Global Finance at Risk: The Case for International Regulation [Hardcover]

John Eatwell (Author), Lance Taylor (Author)

Book Description

Publication Date: January 2000

An urgent argument for an international body that will foster a more stable, viable global financial system. In Global Finance at Risk, two acclaimed economists propose a bold and necessary solution to the financial crises that threaten us all: a World Financial Authority with powers to establish best-practice financial regulation and risk management everywhere. Expansion of finance in industrialized economies, including nineteenth-century America, saw exactly the same kind of turbulence now afflicting Asia, Russia, and Latin America. Then, the solution was to establish national banking and securities regulators, deposit insurance, and lenders of last resort. But in our increasingly globalized world, the savings or checking account you open at your local bank can be based on bad debt from anywhere in the world--including places outside the jurisdiction of those national agencies. And when banks fail, it's not just their account-holders who suffer, but all of us. This is why, argue John Eatwell and Lance Taylor in this timely and urgent book, effective regulation of the international financial system is crucial for the economic health of the nation--and the world. Global Finance at Risk offers a workable solution for today. It will be the subject of serious debate here and in Europe.

Editorial Reviews

Amazon.com Review

Since the collapse of the Bretton Woods system in 1971 and subsequent free-float of currencies, the capital markets have been deregulated. But the benefits of international liberalization, according to John Eatwell and Lance Taylor in their boldly argued Global Finance at Risk, "have been tarnished by considerable costs"--namely, more volatile foreign exchange and domestic interest rates, a greater susceptibility to contagion, and the threat of destabilizing financial crises.

The problem with the current network of regulatory authorities, write the authors (Eatwell is president of Queens' College at Cambridge University and a member of Britain's House of Lords, and Taylor is a professor of economics at the New School in New York), is they offer too little, too late and just don't manage the threat of systemic risk. To rectify this hole in the soul of the capital markets, they propose (some might say fancifully) a World Financial Authority, to be built on the back of the Bank for International Settlements, which would spearhead and manage international capital-market regulation, make policy, oversee the markets, and provide an enforcement mechanism as necessary. The authors don't fuss: their superregulator would supervise all markets. They make the further case, very much against the current grain in OECD countries, for restrictions on short-term capital inflows to developing countries during time of crisis and for the "management" of foreign exchange rates between the U.S. dollar, euro, and yen.

Along the way, Eatwell and Taylor recap (at times controversially) various financial crises over the last 30 years and cover hot-button issues ranging from moral hazard, regulatory arbitrage, and value-at-risk modeling to the risks posed by the increasing complexity of derivatives and the need for greater international accounting standardization. The book does not discuss the Basel Committee's newly proposed capital adequacy framework or the structural changes altering the markets as a result of electronic trading. These omissions, however, don't detract from the authors' feisty argument that the international financial markets--with their "remorseless dynamism" and destabilizing prospect of contagion--need activist leadership rather than mere babysitting. --Nina Mehta

From Library Journal

In light of recent international financial crises (in Asia, Russia, Brazil, etc.), calls to overhaul global financial authorities such as the International Monetary Fund and the World Bank in order to create a new international "financial architecture" have proliferated. Eatwell (Queen's Coll., Cambridge) and Taylor (The New School)--two well-known economists--join the fray here, advocating the creation of a more powerful regulatory agency, the World Financial Authority. In seven sections, exploring foreign exchange rates, investment risk, and market volatility, they carefully build their case. They argue that global economic problems will continue and that there must be some sort of "global safety net" to resolve them before they get out of hand. Although their argument is timely, their language is sometimes overly technical and their proposal ultimately untenable. One wonders, however, who would control such a supranational organization and how it would be paid for. Still, this idea has legs: similar calls for financial intervention have been made recently, most notably by George Soros in The Crisis of Global Capitalism (PublicAffairs: Perseus, 1999). Suitable for larger academic libraries.
-Richard S. Drezen, News Research Ctr., "Washington Post," Washington, DC
Copyright 2000 Reed Business Information, Inc.

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Product Details

• Hardcover: 192 pages
• Publisher: New Press; 1St Edition edition (January 2000)
• Language: English
• ISBN-10: 1565845633
• ISBN-13: 978-1565845633
• Product Dimensions: 8.2 x 5.4 x 1.1 inches
• Shipping Weight: 15.2 ounces
• Average Customer Review: 5.0 out of 5 stars  See all reviews (3 customer reviews)
• Amazon Best Sellers Rank: #2,390,495 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

7 of 8 people found the following review helpful:

5.0 out of 5 stars Where Global Currency is Headed; Excellent Book., March 28, 2001

By A Customer

This review is from: Global Finance at Risk: The Case for International Regulation (Hardcover)

This is an excellent review of what has happened to, may happen to--and will happen to--the situation of Global Finance. Eatwell makes strong points about both currency in global markets, and its pejorative effects in local or regional areas. He brushes on many of the key issues concerned in golbal economic concerns, including Bretton Woods, IMF, the EC, the Asian economic crisis. In the end, he seems to suggest action of major restructuring of current currency guidelines, even to the point of 'support' for currencies or other like dimensions.

Overall, a very good book.

1 of 1 people found the following review helpful:

5.0 out of 5 stars Best book on International Financial Market, May 4, 2004

By 

visa39 (Washington D.C) - See all my reviews

This review is from: Global Finance at Risk: The Case for International Regulation (Hardcover)

John Eatwell was a professor of mine - a wonderful individual and an accomplished economist. This book is a lucid yet comprehensive account of world financial markets. The way it is written and organized makes it easy for almost anyone to read. Although it can be complex at times, this book is an excellent, compelling argument for International Regulation. Dont think twice to buy this one.

5.0 out of 5 stars The Best Option (but least likely to succeed), May 10, 2010

By 

Rufus Burgess (Upstate, NY) - See all my reviews
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This review is from: Global Finance at Risk: The Case for International Regulation (Paperback)

"The institutional framework of the WFA and the role it would perform in the international economy derive both from the analysis of this book and historical experience. History's experience has confirmed the need for regulation and a lender of last resort in domestic markets. The same sorts of measures are now required internationally if a broadly liberal world financial order is to survive."

In "Global Finance at Risk" John Eatwell and Lance Taylor make a persuasive case for international financial regulation (the WFA). They lucidly explain the economic theory behind international economics and finance in a format easy for laymen to understand. The clearly define the weaknesses in our current financial architecture and why a severe crisis is more likely to occur unless international regulation occurs.

Unfortunately, the likelihood of the international community implementing their proposal is slim at best. It has been a decade since the book was published and no one (at least prominent) has seriously called for a World Financial Authority. Most countries are currently looking to increase domestic regulation. But as the authors points out that is not enough. Nor are more 'practical' responses of increased market self-regulation. We need a WFA to complement the IMF in preventing crises from occurring and quickly acting when they happen.

The book perfectly highlights what "should be." However, what they suggest will "not be" for the foreseeable future.