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About this book

The financial crisis prompted many to ask how financial systems from America and Iceland to Russia and Hungary could have been so misgoverned that their near collapse plunged the entire world into recession. Randall Germain assesses what needs to be done, and by whom, to avoid a repetition of what he calls the 'great freeze'.

Table of Contents

1. Financial Governance and the State

Abstract
The wholesale financial carnage wreaked upon the world between mid-2007 and mid-2009 has prompted many to ask whether global finance is out of control. How could financial systems from America and Iceland to Russia and Hungary have been so mis-governed that their near collapse would plunge the entire world into recession, the first such global measurement since 1945?1 What needs to be done to minimize the chances of relapsing into another such state of affairs, and if something can be done who will do it? And finally, what will the future look like, and how (not to mention by whom) will it be ‘made’? These are the questions which animate this book, and they are neither easy nor straightforward ones to settle. But as the world’s economies come out of recession and resume growing in 2010, answers are needed if another repeat of financial chaos is to be avoided.
Randall Germain

2. Forging Financial Governance

Abstract
In November 1890, Baring Brothers, one of the world’s two pre-eminent financial institutions, came face to face with insolvency. If it had gone under, London’s credit markets would have been roiled along with markets in Paris, New York and elsewhere. Everyone who was in a position to know about Baring — and in those early days of November few knew the full extent of its troubles — were under no illusions as to the consequences if such a bastion of credit were to founder. Thus it was that on a Saturday in the City (London’s financial district) the senior partner of this august firm, founded in 1762, could be spied meeting with the Governor of the Bank of England to discuss what to do to retrieve the situation. How Baring was saved, or perhaps better, how the City and the Bank of England rallied together to protect London’s (and possibly the world’s) credit markets from disaster, provides a window into how the international organization of credit functioned during the halcyon days of the nineteenth century gold standard (Ziegler 1988).
Randall Germain

3. Extending Financial Governance

Abstract
The learning curve required of public officials when faced with a new environment can be brutal. Central bankers scrambled to make sense of a new environment after Britain went off gold in 1931, and they did so again in the early 1970s when the fixed exchange rate regime was abandoned by all major governments. And even though central bankers had by then been joined in their efforts by a number of more specialized regulatory authorities, they were unprepared for the ravages which the move to floating exchange rates alongside more liberalized capital markets engendered.
Randall Germain

4. Financial Governance and the Great Freeze

Abstract
Much as the French and German armies faced each other across the Maginot Line during the winter of 1939–40, many watched and waited to see how the looming financial implosion would unfold from the middle of 2007 through to September 2008.
Randall Germain

5. Global Politics and Financial Governance

Abstract
This chapter takes stock of the rich history covered in the previous three chapters and provides a fuller account of the insights and reflections that have arisen in the course of constructing this narrative. It explores the meaning of financial governance and places it into a rounded context that connects global politics more fully to financial governance. The main goal of this chapter is to go beyond the historical narrative to develop in more depth the conceptual framework of the book. In order to accomplish this task, I consider in turn the principal elements of financial governance: (1) the political relationship as structured by the tug-of-war between national and global politics; (2) the market relationship as refracted through the idea of finance; and (3) the governance relationship as it works through the changing balance between public and private authority. But I must stress that this chapter is not exhaustive in detail; for those who wish to explore further the literature behind the views developed here, and especially my views on why international political economy — or IPE — is such an appropriate intellectual vehicle for apprehending finance, please consult the bibliographic essay at the end of the book. Given the complexity of how the basic elements of finance relate to each other, it is no wonder that the global history of financial governance is halting and prone to reversal, and in the final chapter I argue why we should expect another such reversal to unfold.
Randall Germain

6. Power and Governance in the Global Financial System

Abstract
The global history of financial governance recounted in this book suggests that a highly contested set of dynamics have been at work over the long term. In other words, financial institutions are governed precisely through the many ways in which public authority qua states support and undergird the operation of financial markets. These range from providing education to future financial sector employees, to protecting individual and corporate consumers to regulating particular types of activities, to providing overarching rules for the organization and operationalization of financial institutions themselves.
Randall Germain

7. Global Governance and National Responsibility

Abstract
When future historians of financial governance look back on the Great Freeze, will they see it as a significant turning point in how we regulate financial behaviour and indeed the global financial system, much as Karl Polanyi looked back to identify the political consequences of the Depression years as the Great Transformation? I rather think so, for all of the reasons recounted over the last half of this book. But I am here reminded of the words of the great English radical historian, E.P. Thompson (1978: 298), who warned that history could not be compared to an express train racing through a tunnel ready to deliver its passengers onto sunlit plains at the other side. There are too many variables at work, and the sad truth is that sometimes we do not learn our lessons very well. So, even though I believe, and have argued, that an important turning point in financial governance has been reached, the future I have outlined is far from certain to come to pass.
Randall Germain
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