Overview: Good Governance, Economic Crises, International Cooperation and World Happiness credible and effective. In considering how this can best be done, Haley underlines the importance of striking “a judicious balance between the key public policy objective of stability and the need for efficiency and innovation.” He also raises another governance issue that is central in several of the other papers: addressing what is widely seen as “a fundamental trade-off between effectiveness on the one hand and representation on the other.” Another Fine Mess: Repairing the Governance of International Financial Regulation by Pierre Siklos on the governance of international financial regulation, makes a stern judgment at the outset: five years after the onset of the crisis, policy makers “continue to believe that the severity of any crisisled downturn can be divorced from its source,” and that “instead of limiting the extent to which the financial sector is prone to crises, policy makers have opted to socialize the downside risks of a future economic crisis.” Siklos contends that a world of flexible exchange rates and internationally mobile capital renders international collaboration essential if “beggar-thy-neighbour” policies are to be avoided. Although this has long been recognized in the realm of macroeconomic policies, Siklos argues that it is equally important, even if more difficult to achieve, in the realm of prudential policies ensuring the stability and resilience of financial systems. Looking forward, Siklos maintains that “as long as the international community recognizes the potential spillovers from crisis-response measures…there is nothing to prevent the adoption of local solutions to problems that have global repercussions.” What is needed to achieve this in the regulatory sphere, he contends, is “leadership in agreeing on a range of acceptable regulatory frameworks… capable of operating with a minimum of spillovers that might threaten financial system stability.” To achieve this, Siklos argues that especially in the case of financial regulation, a top-down approach is not workable, while current surveillance has failed to assess the global impact of individual country policies. As one step towards an improved framework, he suggests that the Financial Stability Board (FSB) might provide a more representative model than that of the G20. Strengthening International Financial Institutions to Promote Effective International Cooperation by Thomas A. Bernes, focuses directly on what can be done to make IFIs better able to promote international cooperation. Although Bernes’ attention is more on formal aspects of governance, such as voting structures and membership, his conclusions are akin to those of Siklos. Meaningful international cooperation has been easiest to achieve for short-term actions required to deal with immediate threats, and especially where spillovers are modest. Bernes argues, therefore, that when the G20 first met at the leaders’ level in 2008, the spur provided by the financial crisis was sufficient to produce concerted macro responses plus a crisp approach to governance reform of IFIs. The
implementation pace on key elements has, however, been mixed. He points to, for example, the full implementation by 2011 of the agreed IMF quota and voice reforms, but scant progress on further reforms and the proposed Charter for Sustainable Development. Bernes gives high marks to a parallel institutional improvement — the broadened scope and effectiveness of what is now the FSB. More generally, Bernes quotes, with reluctant approval, the judgment of Raghuram G. Rajan that “politics is always local; there is no constituency for the global economy.” Bernes sees the subsequent history of G20 leaders’ meetings as one of a shift to longer communiqués couched in vaguer language, and more inclined to call for further studies than for immediate action. He concludes by documenting what he considers to be flagging belief in the prospects for reform of international financial governance. In Sustainable Development and Financing Critical Global Public Goods, Barry Carin takes up explicitly the problems of developing a global political constituency and of designing mechanisms to match. In choosing sustainable development as his case study, Carin has clearly identified a policy area where new constituencies and mechanisms are both essential, at least with respect to global warming. Carin makes a spirited defence of the idea that global public goods require global public financing. He invites readers to “think outside the box,” recounting what it took to deliver some previous major changes in social norms and international institutions. The two main examples Carin provides of large institutional changes are the development of the euro and sovereign debt relief. In both cases, he cites as necessary but not sufficient ingredients, “a coherent vision of a better option, a champion to articulate and promote the vision, and a process of scheduled meetings to develop and nurture strategy to realize the vision.” Most important, Carin suggests, is “incrementality — the process of change accomplished by a series of small steps towards the vision.” Carin continues his discussion by explaining and evaluating a number of existing mechanisms for funding green investments, finding them inadequate, and proposes Special Drawing Right linkage as a new source for green investment funds. His use of specific examples of institutional reforms, both past and potential, is perhaps of most use in exposing some often ignored elements of successful reforms, especially the time required to change minds, build new relationships and change long-standing social norms. Leadership in a Turbulent Age by Fen Hampson and Paul Heinbecker, starts by listing several ways in which international governance issues are becoming inherently more complicated, as interdependencies increase and global leadership necessarily becomes multilateral, or at least multipolar. They contrast minilateral and maxilateral approaches to global leadership, which leads, once again, John F. Helliwell • 3