Publications on Globalization
Working Paper No. 947 | February 2020Starting from the mid-nineteenth century, this paper analyzes two periods of financial instability connected with financial globalization. The first culminates with the 1929 crisis, while the second characterizes the more recent experience starting from the 1970s. The period in between is divided into two subperiods. The first goes up to World War II and sees a retrenchment from globalization and the affirmation of a statist approach to national policy autonomy in pursuing domestic goals, for which we take as examples the New Deal, financial regulation, and the new international cooperative approach finally leading to Bretton Woods. The second subperiod, marked by the new international monetary order and limited globalization, although appearing as a relatively calm interlude, conceals the seeds of a renewed push toward financial fragility. The above periods are synthetically analyzed in terms of the development and mutual fertilization of theories, institutions, and vested public and private interests. The narrative is based on two interpretative keys: the Minskyan theory of financial fragility and changes in the public-private partnership, mainly with reference to the financial sector for which the role of the state as guarantor of last resort necessarily ensues. The lesson that can be derived is that a laissez-faire approach to globalization strengthens asymmetric powers and necessarily leads to overglobalization, as well as to financial and economic instability, rendering it extremely difficult and socially costly for the state to comply with its role as financial guarantor.Download:Associated Program:Author(s):Mario Tonveronachi
Book Series, October 2014 | October 2014
By Jan A. Kregel. Edited by Rainer Kattel. Foreword by G. C. Harcourt.This volume is the first collection of essays by Jan Kregel focusing on the role of finance in development and growth, and it demonstrates the extraordinary depth and breadth of this economist’s work. Considered the “best all-round general economist alive” (Harcourt), Kregel is a senior scholar and director of the monetary policy and financial structure program at the Levy Economics Institute, and professor of development finance at Tallinn University of Technology. These essays reflect his deep understanding of the nature of money and finance and of the institutions associated with them, and of the indissoluble relationship between these institutions and the real economy—whether in developed or developing economies. Kregel has expanded Hyman Minsky’s original premise that in capitalist economies stability engenders instability, and Kregel’s key works on financial instability, its causes and effects, as well as his discussions of the global financial crisis and Great Recession, are included here. Published by: Anthem Press
Public Policy Brief No. 130, 2014 | January 2014In our era of global finance, the theory of aggregate demand management is alive and unwell, says Amit Bhaduri. In this policy brief, Bhaduri describes what he regards as a prevalent contemporary approach to demand management. Detached from its Keynesian roots, this “vulgar” version of demand management theory is being used to justify policies that stand in stark contrast to those prescribed by the original Keynesian model. Rising asset prices and private-debt-fueled consumption play the starring roles, while fiscal policy retreats into the background.
Returning to foundations laid down by Keynes and Kalecki, Bhaduri sets out to clarify whether there is any place for traditional demand management policies—featuring an active role for deficit spending and public investment—in the context of financial globalization. His conclusion: such policies are ultimately unavoidable if we are to revitalize the real economy and achieve stability.Download:Associated Program:Author(s):Amit Bhaduri
Working Paper No. 553 | December 2008
Is It Worth the Premium? What Are the Alternatives?
Following an analysis of the forces behind the “global capital flows paradox” observed in the era of advancing financial globalization, this paper sets out to investigate the opportunity costs of self-insurance through precautionary reserve holdings. We reject the idea of reserves as low-cost protection against the vagaries of global finance. We also deny that arrangements giving rise to their rapid accumulation might be sustainable in the first place. Alternative policy options open to developing countries are explored, designed to limit both the risks of financial globalization and the costs of insurance-type responses. We propose comprehensive capital account management as an alternative to full capital account liberalization. The aims of a permanent regulatory regime of capital controls, with respect to both the aggregate size and the composition of capital flows, are twofold: first, to maintain sufficient macro policy space; second, to assure a good micro fit of external expertise incorporated in foreign direct investment as part of a country’s development strategy.Download:Associated Program:Author(s):