The System Worked_How the World Stopped Another Great Depression

by Daniel W. Drezner

  83. “IMF Creates Short-Term Liquidity Facility for Market-Access Countries,” IMF Press Release No. 08/262, October 29, 2008.

  84. Joyce 2013, p. 170.

  85. Ibid. p. 168.

  86. Kindleberger 1988, p. xi.

  87. Prasad and Sorkin 2009.

  88. Coenen et al. 2010, fig. 92.

  89. Ibid.

  90. Organization for Economic Cooperation and Development 2008, p. 6.

  91. Bob Davis, “Foreign Funds Agree to Set of Guiding Principles,” Wall Street Journal, September 3, 2008.

  92. Das 2009, pp. 99–100; Cohen and DeLong 2009, p. 89; Truman 2010, pp. 124–33; Bagnall and Truman 2013. See also Robin Wigglesworth, Andrew England, and Simeon Kerr, “Sovereign Wealth Funds Open Up Books,” Financial Times, March 17, 2010.

  93. OECD/UNCTAD 2012.

  94. OECD/UNCTAD 2013, p. 3. The report went on to note, however, that these governments might still be blocking some investment deals through more informal measures.

  95. See, for example, Tom Braithwaite, “Enforcement of Basel III Should Be Focus,” Financial Times, October 1, 2012.

  96. Chinn and Frieden 2011, p. 214; Véron 2012.

  97. Chalk 2012, p. 555.

  98. Naval patrols were not the only explanatory factor. The posting of armed guards on commercial ships as well as political developments in Somalia proper also played a role. See, for example, “Pirates Face a New Foe: A Private Navy,” Economist, January 12, 2013.

  99. Peter Finn, “Somali Pirates Will Face Death Penalty in Federal Trial in Virginia,” Washington Post, June 02, 2013.

  100. ICC International Maritime Bureau 2013, p. 20.

  101. G20 Leaders Statement, September 25, 2009, G20 Information Centre, http://www.g20.utoronto.ca/2009/2009communique0925.html. Accessed December 2013.

  102. Martin 2006; Sobel and Stedman 2006; Drezner 2007a.

  103. Garrett 2010, p. 29. See also Cooper 2010, p. 749.

  104. See, for example, Hale, Held, and Young 2013, p. 167.

  105. Beattie 2012; Bremmer 2012; Patrick 2014.

  106. Butler 2012.

  107. G20 Information Centre 2013.

  108. Downs, Rocke, and Barsoom 1996; Gutner and Thompson 2010.

  109. See Irwin 2013, pp. 344–48.

  110. Davis and Pelc 2013.

  111. Statement of Treasury Secretary Geithner on the Report to Congress on International Economic and Exchange Rate Policies, April 3, 2010, http://www.treasury.gov/press-center/press-releases/Pages/tg627.aspx.

  112. Jamil Anderlini and Alan Beattie, “China Hints at Currency Accord,” Financial Times, April 3, 2010.

  113. Rickards 2011, p. 113.

  114. Keith Bradsher, “On China Currency, Hot Topic in Debate, Truth Is Nuanced,” New York Times, October 17, 2012; Simon Rabinovitch, “Renminbi Hits 19-Year High against the Dollar,” Financial Times, October 12, 2012; Lingling Wei and Bob Davis, “China’s Zhu Changhong Helps Steer Nation’s Currency Reserves,” Wall Street Journal, July 16, 2013.

  115. Lund et al. 2013, p. 6.

  116. “Less Skewed,” Economist, September 28, 2013.

  117. Drezner 2007b, chapter 5.

  118. Kahler 2013, p. 49.

  119. The IMF/World Bank Development Committee report, from September 30, 2010, can be accessed at at http://siteresources.worldbank.org/DEVCOMMINT/Documentation/22723851/DC2010-0014(E)Reform.pdf.

