Economic Governance Institutions Research Articles

The Politics of Capital Flight in the Global Economic Crisis

This paper studies the effects of economic governance and political institutions on portfolio investment during the Global Economic Crisis of 2008–2009. Leveraging a unique cross‐national dataset on portfolio flows immediately following the collapse of Lehman Brothers in September 2008, it shows that countries with “better institutions” – those with more (or less) democratic, more (or less) constrained or more accountable political systems – were no less vulnerable to portfolio outflows than countries with “worse institutions.” However, countries with better governance prior to the crisis – those with better regulatory apparatuses, rule of law, property rights, and those considered less politically risky – experienced lower net portfolio capital outflows after Lehman. Governance is in fact the strongest predictor of portfolio capital flows during the global flight to liquidity, while political institutions perform poorly. The findings shed light onto the political factors that mediated how the collapse of Lehman affected national financial markets the world over, and have implications for literatures on the political economy of foreign investment, as well as for broader topics of institutions, governance, and economic performance.

Economic Independence Of The Village Through Institutional Village Enterprises (BUMDes)

Rural development in developing countries, including Indonesia, will certainly relate to the issue of poverty reduction. One instance of the problem of poverty is rural economic governance institutions. In the perspective of the economic independence of the rural economy is an alternative institutional rational choice and unique , given the village often seen as a small, weak and underdeveloped. Therefore, to change the thoughts and views of the importance of a village in the emic perspective to try to strengthen economic institutions through village-owned enterprises (BUMDes). This study aims to explain the phenomena of the institutional. BUMDes the main issues of governance, BUMDes as actors or institutions (organizations) in order to continue to grow the economy This study used a qualitative approach through the method of phenomenology, the locus of the suburban rural areas in Malang, East Java Province, Ketindan village and Wonorejo village, District of Lawang, and Gondowangi village, District of Wagir. Background for the site selection studies have established institution with its main business BUMDes on water management in order to meet the needs of the villagers. The results of this research in theoretical and empirical perspectives (emic), shows that : (1). Institutional BUMDes refers to the maximization of utility as the goal, the maximization of profit (profit maximization), (2). The community of BUMDes Institutions are more likely to prioritize rationality villagers as a group, with social capital as the basis of individual interests and preferences; (3). BUMDes organizational structure that is outside the village government structures are not always stable and efficient in providing services to villagers., And (4). Villagers are assigned as officers and employees BUMDes more motivation and orientation based on the non-material, namely a sense of respect and appreciation socially and politically than economically. BUMDes institutions to put forward the goal of maximizing the usefulness of water for the fulfillment of (welfare) villagers, rather than maximizing profit for increased revenue village (PADes). BUMDes governance implementation based on the perspectives, preferences, and commodities are produced according to the

Transforming European Capitalism? The European Union and the Governance of Companies

It has been argued that since the mid 1990s the European Commission, with the support of the European Court of Justice, has launched a concerted attack on the institutions of ‘organised’ or ‘non-liberal’ capitalism in member states. In combination, these two institutions are said to possess both the will and, more importantly, the capacity to enforce a liberal transformation of national economic governance institutions across much of Europe. This article evaluates these claims, firstly, through an analysis of the EU's efforts to strengthen the rights of shareholders within the governance of corporations. It identifies the principal political factors that mediate and mitigate the impact of this reform programme through an examination of the fate of the Commission's efforts to create functioning markets for corporate control and for firm incorporation. It then, secondly, assesses the related but broader question of the viability of narrowly focused regulatory reform programmes as a mechanism for transforming governance institutions, through the conduct of a case study of the impact of shareholder protection reforms on corporate governance in Italy. While acknowledging the extent of the obstacles to coherent reform and the limited impact of the reform programme, it finds that the capacity of Commission and ECJ activism to ‘dis-organise’ national governance systems is real and significant.

