The legacy of 2007 is still with us. Its most devastating and destructive effect was to put a premium on unconventional monetary measures. Unfortunately, when policymakers scrambled in search of “big bazookas” ten years ago, they set the stage for the return of an old character: a strongman willing to pull the trigger.
The new central bank network created since 2008 is of a piece with the new networks for stress testing and regulating the world’s systemically important banks. The international economy they regulate is not one made up of a jigsaw puzzle of national economies, each with its gross national product and national trade flows. Instead they oversee, regulate and act on the interlocking, transnational matrix of bank balance sheets. This system was put in place without fanfare. It was essential to containing the crisis, and so far it has operated effectively. But to make this technical financial network into the foundation for a new global order is a gamble.
Reform is always easier when a crisis leaves policy makers no other options. But without further change, Asia will continue to rely too much on debt instead of productivity gains for growth. In poorer nations, improvements in household welfare will lag. As in the years before 1997, economic irregularities could build up to the point where the region faces another crisis. Will the next Kim Dae-jungs be there when you need them?
North Korea might be reined in, the thinking goes, if China could be persuaded to lean harder on its largest trading partner, and so the Trump administration is contemplating a variety of inducements that run from secondary sanctions on some Chinese banks and companies to a better trade deal for Beijing.
Twenty years ago next month, the British government gave the Bank of England the freedom to set interest rates. That decision was part of a trend that made central bankers the most powerful financial actors on the planet, not only setting rates but also buying trillions of dollars’ worth of assets, targeting exchange rates and managing the economic cycle. Although central banks have great independence now, the tide could turn again.
Other countries such as Mauritius and South Africa have been hailed as China’s gateway to Africa, but few countries have positioned themselves aggressively for the position in the way that Morocco has. Last year, the government of Morocco hosted the first Sino-African Entrepreneurs Summit in Marrakech, where Morocco later hosted the COP22 summit. Similar forums are planned in the future.
On January 1st, the United Kingdom began the implementation of the Investigatory Powers Act, widely considered the most comprehensive—and intrusive—surveillance law in the Western world. The Act authorizes government access to bulk datasets such as travel logs, financial transactions, biometrics, the interception of digital communications data, the hacking of devices, and requires the retention of browsing history by Internet service providers.
Had there been no financial crisis in 2007/08 with all the consequences that came with it, the economic outcomes—and, therefore, political history—of the last eight years would have been markedly different. We can talk about globalisation and income inequality until we are blue in the face, but these issues alone don’t explain what’s happening, and anyway, they pre-date the Lehman bust.
The idea that being a banker is an alluring characteristic for a member of the Trump Administration is a startling change. For months, Trump criticised Hillary Clinton for giving paid speeches to banks like Goldman Sachs.
Also read:
Donald Trump and the New Economic Order
It’s a bomb! A mountain! A horror movie and a treadmill to hell! To doomsayers, China’s $25 trillion pile of public and private debt is a threat to the global economy. Or maybe it’s just a manageable byproduct of the boom that created the world’s second-biggest economy.