  120. Council on Foreign Relations, “Global Finance Report Card,” New York: CFR, April 2013. http://www.cfr.org/thinktank/iigg/reportcard/PDFs/CFR%20Finance%20Report%20Card%20Backgrounder.pdf,

  121. Subramanian 2013, p. 4.

  122. Ostry et al. 2010.

  123. Dani Rodrik, “The End of An Era in Finance,” Project Syndicate, March 10, 2010, http://www.project-syndicate.org/commentary/the-end-of-an-era-in-finance#dkuJB92AvW6Fckoy.99.

  124. International Monetary Fund 2012, p. 1.

  125. Wolfe 2012, pp. 787–79; Kim 2013; Kahler 2013.

  126. Wolfe 2012; Kim 2013. See also Ruddy 2010, fn. 38l, and European Central Bank 2013, p. 93.

  127. Doug Palmer, “US, trade allies push for international services talks,” Reuters, http://www.reuters.com/article/2012/09/19/wto-services-idUSL1E8KJ8Q520120919, September 19, 2012.

  128. Data from the WTO’s Regional Trade Agreements Information System at http://rtais.wto.org/UI/PublicPreDefRepByEIF.aspx. Accessed July 2012.

  129. Lazer 1999.

  130. See Drezner 2006, pp. 71–92 for more on this dynamic.

  131. Dadush, Ali, and Odell 2011, pp. 8–9.

  132. There are also growing concerns about the arbitration process used to settle disputes between states and investors in BITs. See United Nations Conference on Trade and Development 2013, chapter 3.

  133. James Politi, “US Revises Investment Treaty Approach,” Financial Times, April 20, 2012.

  134. Ikenberry 2011, p. 6.

  Chapter 3

  1. Exceptions include Kahler 2013 and Jones 2014.

  2. Eric Pfanner, “U.S. Rejects Telecommunications Treaty,” New York Times, December 13, 2012; Ellen Nakashima, “U.S. Refuses to Back U.N. Treaty, Saying It Endorses Restricting the Internet,” Washington Post, December 13, 2012.

  3. Deibert 2013.

  4. Nyhan and Reifler 2010.

  5. Alan Beattie, “IMF Chief Warns on Exchange Rate Wars,” Financial Times, October 5, 2010.

  6. Irwin 2013, pp. 273–74.

  7. Eichengreen 2011a.

  8. Matthew Brown, “Currency Swings Show Faith in G-20 Pledges Fading,” Bloomberg, November 1, 2010.

  9. Sebastian Mallaby, “The Fed’s Foreign Policy Misstep,” November 4, 2010, First Take, Council on Foreign Relations, http://www.cfr.org/monetary-policy/feds-foreign-policy-misstep/p23314.

  10. Dadush and Eidelman 2011, pp. 17–21.

  11. Ibid., pp. 13 and 21.

  12. Hood 2012.

  13. Bloomberg Global Poll, September 22, 2010, http://media.bloomberg.com/bb/avfile/rDd_07fmjdxc.

  14. Bloomberg Global Poll, January 25, 2011, http://media.bloomberg.com/bb/avfile/rv_TLKsI_zGc.

  15. “How to Stop a Currency War,” Economist, October 14, 2010.

  16. Jim O’Neill, “Time to End the Myth of Currency Wars,” Financial Times, November 21, 2010; Eichengreen 2011a; Dadush and Eidelman 2011.

  17. Google Trends, http://www.google.com/trends/explore#q=currency%20 war. Accessed July 2013.

  18. Aaron Back and In-Soo Nam, “Beijing, Seoul Blast Fed Push,” Wall Street Journal, September 27, 2012.

  19. Reuters, “ECB’s Weidmann: Pressure on Central Banks Risks FX Competition,” January 21, 2013, Reuters Editorial online, http://www.reuters.com/article/2013/01/21/ecb-weidmann-currency-idUSL6N0AQCMF20130121; Simon Kennedy and Scott Rose, “Russia Says World Is Nearing Currency War as Europe Joins,” January 16, 2013, Bloomberg, http://www.bloomberg.com/news/2013-01-16/russia-says-world-is-nearing-currency-war-as-europe-joins.html.

