A New World Economic Order: Overhauling the Global Economic Governance as a Result of the Financial Crisis, 2008–2009

Abstract:

The Financial Crisis of 2008–2009 dealt a serious blow to the belief that an unregulated economic order could maintain stability in the world economy. In Autumn 2008, notably the Group of Twenty (G-20), consisting of the twenty largest economies, undertook to organize world-wide concerted action against depression.

Prompt stimulus managed to confine an imminent depression to a relatively short recession, but it led to excessive public debt in many countries. The lesson is that economic fluctuations are manageable, but governments must prepare manoeuvring room for stimulus by melting down public debt in years of economic boom.

The G-20 effort to prevent similar crises in the future generated a grandiose design to overhaul the regulation on financial institutions within the framework of the global market economy. For the time being, the new guidelines are being implemented in different countries.

The crisis also manifested the rise of the emerging economies to prominence within the world economy. This will be reflected, for example, as a more remarkable role in the global economic governance.