Distinguished Speaker Seminars

Johannes F. Linn, formerly World Bank Vice President for Europe and Central Asia and currently Senior Fellow, Global Economy and Development, Executive Director, Wolfensohn Center for Development at The Brookings Institution, discussed global governance reform issues with a focus on the imperatives of a new global economic reality on 5 March 2008. He started his lecture by noting three major points. First, the world now faces dramatic shifts in global power distribution and pressing global challenges. Second, international institutions established after World War II are fragile and lack legitimacy in responding to these challenges. Third, far-reaching reforms based on a new set of values are necessary for creating architecture of legitimate global institutions that will be representative, relevant, and effective.

The emergence of key dynamic economies, resurgence of Asia, and integration of the Eurasian super-continent are bringing about significant changes in national demographic and economic balances in the 21st century. By 2050, the People's Republic of China (PRC) and India will probably be the largest economies in the world, followed by the United States (see Figure). The rapid growth of trade and capital flows, energy security, global warming, and threats of epidemics are calling for increasing global cooperation, which in turn require global institutions that can address these global changes effectively.

Existing global institutions such as the United Nations (UN), UN agencies, international financial institutions, and summits are fragmented, unrepresentative, ineffective, and outdated. There is a stalemate on many issues, including the Doha trade round, global financial imbalances, global warming, and epidemics, and on reform of individual agencies dedicated to addressing those global issues. One example is the G8 Summit, which despite five non-member countries (Brazil, PRC, India, Mexico, and South Africa) being permanently associated under the “Heligendamm Process,” is insufficient to push the global reform agenda. To solve this problem by creating an effective “global apex forum,” Mr. Linn introduced an alternative summit model, the G20. This group of 20 countries, which currently meets at the finance minister level, has developed into a representative and effective forum that will be geographically and culturally diverse and broadly representative of global population distribution, economic weights, and geography.

Finally, Mr. Linn introduced a new set of “global values” for better global governance, which is important to make the shift from the old order global values—which focus on nation-states and national power politics and promote singular economic models and political values—to new order global values that focus on global society and new multilateralism and accept the coexistence of diverse models of market economy and political systems.

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Yung Chul Park, Research Professor and Director of the Center for International Trade and Finance at Seoul National University's Graduate School of International Studies, discussed East Asia's adjustments to global imbalances and the subprime crisis on 13 March 2008.

Professor Park cited Roubini's estimate of the losses related to the subprime loan crisis incurred by financial institutions, which amounted to US$3 trillion. Despite East Asia's relatively low exposure to mortgage-backed structured products he said, spreads have widened in many East Asian emerging economies. Capital inflows into Indonesia, Malaysia, Philippines, Thailand, and Association of Southeast Asian Countries (together making up ASEAN 4) and four Asian newly industrialized economies (Hong Kong, China; Republic of Korea; Singapore; and Taipei,China) have fallen off recently.

Professor Park offered the following scenarios for East Asia: adjustment through inflation, large currency appreciation and domestic demand expansion, and the decoupling of East Asia from global business cycles. He addressed the importance of an ASEAN+3 free trade agreement, financial market opening and deregulation of cross-border investments in East Asia, and a cooperative framework for improving macroprudential regulation of financial institutions and markets. He concluded that the objectives of the Asian Bond Markets Initiative (ABMI) need to be redirected toward creating regional financial centers catering to financial services needs of Asian investors and savers.

Read a more detailed summary of Professor Park's lecture.

Vito Tanzi, former State Undersecretary for Economy and Finance, Ministry of Economy and Finance, Italy and former Director, Fiscal Affairs Department, International Monetary Fund, delivered a seminar on the future of fiscal federalism on 20 February 2008. Focusing on the creation of supranational institutions to manage externalities associated with the globalization of economic activities, Mr. Tanzi argued that responsibilities and powers are being progressively shifted upward from national governments to international or global institutions.

Mr. Tanzi noted that in the period following World War II, national governments faced increasing pressure to maintain economic stability and to provide their citizens with essential public services. The size of the government grew rapidly, as did its power and economic role.

The central government's growing size and rising share of public spending in the GDP, Mr. Tanzi argued, resulted in economic inefficiency. Economic growth in many countries faltered and privatization and fiscal decentralization followed. In particular, the growing private sector reduced the public provision of goods and services and became more involved in production and distribution in general. This process sped up in the 1990s and thereafter through public–private partnerships, and the role of the private sector further deepened.

