The conundrum of global reform is that the proposals that go far enough, such as establishing a global financial regulator, are wildly unrealistic, while those that are realistic, such as reform of the IMF, fall far short of what is needed.
What we need is a vision of globalization that is fully cognizant of its limits. We can start with a simple principle: We should strive not for maximum openness in trade and finance, but for levels of openness that leave ample room for the pursuit of domestic social and economic objectives in rich and poor countries alike. In effect, the best way to save globalization is to not push it too far.
Consider a traffic analogy. One way to prevent traffic accidents is to require everyone to drive a similar car, travel at the same speed, and head in the same direction. Another is to enforce some simple rules: don’t drive in the fast lane if going slow, stop at red lights, use a signal before a turn, and so on.
The first approach may maximize the traffic load that can be carried safely, but it fails to take most people where they want to go and is ultimately self-defeating. The second approach allows drivers to make their own choices, even if this means that they will have to slow down or stop on occasion. Similarly, healthy and sustainable globalization should not impose a straitjacket of common rules on everyone.
The financial crisis laid bare the soft underbelly of globalization. It would be a mistake to respond by trying to take globalization to the next level. The economic and political obstacles that block deep integration cannot be wished away by exhortations. It would serve us far better to take these limits into account and scale down our ambitions.
© 2009 Project Syndicate. Republished with kind permission.
