Morning Must-Read: Cardiff Garcia: “The System Worked”, by Dan Drezner

Cardiff Garcia: Video and review: “The System Worked”, by Dan Drezner “I kept thinking of the well-publicised conversation… in January 2009….

…Geithner: ‘Your accomplishment is going to be preventing a second Great Depression.’ Obama: ‘That’s not enough for me. I’m not going to be defined by what I’ve prevented.’ Geithner: ‘If you don’t prevent a depression, you won’t be able to do anything else.’ Obama: ‘I know. But it’s not enough.’ For global economic governance, as opposed to Presidential legacies, avoiding economic catastrophe when catastrophe was a non-trivial possibility is enough. That’s the case made by Drezner…. So, was it indeed good enough? Sluggish recovery in the US accompanied by lower median incomes. Double-dip recession in Europe…. Ongoing stagnation in Japan pending the outcome of Abenomics. Slowing growth in China…. A Bank for International Settlements that called for tighter money earlier than any reasonable analysis could justify. Currency wars. An IMF that pushed austerity before a later volte-face, not to mention its numerous mistakes in tackling the euro zone crises…. All of these items would suggest a deep failure…..

Drezner… begins by highlighting the scale of the global collapse…. And yet, despite important local exceptions, the worst global consequences of the Depression were avoided…. Later mistakes were inexcusable, especially the turn to austerity and premature monetary tightening in Europe. Yet many of these subsequent errors were national policy failures and ‘had little or nothing to do with foreign economic policy or adherence to global governance structures’–admittedly a fine and not always obvious distinction…. I find the argument persuasive….

But ‘good enough’ is a tough sell, and my colleague Alan Beattie isn’t buying…. Alan writes: ‘The truth, as both of us I think admit, is that the record of global governance is patchy, and its results even now uncertain’…. whether the system as a whole worked is probably less important than knowing how to distinguish between the parts that worked and the parts that failed. The forthcoming book by Barry Eichengreen, whose data Drezner cites, appears to split the difference. Beattie refers to the resilience of wrong-headed ideologies…. Consider how much commentary about the crisis has naturally focused on the long list of subsequent policy failures. It’s good to have at least one book emphasising that the list could have been much longer still…