Affordable Custom Written Analysis of an Article or Case Study
Summary: what is a main concept in the case or article?
The main concept of the article is to explain why the New International Financial Architecture (NIFA) was created and who is being benefited from this approach. The discussion begins with an examination of the power structures of the global political economy by focusing on the continued dominance of the USA. The article presents the contradictory relations between USA and global finance will be explored so as to shed more critical light on the NIFA. This article critically examines the NIFA by linking its institutional components to the larger contradictions of the capitalist inter-state system. A contradiction is the constant promotion of financial liberalization in emerging markets by US-led international financial institutions (IFIs), and the frequency of financial crises in the developing world, on the other. The article suggests that the NIFA is an attempt to stabilize and legitimate the scaffolding of the existing imperative of free capital mobility.
Situations that arise in the case or article.
External debt and domestic financial crises generate substantial social costs. As it happens, poor sectors of society pay a substantial share of the costs of adjustment to debt crises, whereas they benefit rather marginally from financial booms. The experience of many developing countries in several regions of the world also indicates that the social effects of debt crises continue to afflict countries even after several years of successful economic restructuring and recovery. The recent crisis has demonstrated a fundamental problem in the global economy: the enormous discrepancy that exists between an increasingly sophisticated and dynamic international financial world, with rapid globalization of financial portfolios, and the lack of a proper institutional framework to regulate it. In summary, existing institutions are inadequate to deal with financial globalization. This systemic deficiency and the associated threat of recurring crises have create the need for a comprehensive reform of the international financial system, geared to prevent costly crises and to manage them better if they occur. Eager to defend the feasibility of continued mobility of cross- border financial flows, in the hope of strengthening the international financial system. This strategy has been referred to as the New International Financial Architecture (NIFA). The NIFA should be seen as political reactions of the underlying paradoxes of global capital accumulation based on free capital mobility. The NIFA was an attempt to revise the rules and standards so as to reproduce, the nature of the Washington Consensus.
Possible solutions to such situations (applying the lesson of the day)
The goal of redesigning the international monetary and financial system is to harness the potential of private international financial flows to the service of stability and growth in the world economy. It is important that the various components of the architecture (NIFA) be addressed at the same time. These components are interrelated, and putting one or some of them in place in isolation will have limited impact in reducing the disruption caused.
Improvements in supervision and regulation of financial firms are preventive measures that can reduce the incidence of crises and hence the need for IMF resources to cure them. However, since supervision and regulation are far from foolproof, financial crises and contagion will remain problems that need to be dealt with at the international level. Macroeconomic coordination and surveillance are essential to manage both inflationary and deflationary situations, which lie behind boom-bust financial cycles. Regional and sub-regional institutions could play an essential role as complements to IMF funding and surveillance activities, as well as in surveillance of domestic financial regulation and supervision.
Select one possible solution to the case. Explanation for how you select this solution (the best alternative is not always feasible to resolve the central or primary situation presented in the case or article).
In order to prevent the current crisis from deepening, immediate actions are required from the major industrial countries and from the international community. There is evidence that the world economy is experiencing a major slowdown, which may deepen if inadequately managed. For example, Japan is in its worst recession since the war, much of East and South-East Asia is in depression, Russia is experiencing a major downturn, growth has stalled in Latin America, and the prices of primary commodities and a number of manufactures are falling in international markets. Authorities in the industrial countries must nonetheless continue to be alert. Several downside risks still remain, and current policies may prove insufficient to prevent the world economy from slipping into recession. Expansionary fiscal policies may be required in other industrial economies, in addition to Japan. It is also crucial that the rules of an open international trading system should operate smoothly, allowing the economies that face adjustment to reduce their deficits or generate trade surpluses with the more vigorous industrial economies.
With the full support of the international community, IMF should put together contingency funds to assist countries now experiencing crisis or contagion and others that could become the victims of world financial crisis in the future. These include countries that may be affected indirectly by the effects of such crises on trade and commodity prices, particularly low-income African and Asian countries. It is essential that this new type of contingency financing, should become a stable feature of the new international financial order, and that the availability of funds should be guaranteed without delay when needed. Developing and transition countries experiencing difficulties must obviously be ready to adopt the necessary adjustment policies. Rescue packages and adjustment policies should give special emphasis to a fair and progressive sharing of the costs of adjustment. The design of gender-equitable social safety nets is necessary to ensure that this burden does not fall disproportionately on the poor.
Reflexive analysis on developments in the case or article. You can use other references that approach the situation raised in this case or article from other perspectives. Fundamental reforms of the NIFA are needed. The international financial system is requires a comprehensive approach. Reform must encompass a number of interrelated aspects of international liquidity management, global consistency of macroeconomic policies and financial regulation, areas essential to the prevention and management of financial crises, as well as finance for development and the resolution of outstanding debt issues.
It must be emphasized that the present system is badly equipped to prevent financial crises and only partly equipped to manage them. Reforms in this area must be addressed with a sense of urgency in six key areas: (1) Improved consistency of macroeconomic policies at the global level (2) Reform of IMF aimed at providing adequate international liquidity in times of crisis; (3)The adoption of codes of conduct, improved information, and financial supervision and regulation at national and international levels; (4)The preservation of the autonomy of developing and transition economies with regard to capital account issues; (5)The incorporation of internationally sanctioned standstill provisions into international lending; and (6)The design of a network of regional and sub-regional organizations to support the management of monetary and financial issues.
Any reform of the international financial system ought to be based on a broad discussion, involving all countries, and a clear agenda, including all key issues. The process must ensure that the interests of all groups of developing and transition economies, including poor and small countries, are adequately represented.
Conclusion or Recommendation
The main challenge of financial globalization is how to integrate with the world financial system. Some economists would argue that the main challenge is to integrate all sectors and countries that do not participate in the globalization process. Though financial globalization can bring about many positive benefits, not all countries, sectors, or firms have access to global financial markets and services or can take advantage of the benefits induced by globalization. Among developing nations, only some countriesreceive foreign capital, particularly middle-income countries. Within each country, investment is concentrated in certain sectors. Selected companies can obtain foreign funds. The lack of participation in the financial globalization process might put countries, sectors, and companies in disadvantageous positions. There is no easy solution on how to integrate them. The main challenge of globalization is to selectively integrate with the world economy and to adopt an active capital account regulation. These measures would help to minimize the risks of crises and reduce the impact of fluctuations in the international financial markets.
Originally posted 2017-09-26 11:32:50.