Government & Politics

A country that produces goods of high quality at a competitive price is likely to be rewarded for its ingenuity with a trade surplus. Small countries often achieve great development success through export-led growth. At the same time, the entire economic system must be balanced.

These are truly testing times. The world economic order – capitalism – is being called into question following the Lehman crisis. The world’s best form of societal organization – democracy – is being challenged by the economic success of autocratic countries such as China and Singapore.

When the very fabric of society is threatened by prolonged austerity or a financial sector collapse, a deliberate re-structuring of debt may be necessary to restore the hopes of renewed prosperity.

After an era of vigorous expansion a downturn can reveal a large stock of debt relative to the economy’s capacity to service it.

What has been learned now that the Euro zone’s fault lines have been revealed? Where are Europe and the Euro zone today?

The Institute joined the Centre for International Governance Innovation, and the Mercator Research Institute on Global Commons and Climate Change in hosting its third-annual plenary conference in Berlin from April 12-15, 2012.

With my remarks today on financial markets and the financial crisis, I do not make any claims to originality. Rather, they are intended as a reminder of certain circumstances that are already familiar to us, in one form or another.

The global economy is in turmoil. Societies are unstable and not anchored by faith in the system or social order.

In a classic book and subsequent articles, Obstfeld and Taylor (2004) have shown how the broad contours of international financial history over the past century and a half can be well understood by appealing to the famous economictrilemma which emerges from the standard Mundell-Fleming model many of us still teach our undergraduates.

The euro area’s sovereign debt crisis continues though significant steps have been taken to resolve it.