Governance, Regulation and Innovation: Introducing New Studies

We introduce new studies that argue in favour of: (i) according a central role to governance and regulation as potential determinants of innovation; and (ii) analysing the effects of governance and regulation on innovation in conjunction with the effects of the market structure. These studies were presented at an international conference at the University of Greenwich in September 2011 and will be published as an edited book titled Governance, Regulation and Innovation: Theory and Evidence on Firms and Countries (Edward-Elgar, 2013). The studies explore the relationship between governance and regulation widely defined and innovation, taking into account the interactions between governance and market structure as well as between different dimensions of governance. They contribute to existing literature by providing new empirical evidence and by pointing out to complementary and offsetting innovation effects that may result from interactions between economic governance institutions, corporate governance rules, regulation on the one hand and the market structure on the other.

Changing macro-structural varieties of East Asian capitalism

The dominant institutions of economic governance vary considerably between countries in both Northeast and Southeast Asia, generating four nationally distinct varieties of political?economic organization in terms of varying state direction of the economy and degree of business co-ordination of economic activities: co-governed, state-led, networked and personalized. In the 1980s, Malaysia and Taiwan represented more the state-led variety of capitalist development, while Japan and Thailand shared many characteristics of the networked form. In the 1990s and 2000s, these four political economies began to change, but to different degrees and in different directions. In particular, Taiwan became more similar to the co-governed variety of capitalism, while the degree of business co-ordination declined significantly in Thailand so that its political economy became more personalized. These contrasting kinds of changes in the four economies can best be explained by shifts in the interest and power configurations of dominant coalitions.

Can green building councils serve as third party governance institutions? An economic and institutional analysis

Green Building Councils (GBCs) have been established in many different countries in recent years. This paper discusses the role such organizations can play in the respective construction and real estate industry and under what circumstances a GBC can contribute positively to the development of a “greener” or “more sustainable” stock of buildings. The paper investigates the main informational problem of the industry by looking at the relation between a developer and an investor from an economic point of view. We argue that the investor's uncertainty about the true quality of a building and the corresponding incentive for the developer to cheat may lock them into a prisoners' dilemma trap. The corresponding barriers for a transition toward a “greener” buildings market are analyzed. GBCs are described as institutions of economic governance that can assist the economy in overcoming these problems. They can act as third party institutions in transactions between developers and investors. By certifying the quality of a building, they can reduce the risk for the investor to be cheated by the developer and also increase the incentive to develop good quality buildings for the developer. This task, however, raises some severe management challenges for the GBCs.

Institutions of Economic Governance and Corporate Governance: An Earnings Redistribution Analysis

In our study we use the conceptualization of institutions of economic governance as a holistic approach to investigate the linkage between country-level institutional characteristics and firm-level...

The Participation of the European Union in Global Economic Governance Fora

AbstractDespite its economic importance and successive Treaty reforms, the EU does not always succeed in asserting itself as a leading actor on the international stage. Both internal and external factors influence the EU's participation in international economic governance institutions. They constitute a definite handicap concerning the EU's potential role as a real normative power. At the same time, as indispensable reforms of global economic governance are in the offing, the EU seems to be giving up any claims for better representation within competent organisations and forums, such as the International Monetary Fund.

Endogenous Coordination: Multinational Companies and the Production of Collective Goods in Central and Eastern Europe

Most accounts of business coordination assume historically given conditions for this to emerge. Business coordination is therefore difficult, perhaps impossible, to construct endogenously. This paper examines a process of 'endogenous coordination' through an analysis of reindustrialization and industrial upgrading in Central Europe during the 2000s. Because of its recent post-communist history, during which existing institutions of economic governance were dismantled wholesale, Central Europe is a particularly unlikely place for complex forms of business coordination to emerge. Demonstrating the empirical possibility of endogenous coordination, and identifying conditions under which it has emerged thus shifts the debate from pessimistic fatalism to a more optimistic world of possibility. The paper identifies three conditions for business coordination to emerge. One, a pattern of industrialization that combines sophisticated skills and capital goods, leading to higher asset specificity and fixed costs; two, bottlenecks in the production of collective goods associated with these assets against the background of potentially high returns in investment; and, three, the existence of a third party, which provides a forum for deliberation and strategic coordination while holding effective sanctioning capacity.

