Conclusion

This chapter attempts to bring together the main threads of the previous discussion to understand how the IFA has come to take the shape it has and what needs to be done to make it work better. Since the middle of the last century, there has been a persistent and rapid expansion in global trade and finance, which at first recovered, and then surpassed levels of interdependence observed during the period of the international gold standard. That first era of globalization ultimately broke down because of (a) the growing incompatibility for governments of the international “rules of the game” with the demand for more national policy autonomy, and (b) political conflict among the great powers. By contrast, the current era of globalization has endured for a longer period of time, in part because of the collective governance arrangements that governments have put in place to manage the process of economic and financial globalization. However, the continuing and growing scale of financial crises in the modern era points to important defects in those arrangements, which we call the IFA, that need to be addressed to make the international financial system work more effectively.