GLOBAL FINANCE AT RISK

Global Finance At Risk

Global Finance At Risk

Introduction

In Global Finance at Risk, two acclaimed economists propose a bold and necessary solution to the financial crises that threaten us all: a World Financial Authority with powers to establish best-practice financial regulation and risk management everywhere. The expansion of finance in industrialized economies, including nineteenth-century Britain and the United States, saw exactly the same kind of turbulence now afflicting Asia, Russia and Latin America. Then, the solution was to establish national banking and securities regulators, deposit insurance and lenders of last resort. But in our increasingly globalized world, the savings account you open at your local bank can be based on bad debt from anywhere in the world, including places outside the jurisdiction of those national agencies. And when banks fail, it is not just their account-holders who suffer, but all of us. This is why, argue John Eatwell and Lance Taylor in this timely and urgent book, effective regulation of the international financial system is crucial for the economic health of all nations.

From 1985 to 1992 John Eatwell served as economic adviser to Neil Kinnock, leader of the British Labour Party, and was responsible for much of the work that led to a substantial re-alignment of the Labour Party's economic policies. In 1992 he entered the House of Lords, and from 1993 to 1997 was Principal Opposition Spokesman on Treasury and Economic Affairs. In 2009 he became a member of the House of Lords' Economic Affairs Committee.

In 1988, together with others, John Eatwell set up the Institute for Public Policy Research, one of Britain's leading policy think-tanks. He remains a trustee of the Institute. From 1997 to 2002 he sat on the board of the Securities and Futures Authority, Britain's securities markets regulator, where he developed his interest in securities regulation. He was a member of the Regulatory Decisions Committee of the Financial Services Authority from 2001 until 2006.

Discussion

Global Finance at Risk presents a compelling case for the international regulation of world financial systems. Written in a clear and accessible style and addressing one of the most critical issues in the world today, this is a book which deserves to be widely read and discussed.( Aggarwal, 1993)

Since the collapse of the Bretton Woods system in 1971 and subsequent free-float of currencies, the capital markets have been deregulated. But the benefits of international liberalization, according to John Eatwell and Lance Taylor in their boldly argued Global Finance at Risk, "have been tarnished by considerable costs"--namely, more volatile foreign exchange and domestic interest rates, a greater susceptibility to contagion, and the threat of destabilizing financial crises.

The problem with the current network of regulatory authorities, write the authors (Eatwell is president of Queens' College at Cambridge University and a member of Britain's House of Lords, and Taylor is a professor of economics at the New School in New York), is they offer too little, too late and just don't manage the threat of systemic ...