Massively Parallel Globalization: Explorations in Self-Organization and World Politics by David C Earnest

Author:David C Earnest [Earnest, David C]
Language: eng
Format: epub
Tags: Globalization, Political Economy, Social Science, Political Science, Sociology, General
ISBN: 9781438456621
Google: 5-f0CAAAQBAJ
Goodreads: 27787543
Publisher: SUNY Press
Published: 2015-05-05T11:08:59+00:00

SIX

TOO BIG TO COMPROMISE

Did Eleven Banks Block Reform during the Great Recession?

Just as species and harvesters coevolve in an ecosystem, firms, consumers, and products adapt, learn, and change in markets. Their coevolutionary dynamics can produce market efficiencies through network effects, complementary technologies, and economies of scale, but also lead to immense global firms, oligopolistic competition, and market distortions. Like natural ecosystems, markets may exhibit qualities of punctuated equilibrium, or “long periods of relative stability, or evolutionary change, interrupted by short periods of quick and extensive, or revolutionary, change.”1 The ecological perspective helps explain why firms’ fortunes may rise and fall with breathtaking suddenness. For example, Finnish communications firm Nokia once was the largest manufacturer of mobile phones in the world but saw its profits fall 49 percent in the three years following Apple’s introduction of the iPhone.2 There are numerous examples of firms experiencing a reversal of fortune, but nowhere have the extensive, sudden, and catastrophic changes in markets—the “extinction events” of creative destruction—been more consequential than in global finance.

During the crucible of the 2008 financial crisis, Rahm Emanuel—newly designated chief of staff for President-elect Barack Obama—told the Wall Street Journal, “You never want a serious crisis to go to waste. … The crisis provides the opportunity for us to do things that you could not do before.”3 With the collapse of Lehman Brothers and its chilling effect on credit markets, one pressing area for reform was banking regulation. By early 2009, many world leaders anticipated a broad consensus on the need to prevent banks that are “too big to fail” from causing national credit crises to spread globally. Then-UK prime minister Gordon Brown told the Scottish Labour Conference in March 2009 that he saw “an emerging consensus on how we strengthen the global regulation of our financial markets to prevent any recurrence of the collapse that has caused so much damage to economies around the world.”4 The Basel Committee on Banking Supervision, the intergovernmental body in which governments negotiate rules for the global banking system, began discussions on strengthening the then-existing regime known as the Basel II Agreement. The twenty-seven members of the European Union agreed in July 2009 to create a European Systemic Risk Board to resolve disagreements among national banking regulators, an agreement so promising that French president Nicolas Sarkozy called it a “complete change in Anglo-Saxon strategy.”5 In September 2009, Josef Ackermann, the chief executive of Deutsche Bank, expressed his support for increased capital adequacy ratios to buffer banks from financial contagion.6

Yet just two weeks later, and just a year removed from the failure of Lehman, negotiations on a new, stronger international banking regime began to unravel. Contradicting Ackermann’s support for a strengthened regime, several German bankers and regulators expressed concerns that the proposed Basel III Agreement would impose rules on capital adequacy that would harm many German banks.7 By the time the Basel Committee announced the Basel III rules in September 2010, negotiators had considerably weakened the regime. Many observers concluded that the new regime did not provide sufficient protection against another global contagion of bank failures.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.