  20. Mohammed El-Erian, “Beggar Thy Currency or Thy Self?” Project Syndicate, January 22, 2013, http://www.project-syndicate.org/commentary/the-logic-of-today-s-brewing-currency-wars-by-mohamed-a—el-erian; Transcript of Fareed Zakaria’s interview with Bill Gates, February 3, 2013, CNN online, http://transcripts.cnn.com/TRANSCRIPTS/1302/03/fzgps.01.html. See also Stephen King, “Era of Independent Central Banks Is Over,” Financial Times, January 10, 2013; Felipe Larrain, “QE Takes a Toll on Emerging Economies,” Financial Times, February 4, 2013; Komal Sri-Komar, “Fix Exchange Rates to Revive Growth,” Financial Times, February 11, 2013; and Rickards 2012.

  21. Philipp Hildebrand, “No Such Thing as a Global Currency War,” Financial Times, February 11, 2013. See also Jeffrey Frankel, “All Quiet on the Currency Front,” June 11, 2013, Project Syndicate, http://www.project-syndicate.org/commentary/a-currency-war-without-warriors-by-jeffrey-frankel.

  22. Communiqué of Meeting of G20 Finance Ministers and Central Bank Governors, Moscow, Russia, February 16, 2013, University of Toronto,
G20 Information Centre, http://www.g20.utoronto.ca/2013/2013-0216-finance.html.

  23. See, for example, Victor Mallet, “Sing Demands ‘Orderly Exit’ from Global Easing Policies,” Financial Times, September 4, 2013.

  24. Eichengreen 2013a.

  25. Jim O’Neill, “Currency Warriors!” January 20, 2013, Goldman Sachs.

  26. Joe Weisenthal, “Facebook Is to Blame for the Outbreak of ‘Currency Wars.’” Business Insider, January 26, 2013, http://www.businessinsider.com/goldmans-jim-oneill-facebook-is-to-blame-for-the-outbreak-of-global-currency-wars-2013-1.

  27. Frieden 2006, p. 17.

  28. Nathan Lewis, “Would a Gold Standard Have Worsened the 2008 Financial Crisis?” Forbes, August 30, 2012; Will Weissert, “Ron Paul Gives New Life to Gold Standard Issue,” Associated Press, January 18, 2012, HuffingtonPost.com, http://www.huffingtonpost.com/2012/01/18/ron-paul-gold-standard_n_1212651.html.

  29. Ikenberry 2011; Drezner 2007a.

  30. Scowcroft 2012, p. 8.

  31. Frieden 2006, pp. 261–71.

  32. Barnett and Finnemore 2004, chapter 3; Foot and Walter 2011, chapter 3.

  33. Gowa 1984.

  34. Keohane 1980.

  35. Putnam and Bayne 1987; Andrews 2005.

  36. Eichengreen 2008, p. 30.

  37. Flandreau et al. 1998.

  38. Dominguez 2006.

  39. Webb 1994; Willett 1999.

  40. This parallels the recent argument by Robert Kagan that many people exaggerate the effectiveness of American hegemony in the past as well. Kagan 2012, pp. 109–22.

  41. Reinhart and Rogoff 2009.

  42. Author’s calculation based on a survey of research abstracts and author identification. The journals were International Organization, International Studies Quarterly, World Politics, Review of International Studies, and Review of International Political Economy, which were the top five international relations journals that published International Political Economy work according to Maliniak, Peterson and Tierney 2012.

  43. For example, a few years into the financial crisis, the Review of International Political Economy published a reading list that included books, special issues of journals, and popular articles written about the crisis. Of the forty-five suggested readings, only two contained material written by non-Western authors. See RIPE Editors 2009.

  44. See, for example, Zhu 2001.

  45. Chanley, Rudolph, and Rahm 2000.

  46. See “2012 Edelman Trust Barometer Global Results,” Edelman Trust Barometer 2012 Annual Global Study, Edelman online, http://trust.edelman.com/trust-download/global-results/.

  47. Inglehart 1997.

  48. Mahbubani 2013; Arvind Subramanian, “This Is a Golden Age of Growth (Yes, You Read That Right),” Financial Times, April 7, 2013.