Due to the recent trend of globalization of trade, investment, and financial activities, the economic activities within a nation state now have an international scope; they can produce adverse consequences at the international and/or global level. Mr. Tanzi discussed several issues ranging from global climate change to exchange rate management that required collective action at the international level. The provision of public goods at the international level is therefore a necessity. He argued that the progressive, de facto creation of supranational or global institutions could be a choice in many instances. He also discussed organizational and financial aspects of international institutions, highlighting their potential benefits for nation states. Mr. Tanzi argued that in the future, the world will have more global institutions and more important roles for municipal governments.

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Manoranjan Dutta, Professor of Economics, Rutgers University, discussed lessons from the European Union for sustaining Asia's growth momentum and the European Union's paradigm of unity in diversity. In his 28 February 2008 presentation, Professor Dutta stated that although no individual country can deliver the best for its citizens, the European Union can deliver more for its citizens and can help its members compete in the world market. As of 2006, the share of the European Union's 27 member countries in the world GDP accounted for almost 30 percent, which was higher than the share of the United States. More importantly, the income gap among the member countries had narrowed during the period 1971–2006.

Turning to Asia, Professor Dutta noted that the Asian financial crisis of 1997–1998 prompted the “Asianization of Asia,” as countries in the region searched for a coordinated fiscal and monetary policy response to the crisis. Professor Dutta takes the view that Asia-Pacific Economic Cooperation (APEC) has delayed the Asianization movement in that it failed to deliver the result of greater intra- APEC free trade. He concluded that Asian economic cooperation is in progress and that nothing can stop it. Problems will crop up along the way, he said, but they can be solved as was done in Europe.

Professor Dutta argued that the Asian economic integration will draw upon the now famous 4 plus 10 model, comprising People's Republic of China, India, Japan, and Republic of Korea, plus the 10 members of the Association of Southeast Asian Nations (ASEAN). He also stated that Bangladesh; Bhutan; Nepal; Maldives; Mongolia; Pakistan; Sri Lanka; and Taipei,China belong to the regional map of Asia and that following the principle of inclusion, they will make an Asian economy with Asian money. Australia, New Zealand, and the Pacific Islands will have a choice of their own.

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Klaus Regling, Director General of Economic and Financial Affairs of the European Commission, presented a paper that addressed the history, achievements, and future challenges of the euro on 7 February 2008. The launch of the euro, said Mr. Regling, was an unprecedented step in the history of international monetary and economic cooperation. The European Monetary Union's (EMU's) initial goals of macroeconomic stability, growth and job expansion, and economic cohesion and convergence have all been met. The challenges, which were known from the beginning, are related to the EMU's unique policy set-up: a centralized, single monetary policy combined with decentralized fiscal and structural policies. Consequently, certain institutional features were introduced, including stability-oriented economic policies (convergence criteria), strengthened fiscal discipline (stability and growth pact), and a framework for comprehensive structural reforms (Lisbon agenda). Mr. Regling reported that a number of challenges remain because Europe is facing today a radically different environment than it did a decade ago. In response to these challenges, Mr. Regling focused on the need for euro area economies to become more knowledgebased, which would boost productivity; to enhance the intra-EMU adjustment mechanisms; to strengthen public finances; and to become more actively engaged on the world stage through a more coherent representation in international institutions and fora.

View Mr. Regling's presentation and read a more detailed summary of his lecture.

Michael G. Plummer, Professor of International Economics at Johns Hopkins University, SAISBologna; Senior Fellow, East-West Center; Editorin- Chief of the Journal of Asian Economics; and Director, American Committee for Asian Economic Studies, shared his views on regional integration strategies for ASEAN on 19 March 2008.

Professor Plummer pointed out that the Association of Southeast Asian Nations (ASEAN) has committed itself to creating an ASEAN Economic Community by 2015, which is envisioned as having a free flow of goods, services, capital, and skilled labor. Another aspect of regionalism in ASEAN relates to the numerous bilateral free trade agreements that have already been concluded. The results of his empirical study find support for the current course of bilateralism. Still, it should also be open to wider forms of cooperation in the Asia- Pacific. For ASEAN as a whole, an alliance with Japan, the People's Republic of China, and the Republic of Korea (ASEAN+3) appears to be the best option for financial integration. He argued that from a practical point of view, ASEAN+3 is the more likely grouping for a monetary union in the long-run, a statement that was supported by the results of his empirical analysis.

Professor Plummer concluded optimistically, stating that despite the long road to policy harmonization among ASEAN member countries, moving ahead with it and maintaining political relations and goodwill are important for Asia's integration.

Read a more detailed summary of Professor Plummer's lecture.