Integrating Regions by Unknown

Author:Unknown
Language: eng
Format: epub
Publisher: Stanford University Press
Published: 2013-08-15T00:00:00+00:00

7

Economic Crises and Regional Institutions

C. RANDALL HENNING

Introduction

Regionalist movements are intimately connected to economic and financial crises. Most of the financial crises of the last four decades have had a strong regional dimension. We identify them as the “Latin American debt crisis,” the “European currency crisis,” and the “Asian financial crisis” because their impact has been geographically concentrated. Crises call into question the adequacy of multilateral arrangements for prevention and stabilization and, under certain circumstances, galvanize support for proposals to strengthen regional agreements and institutions. Once in place, regional arrangements can shield countries against the adverse effects of global financial turbulence, if they are well designed.

Our understanding of regionalism would benefit from more systematic analysis of its relationship to crises. This chapter examines the extent to which economic crises help or hinder the development of more effective regional institutions and addresses the determinants of institutional evolution and design in the Asian region. First, it conducts a structured comparison of the most important region-wide crises over the last four decades and their impact on regional institutions. By asking similar questions in each case, we can draw generalizations about the conditions that are conducive and averse to institutional building. Second, the chapter elaborates on aspects of cases that speak to key points in the present Asian discourse on regional institutions. While considering a common set of factors, the treatment here will sometimes explore instructive aspects of cases even when they might not fit with a common template.

After comparing these crises, the chapter concludes that five conditions are especially important in facilitating a constructive regional response to a crisis: a significant degree of regional economic interdependence (market integration); an independent secretariat or intergovernmental body charged with cooperation; webs of interlocking economic agreements; and, as elements of the multilateral context, conflict with the relevant international organization (such as the IMF) and acceptance by the United States of regional integration. These findings are further supported by the European sovereign debt crisis more recently. The chapter does not argue that regional movements can only be generated by crises, but that these conditions are conducive to institution building in response to them. Asian regionalism would be favored in the future by shocks that are external to the region, rather than coming from a member state, and responses from multilateral institutions that are averse to Asian preferences. Asian regionalists would be well served by using crises to ratchet up governments’ commitments to secretariats and intergovernmental bodies, establishing linkages among economic issue areas, and forging cooperation with multilateral institutions.

The following section discusses the nature and definition of “crisis” and “institution,” central concepts in this study. The third section addresses the causal links between crises and institution building, as well as the factors that condition regions’ responses to crises. The fourth section presents five crisis cases. The fifth section draws conclusions from the comparison of cases and identifies conditions favoring further institution-building in Asia and strategies that advocates of Asian regionalism might adopt.

Defining the Concepts

The Oxford English Dictionary’s first definition of “crisis” is “a time of intense difficulty or danger.

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