  49. Frieden, Pettis, Rodrik, and Zedillo 2011; Rodrik 2011a.

  50. For a recent primer, see Akram 2012.

  51. William Pesek, “Abenomics Races against the Clock,” June 17, 2013, Bloomberg online, http://www.bloomberg.com/news/2013-06-17/abenomics-races-against-clock-as-stocks-seesaw-william-pesek.html.

  52. Eberstadt 2012.

  53. See “2012 Edelman Trust Barometer Global Results,” Edelman Trust Barometer 2012 Annual Global Study, Edelman online, http://trust.edelman.com/trust-download/global-results/.

  54. Data available from “Senate Action on Cloture Motions” table, website of the US Senate, http://www.senate.gov/pagelayout/reference/cloture_motions/clotureCounts.htm.

  55. See Ezra Klein, “14 Reasons Why This Is the Worst Congress Ever,” Washington Post, July 13, 2012; Klein, “Goodbye and Good Riddance, 112th Congress,” Washington Post, January 4, 2013; Stephen Dinan, “Capitol Hill Least Productive Congress Ever: 112th Fought ‘about Everything,’” Washington Times, January 9, 2013.

  56. On the degree of policy uncertainty, see Baker, Bloom, and Davis 2013. On the macroeconomic effects of uncertainty, see Haddow et al. 2013.

  57. “Debt Limit Analysis,” report of the Bipartisan Policy Center, Bipartisanpolicycenter.org, November 27, 2012, http://bipartisanpolicy.org/sites/default/files/files/Debt%20Limit%20Analysis%20Slides.pdf; Betsey Stevenson, and Justin Wolfers, “Debt-Ceiling Déjà Vu Could Sink Economy,” Bloomberg online, May 28, 2012, http://www.bloomberg.com/news/2012-05-28/debt-ceiling-deja-vu-could-sink-economy.html.

  58. Standard and Poor, “United States of America Long-Term Rating Lowered to ‘AA+’ Due to Political Risks, Rising Debt Burden; Outlook Negative,” August 5, 2011. http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563. Accessed December 2013.

  59. See, for example, Nelson D. Schwartz, “Fearing an Impasse in Congress, Industry Cuts Spending,” New York Times, August 5, 2012.

  60. U.S. Council of Economic Advisers 2013; Macroeconomic Advisers 2013.

  61. See the discussion of austerity in chapter 6.

  62. Macroeconomic Advisers 2013.

  63. Gallup poll, “Trust in Government,” Gallup online, 2013, http://www.gallup.com/poll/5392/trust-government.aspx. Accessed March 2013; Pew Research Center, “Public Trust in Government, 1958-2013.” Pew Research Center for the People and the Press online, October 19, 2013, http://www.people-press.org/2013/01/31/trust-in-government-interactive/. Accessed March 2013.

  64. Thomas Mann, and Norman Ornstein, “Let’s Just Say It: The Republicans Are the Problem,” Washington Post, April 27, 2012. See, more generally, Mann and Ornstein 2012.

  65. Irwin 2013, pp. 227–29.

  66. Ibid., p. 226.

  67. Blyth 2013.

  68. Reinhart and Rogoff 2009; Roxburgh et al. 2012.

  69. Peter Doyle, letter to IMF Executive Board, June 18, 2012, available at http://cnnibusiness.files.wordpress.com/2012/07/doyle.pdf.

  70. Alan Beattie, and Chris Giles, “IMF and Eurozone Clash over Estimates,” Financial Times, August 31, 2011; James Kanter, “IMF Urges Europe’s Strongest to Shoulder Burdens of Currency Bloc,” New York Times, June 21, 2012.

  71. Edwards and Senger 2013.

  72. Pepinsky 2012.

  73. Dadush and Eidelman 2011, p. 8.

  Chapter 4

  1. Gourevitch 1986.

  2. Mansfield and Mutz 2009; Naoi and Kume 2011.

  3. Rose 2012; Bown and Crowley 2013.

  4. Hirschman 1970.

  5. Drezner 2007b, chapter 2.

  6. Simmons 1994; James 2001; Frieden 2006, chapters 8 and 9.

  7. Yergin and Stanislaw 1997; Blyth 2002.

  8. Erixon and Sally 2010.

  9. Ikenberry 2011, p. 340.

  10. Lake 2009, p. 225.

  11. Examples of effects that would be neglected under OEP are ideational factors, second-image reversed factors, and systemic complexity. See Oatley 2011; Drezner and McNamara 2013; and Katzenstein and Nelson 2013 for a fuller critique.

