As a response to the global financial and economic crisis that began in 2008, many developing and emerging-market economies undertook resolute countercyclical monetary and fiscal actions, which paralleled those of the developed countries. These policy responses contributed significantly to the recovery of the world economy in 2010 and 2011. In particular, the strong and fast responses of Brazil, China and India helped mitigate deflationary risks and avoid a repetition of the Great Depression of the early 1930s.
On the other hand, reforms of financial regulation and supervision are taking time to advance, and little progress has been achieved so far in implementing measures to reduce global imbalances and to avoid a malfunctioning of the international exchange-rate system. These would contribute to greater coherence between the international trading and financial systems, and to creating a more stable international economic environment for development.
This book - co-published by UNCTAD and Hochschule für Technik und Wirtschaft, Berlin - is a collection of papers that contribut to the debate on these topics, putting the South at centre stage.
Written by established experts in the field, it examines how the countries of the South were affected by the global economic and financial crisis, and how they responded to it. It also reflects on the lessons the South should take away from the experience, and on the policy agenda necessary for supporting the interests of developing countries, the least developed countries, and emerging-market economies. One of the book´s editors is Detlef J. Kotte, Head of UNCTAD´s Macroeconomic and Development Policies Branch.
The contributions to the publication fall into three categories:
- General issues relating to the causes of the crisis and its transmission to the developing world.
- Country and regional case studies.
- Policy recommendations, drawing on the work of the Stiglitz Commission and the UNCTAD secretariat.
The book points to some key lessons that developing countries should draw from the crisis experience:
- There is widespread awareness of a growing wedge between financial-sector growth and the real economy in many countries, which calls for a profound rethinking of past approaches to financial liberalization. Unregulated or badly supervised finance, opaque "financial innovations" and minimum State intervention - as well as an unfettered rise in inequality - are increasingly seen as detrimental to development. Opening up to financial globalization can make developing countries more vulnerable and thus jeopardize growth.
- In the same way as the roles of business and the State need to be rebalanced at the national level, economic globalization requires enhanced global economic and financial governance. Its aim should be to protect countries against exogenous financial shocks and to provide for a global macroeconomic environment that is conducive to the creation and strengthening of productive capacities as a precondition for sustained growth.
- The macroeconomic strategies of developing countries may need to be redirected - away from a one-sided focus on inflation control and budget balance and towards greater emphasis on employment creation and active management of domestic demand. Macroeconomic policy space for the pursuit of domestic macroeconomic objectives could be enlarged by a reform of the international exchange-rate system and the accepted use of capital-account management techniques.
