Larry Summers makes a plea for renewed globalism

August 26, 2008

From Sunday’s FT opinion pages:

The current global policy debate is a cacophony. It is all very well to advocate increased US saving and a cut in the US current account deficit but the process for bringing it about will mean less US demand for foreign products. That will put pressure on jobs and output growth in other countries if no countervailing measures are put in place. Conversely, the return of a stronger dollar without other policy changes will raise US demand for exports but at the price of cutting demand for domestically produced goods and compounding the recession.

These problems will be with us for some time. They may not be at the top of anyone’s agenda right now. But the success of the next administration could depend on its ability to engage with a wider range of global economic stakeholders, on a broader agenda, at a time when disagreements are increasing not just about means but also about ultimate ends.

Are the governmental institutions of the United States up to this challenge? Europe? China?

The collapse of consensus at the global level appears more imminent than ever these days – Doha’s failure and the appearance of ACTA (a proposed trade agreement that would effectively undermine WIPO and the TRIPS agreement) are part of a broader current that may sweep the Bretton Woods institutions into the dustbin of history.

Intentionally or not, the Bush administration has furthered this process quite effectively.

In the midst of a (likely) recession and the ongoing erosion of its diplomatic and military authority, what steps will the next U.S. administration take?

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