).  The IFA represents the institutional and cooperative arrangements that governments have put in place, such as the International Monetary Fund (IMF) and the Financial Stability Board (FSB), to monitor and regulate global financial flows and to provide emergency financing for countries in times of financial crises.  A key aspect of this reform effort has been focused on the governance arrangements for the IFA.  Notwithstanding the extensive discussions that have taken place, the pace of reform has been very slow and much remains to be accomplished.

At the institutional level, the shift of discussions on global financial reform from the G7 to the G20 has been an important improvement, along with the establishment of regular semi-annual meetings of the G20 at the level of both national leaders and finance ministers/central bank governors. This change, however, still leaves open the question of what criteria determine membership in the G20, as distinct from the International Monetary and Financial Committee and the Development Committee that oversee the operations of the IMF and World Bank, respectively, which are grounded in the clearly specified membership criteria of these institutions. There is also a large amount of redundancy among these three committees at the ministerial level, which has not been addressed, and should be simplified. In addition, with the passage of time, the agenda of the G20 has become extremely diffuse, embracing a wide range of topics beyond global financial reform. As a result, the initiative adopted by the G20 at the London Summit of 2009 to establish specific targets for coordinating and monitoring macroeconomic policy adjustments subject to a strict peer review process among its members has been abandoned.  This failure means that there is lacking within both the G20 process of deliberation and the IMF surveillance exercises an effective enforcement mechanism, which would help to avoid problems such as the build-up of global payments imbalances that were a major contributing factor in the global financial crisis.

Another important governance reform promoted by the G20 that is yet to be implemented relates to an increase in the financial resources of the IMF and the distribution of quota shares in the institution. A proposal to double the financial resources of the IMF along with a significant shift of quota shares in favor of the major emerging market economies was adopted by the Fund’s Executive Board, but these changes have yet to be approved at the national level. Significantly, legislative approval by the United States, whose vote is required for any major change in IMF operations, is highly uncertain in the present political climate. In addition, no discussions have taken place on the process of leadership selection of the Bretton Woods institutions, which by an informal agreement has always called for a European to take the top position in the IMF and an American to lead the World Bank.  Another reform that should be taken up within the IMF is the means by which its resources could be temporarily augmented during a major financial crisis, including through an issue of SDRs that were intended to be a major form of international reserve currency, and coordinated within a network of central bank swap arrangements.

The governance arrangements of the IFA also need to be improved in regard to its regulatory focus, which is coordinated through the FSB. The role of the FSB is to coordinate international discussions on the regulatory and other infrastructural aspects of the global financial system as a twin pillar within the IFA along side the IMF with its financial and policy surveillance responsibilities. However, even though the FSB has been formally established as an international institution unlike its predecessor body (the Financial Stability Forum), it still only has a very limited secretariat (of around 25 people, some of whom are seconded from member countries), and a part-time chairman. Clearly, to be effective, the resources of the FSB need to be significantly expanded.

The FSB has coordinated some reforms of the Basel capital accord, involving a limited increase in capital requirements for banks and the introduction of a new, maximum (leverage) ratio for total assets to capital and minimum liquidity requirements. However, in the opinion of most experts, the new capital and leverage requirements are very weak, in part because of intense lobbying pressure by banks on the national regulators that participate in FSB discussions, and need to be strengthened.

Anthony Elson is a Visiting Lecturer at the Sanford School, and will be teaching a mini-seminar in the Spring 2014 term on the Global Financial Crisis and Reform of the International Architecture.

Rage Against The (Chinese) Machine

By: Michael Chiulli

 

As captured in Rage Against the Machine’s self-titled album cover, self-immolation has long been a terrifying means of protest in Tibet, particularly among Buddhist monks.  A recent wave of fiery deaths has brought this issue back into the international spotlight.  Since 2009, 81  Tibetans have set themselves alight.  A drastic spike has seen 19 self-immolations in the month of November.  What would push a people to protest so vehemently that they would attempt such a painful suicide?  The Chinese government insists that its rule is not oppressive and that Tibetans enjoy a great degree of freedom.  However, Tibetans wouldn’t self-immolate merely for sport.  Self-immolation represents Tibetans’ desperation and frustration with the authoritarian regime.  So far, that proclamation of their condition has fallen on deaf ears in the international community.

The Chinese stranglehold on media and its censorship of the internet has made reliable information difficult to obtain.  Often, Chinese reports vary greatly from those of Tibetans or other sources.  One ex-monk was quoted, “Tibetan religion and culture is under such unthinkable repression that it has reached a point of desperation where people would choose to die rather than go on living.”  Tibetans’ exiled government, based in Dharamsala, India, is unrecognized by the United Nations and is powerless against the Chinese.  The Dalai Lama, formerly Tibet’s political leader and now merely an influential spiritual figure, commands no military.

The Dalai Lama, usually silent on this issue, has recently called for China to address the issues causing these self-immolations.  The Dalai Lama does not condone self-immolation, but admires the courage of those who practice it; nonetheless, the Chinese claim he encourages it.

As China expands as a world power and other parts of the world sway the spotlight from Indonesia, outside involvement seems unlikely.  However, the Western world must bravely confront the Chinese and somehow relieve the Tibetans of their plight.  The UN High Commissioner for Human Rights, Navi Pillay, condemned the Chinese occupation and called for an end to Chinese excessively harsh rule.  However, intervention on behalf of the Tibetans for an independent state seems unnecessary.  A middle ground somewhere should be attainable.  The Chinese should be able to rule fairly, allowing the Tibetans basic freedoms.  The Tibetans have more than done their job of shedding light on the situation.  Until China acts and rules responsibly, the influential nations of the world must find a solution.

