Economics of G20. Группа авторов
In contrast to the inter-war period, there are a host of institutions that seek cooperative solutions in their field. We have institutions developing rules and procedures in areas such as banking, insurance and stock exchanges. These rules and procedures bring about greater certainty and uniformity in regulations, which in turn reduces the uncertainties companies face.31 Also, under the aegis of the GATT/WTO, rules for the conduct of trade policy have been agreed upon. These rules have prevented any substantial increase in protection since the crisis unlike in the 1930s. Furthermore, countries have not been compelled to institute restrictive trade measures because of BOP reasons as the IMF can provide BOP financing to countries in need, whereas the absence of any such lender in the inter-war period had also often frozen private BOP financing.
Despite all these institutional innovations, recovery has been very slow. This seems to be that the basic model of economic behaviour on which policy is based is the same as that which had existed in the inter-war years even though ERs are now flexible in many countries rather than being fixed. Central banks are now independent. Furthermore, their mandate in many countries is merely to control the rate of inflation. This is supposed to provide stable expectations that would encourage investment. But the stability that is provided is slanted towards deflation, even though most central banks undertake to target a rate of inflation of 2% with a margin of 2% on either side, i.e. keep inflation between 2% and 4%. But suppose the rate of inflation rises from 1% to 1.5%, there is an immediate clamour to raise interest rates.32 Hence, the expectation is that with the slightest recovery, interest rates will be raised. Thus, monetary policy is biased towards deflation.
Fiscal policy has also been rendered ineffective. It is not supposed to be very effective in tackling short-term fluctuations and is supposed to be geared towards long-term growth. In fact, modern macro is geared towards the long-term and does not really deal with short-term fluctuations. That is why even at the Toronto summit in 2009 there was a strong group of countries arguing that budget deficits should be reined in order to provide a conducive atmosphere for private investment — the same arguments that were made in the 1930s to rein in budget deficits.
Today also there is a shift in the balance of power and no hegemon may exist. But cooperative practices are more deeply entrenched. When the IMF had to raise fresh resources in 2008, China and India agreed to provide them without any quid pro quo. At the time of the 1997 Asian Financial Crisis, there were fears that China may also devalue its currency in order to maintain export competitiveness. But it did not do so. The newer powers have been more cooperative than the US had been then as their economies are much more dependent on the world economy.33
The main role we envisage for the G20 is for leaders to exchange views about how they see their economies evolving. In particular, they can inform their peers how policy in their country is likely to be so that other countries can base their policies on a proper assessment of policies in other countries and would not be faced by surprises. A recovery of the world economy would have to depend on what is the right model of the world economy and what role there is in it for policy.
References
Agarwal, M. (2017). The Operation of the Gold Standard in the Core and the Periphery Before the First World War, Centre for Development Studies WP 473, Centre for Development Studies, Thiruvananthapuram, Kerala, India.
Ahamed, L. (2009). Lords of Finance: The Bankers Who Broke the World, New York: Penguin Press.
Borio, C. and Toniolo, G. (2006). One Hundred and Thirty Years of Central Bank Cooperation, BIS Working Papers No. 197, Bank of International Settlements, Basel Switzerland.
Clarke, S. V. O. (1973). The Reconstruction of the International Monetary System: The Attempts of 1922 and 1933, Princeton Studies in International Finance, No. 33, Princeton University.
Cohen, B. J. (2015). Currency Power, Princeton: Princeton University Press.
Costigliola, F. C. (1977). Anglo-American Financial Rivalry in the 1920s, The Journal of Economic History, Vol. 37, No. 4, pp. 911–934.
De Cecco, M. (1984). The International Gold Standard, London: Pinter Publishers. Decorzant, Y. and Flores, J.-H. (2012). Public Borrowing in Harsh Times: The League of Nations Loans Revisited, Universite de Geneve, Faculty de Sciences Economique et Social, WP 12091.
Eichengreen, B. (1996). Hegemonic Stability Theory and Economic Analysis: Reflections on Financial Instability and the Need for an International Lender of Last Resort (December 9, 1996), Center for International and Development Economics Research, Paper C96-080.
Eichengreen, B. (1998). Globalizing Capital: A History of the International Monetary System, Princeton: Princeton University Press.
Eichengreen, B. and Hatton, T. (eds.) (1988). Editors’ Introduction to Interwar Unemployment in International Perspective, in Interwar Unemployment in International Perspective, B. Eichengreen and T. Hatton (eds.), Dordrecht: Kluwer Academic Publishers.
Findley, C. V. and Rothney J. A. (2006). World War I Reparations: Twentieth Century World, 6th ed., Boston: Houghton Mifflin Company.
Flandreau, M. (1997). Central Bank Cooperation in Historical Perspective: A Sceptical View, Economic History Review, Vol. 50, No. 4, pp. 735–763.
Gallarotti, G. M. (1995). The Anatomy of an International Monetary Regime: The Classical Gold Standard, 1880–1914, Oxford: Oxford University Press.
Gilpin, R. (1987). The Political Economy of International Relations, Princeton: Princeton University Press.
Kindleberger, C. P. (1973). The World in Depression: 1929–1939, Berkeley: University of California Press.
Keohane, R. (1984). After Hegemony: Cooperation and Discord in the World Political Economy, Princeton University Press.
Laybourn, K. (1999). Modern Britain since 1906, London: I.B. Tauris.
Marks, S. (1978). The Myths of Reparations, Central European History, Vol. 11, No. 3, pp. 231–255.
Modelski, G. (1987). Long Cycles in World Politics, Seattle: University of Washington Press.
Moggridge, D. E. (1972). British Monetary Policy 1924–31: The Norman Conquest of $4.86, Cambridge: Cambridge University Press.
Morrison, R. J. (1993). The London Monetary and Economic Conference of 1933: A Public Goods Analysis, The American Journal of Economics and Sociology, Vol. 52, No. 3, pp. 307–321.
Moure, K. (1996). Undervaluing the franc Poincare, Economic History Review, Vol. XLIX, No. (i), pp. 137–153.
Moure, K. (2002). The Gold Standard Illusion: France, the Bank of France and the International Gold Standard, 1914–1939, Oxford: Oxford University Press.
Myers, M. G. (1945). The League Loans, Political Science Quarterly, Vol. 60, No. 4, pp. 492–526.
Orde, A. (1990). British Policy and European Reconstruction after the First World War, Cambridge: Cambridge University Press.
Organski, A. F. K. (1968). World Politics, 2nd ed., New York: Knopf.
Pittaluga, G. The Genoa Conference: Was It Really a Failure? Available at http://citescerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1626.8385&rep=rep1&type=pdf.
Wallerstein, I. M. (2004). World-Systems Analysis: An Introduction, Durham: Duke University Press.
Warnock, B. S. (2015). The First Bailout — The Financial Reconstruction of Austria, 1922–1926. PhD dissertation, Birkbeck College University of London.
1It is always difficult to judge whether the deficit of the US is too high. Since the dollar is the international currency, there would be demand for it from other countries and