  12. Xing and Detert 2010.

  13. Ibid.

  14. This data set can be accessed at http://www.wto.org/miwi. The data in this paragraph comes from “OECD-WTO Database on Trade in Value-Added: Preliminary results,” at https://www.wto.org/english/res_e/statis_e/miwi_e/tradedataday13_e/oecdbrochurejanv13_e.pdf, accessed January 2013.

  15. Briand et al. 2012; Ip 2013.

  16. Mishkin 2010.

  17. Obstfeld 2012, fig. 2.

  18. Palmer and Maher 2010. See also Clive Cookson, Gillian Tett, and Chris Cook, “Organic Mechanics,” Financial Times, November 26, 2009.

  19. Kinderman 2008.

  20. See, for example, Farrell and Newman 2010.

  21. Ibid., p. 618. See also Pierson 2004.

  22. Rogowski 1989; Hathaway 1998.

  23. Chwieroth 2009.

  24. Philippon and Reshef 2013.

  25. Figures from Rajan 2010.

  26. Baker 2010, p. 655.

  27. Johnson and Kwak 2010.

  28. Philippon and Reshef 2013.

  29. Gawande, Hoekman, and Cui 2011.

  30. Bown and Crowley 2013; Davis and Pelc 2013.

  31. The KOF data
can be accessed at the KOF Index of Globalization website, http://globalization.kof.ethz.ch/. The G20 compliance data can be found at the University of Toronto’s G20 Information Centre, http://www.g20.utoronto.ca/analysis/. The correlation coefficient between the two indices for the nineteen countries (minus the European Union) was approximately 0.3.

  32. For example, even though the United States was the epicenter of the financial crisis, it had not truly implemented Basel II prior to the collapse of Lehman Brothers.

  33. Crotty 2009; Levinson 2010. See Bair 2012, pp. 27–40 and Zaring 2009/10, p. 483, for more pointed critiques.

  34. Eichengreen 2009.

  35. Financial Stability Forum 2008.

  36. There is another reason that this would seem to be an ideal issue to test the strength of sectoral interests: because the regulatory debate was so arcane, it should have been easier for the banks to make their preferences clear without a fear of public backlash. See Kono 2006 on how standards can be used by sectoral groups to more readily advance material interests.

  37. Thirkell-White 2009.

  38. See BBC World Service, “Economic System Needs ‘Major Changes,’” March 31, 2009, available on WorldPublicOpinion.org, http://www.worldpublicopinion.org/pipa/articles/btglobalizationtradera/596.php, accessed December 2012; and PIPA, BBC World Service, “Publics Want More Aggressive Government Action on Economic Crisis,” July 21, 2009, available on WorldPublicOpinion.org, http://www.worldpublicopinion.org/pipa/articles/btglobalizationtradera/626.php, accessed December 2012.

  39. See Singer 2007; Schirm 2009; and Lyngen 2012 for more on the preferences of national financial sectors.

  40. Quoted in Robert Kaiser, “‘Act of Congress’: How Barney Frank Foiled the Banking Lobby to Form a New Financial Watchdog,” Washington Post, May 5, 2013. Indeed, even during the depths of the 2008 crisis, the IIF’s primary recommendation to regulators was the “full and consistent implementation of the Basel II accord.” See IIF letter to George W. Bush, November 7, 2008.

  41. Interview with Timothy Geithner, Wall Street Journal, January 17, 2013.

  42. Vitali, Glattfelder, and Battiston 2011.

  43. Johnson and Kwak 2010, p. 5.

  44. Makkai and Braithwaite 1992; Seabrooke and Tsingou 2009; Baker 2010, pp. 652–53.

  45. Underhill and Zhang 2008; Helleiner and Porter 2009; Ozgercin 2012.