As the U.N. Honors Sergio Vieira de Mello, Attacks Sweep Across Iraq

By: Daniel Jasper

As the United Nations honors the loss of one of its most skilled diplomats, Sergio Vieira de Mello, attacks sweep across Iraq killing more than 90 people.  Nearing a decade since Vieira de Mello’s untimely death from a car explosion in Baghdad, things remain much the same in the war torn country.

Vieira de Mello made a name for himself by his unique ability to synthesize humanitarian relief efforts and peacekeeping.  The two seemingly parallel operations are often at odds with each other.  Humanitarian relief can often exacerbate conflict by inadvertently supplying militant groups with food and medicine.  Today, the current Secretary-General’s Special Representative in Iraq, Martin Kobler, could attempt to use a similar approach while he tries to negotiate the resettlement of refuges from Camp New Iraq (formerly, Camp Ashraf).  However, Kobler faces an uphill battle as al-Qaeda’s forces enjoy the absence of U.S. troops.  Now, nine years after the death of Vieira de Mello and the 2003 disbandment of the Iraqi forces, Kobler finds himself dealing with the aftermath of those vital mistakes in the first years of the war.

While we remember Vieira de Mello’s unprecedented career and endless accomplishments in such places as Cambodia, Serbia, and Kosovo, it is important we remember what made him such an effective U.N. diplomat – his uncanny ability to charm both sides of virtually any conflict while maintaining the support of member nations.  Vieira de Mello had a long history of undertaking the unsavory task of negotiating with war criminals in the name of peace and for the ultimate protection of refugees and everyday citizens.  His mantra seemed to be “the United Nations must remain neutral”.  Although in hindsight many criticize his approach in certain circumstances, it is clear that in order to bring peace to Iraq the United Nations cannot be held to the domestic agendas of its largest donors–a task which Vieira de Mello’s successors have found terribly difficult.

Op-Ed: Skirting Responsibility in Syria

Image Via TheRawStory.com

 

By Dan Jasper, Staff Editor

For nearly a year, Syria has been in a state of unrest that has caused upwards of 5,000 deaths and an immeasurable amount of destruction. For nearly a year, the United Nations, the Arab League, and the world has watched as the regime of Bashar al-Assad has decimated the lives of its citizens and desecrated the principles that the Universal Declaration of Human Rights was built upon. For nearly a year, nothing has been done about it.

In the wake of Rwanda, the world declared “never again,” as it had many times before. But this time, it was supposed to be different. The world would wake up and live by a new set of standards, a new set of responsibilities, a new honor code of sorts. The Responsibility to Protect doctrine was supposed to change the way the state viewed its citizens, states viewed each other, and the way the international community viewed conflict. It was supposed to make the world care. But the image above illustrates the failure of the doctrine in Syria.

The inaction of the UN Security Council has cast doubt on the role of the R2P principles in international affairs. Moreover, the Security Council is losing credibility as it fails, again, to take action, and is once again highjacked by the oppressive domestic agenda of Russia and China. What does this mean for the future of international relations?  It’s difficult to say. But what is clear is that the structure of the Security Council is inherently flawed, and the functionality of the UN will continue to be impaired by these structural flaws.

But the future of international relations is not what we should focus on at the moment. We should focus on the lives being lost and the freedom of the Syrian people. In a series of youtube videos (some images may be disturbing) a brave Syrian man named Danny Dayem captures the ongoing violence in Homs (the epicenter of the violence in the past weeks) and makes a heartfelt plea for help.  I think Danny captures the frustrations of many Syrians in six simple words: “Where the f*** is the UN?” And given the gap between rhetoric and action, that anger is seeming more and more understandable.

Can American Factories Compete?

Images via William Hook using a Creative Commons license

 

By Eric Nakano, Staff Editor

In moving its iPhone production overseas to China, Apple executives cited not just the lower costs of production but also the flexibility Chinese factories provide. One Apple executive recalled how Apple’s redesign of its iPhone screen forced a revamp of the phone’s production. The new screens arrived at the factory around midnight and the factory got its workers out of bed to work a 12 hour shift in order to ensure timely delivery of the new phones. From a customer service and bottom line perspective, having this kind of flexibility enables companies to stay a step ahead of the competition and meet demand for their products in a fiercely competitive global economy.

But is rousing a low wage factory worker out of bed after a full day’s work so that a consumer can get delivery of his iPhone on time ethically right? What does this mean for factories around the world? Must they impose similar burdens on their employees in order to remain “competitive”? Should international standards be developed to prevent a race to the bottom? Are these questions being discussed in the ethics courses of our nation’s business schools and debated in the board rooms of Fortune 500 companies? As wealth and income inequality widen, they should be.

Arab Views Evolve Following Arab Spring

Image via Diario El Tiempo, All Rights Reserved

By Katherine White, Staff Editor

A recent Arab Public Opinion Poll conducted in several Arab countries by the Anwar Sadat Chair for Peace and Development reveals that 55% of pollsters are “more optimistic about the future of the Arab world in light of the Arab Spring.” While the majority of Arabs polled still expressed unfavorable views of the United States (59%), the number of respondents that hold favorable views of the U.S. has increased since 2010. This improvement may reflect the belief among Arabs that the U.S. has played a constructive role in facilitating the Arab Spring, which would represent a major foreign policy success for the Obama administration.