The International Financial Crisis, Global Financial Governance and the European Union

The financial crisis that hit the world in 2008 exposed the fragility and weaknesses of our global financial system. It has triggered a global response: world leaders – for the most part in the framework of the revitalised G20 – have held several meetings to discuss and agree on a global plan for recovery and the reform of global financial governance. This chapter addresses these responses, with particular attention to the position, role and representation of the European Union (EU) in global economic and financial governance institutions in the light of the changes brought about by the Treaty of Lisbon.

‘Financial Globalisation’ and the ‘Crisis’: A Critical Assessment and ‘What is to be Done’?

Do we have a genuine global financial system? This article challenges the strong notion that the recent financial crisis was global in scope. It argues the international financial system is quite differentiated, being made up of domestic-national, supranational regional and international aspects. The system is characterised by contagion, however, and the article goes on to consider the role of this in generating spill-overs into the wider economic mechanism. Given this characterisation of the financial system the implications for how to organise a regulatory response are pursued. Here the argument is that the principle of ‘distributed preparedness for resilience’ should guide this response not a new set of top-down global rules and norms organised once again by the institutions of global economic governance.

Remaking the Chinese State and the Nature of Economic Governance? The early appraisal of the 2008 ‘super-ministry’ reform

This report explains the shifts and strains in the 2008 super-ministry government reform, focusing on the reform of government institutions of economic governance. Drawing on interviews with officials and scholars in Beijing after the reform, and on Chinese-language reports and books, this study suggests that the key to substantial progress in remaking the Chinese state into a macroeconomic regulator is the reform of the National Development and Reform Commission (NDRC), which was lacking in the 2008 scheme. Its powerful authority for investment endorsement is particularly problematic. A continued administrative malaise in the energy sector and strategically articulated state engagement in industrial development also should be noted as the salient features of China's economic governance.

The Decline of Global Economic Governance and the Role of the Transatlantic Powers

Although the global economy has flourished in the current global economic governance regime, the foundations of this order are starting to crumble. Both in trade and in finance, the existing institutions are under severe stress. In trade, more and more countries undermine the WTO by implementing preferential trade agreements. In finance, the IMF has been weak for most of this decade, although it experienced a revival in the current crisis. First and foremost, this weakness of the institutions of global economic governance is the result of policies implemented by the transatlantic powers. Both the European Union and the United States are actively pursuing policies that weaken the existing institutions. In trade, there is a large gap between the official rhetoric, which highlights the importance of the multilateral regime, and the trade policy practice, which is weakening the WTO. In finance, the transatlantic powers have until very recently blocked any progress in the IMF with regard to lending policies. In addition, the EU continues to defend its unjustified overrepresentation in the IMF's governance structures. The article suggests that one of the key explanations for this development is the weak support for globalization in most OECD-countries. Confronted with no enthusiasm for globalization in their domestic constituencies, policy makers in Europe and the United States are increasingly opting for policies that will, over time, erode the existing regimes of global economic governance.

From corporatism to lawyocracy? On liberalization and juridification

AbstractIn 1997 Robert Kagan questioned whether European countries had to fear the coming of American style adversarial legalism. He answered this question with a qualified “no.” Today we are no longer so sure the answer is “no,” even in a country that Kagan considered the antipole of US adversarial legalism, the Netherlands, traditionally characterized by informal and consensual conflict resolution. In the present article we chart a trend of increasing juridification and legalism, that is, more formal and legal conflict resolution, in the Netherlands between 1970 and 2008. The trend is related to major changes in economic governance institutions, which generated a shift from corporatism toward lawyocracy; from power of the associations of civil society toward power of courts, lawyers, and judges. Yet the newly dominant system of governance is modified and merged with elements of the old system, producing a specific Dutch version, which one could call “corporatist lawyocracy.” We identify two types of liberalization as major driving forces: social liberalization in the 1970s and 1980s, followed by economic liberalization in the subsequent decades. If one considers economic liberalization a product of neoliberal “Reaganomics,” the legal changes are in a way an “American export product,” although a different one than the lawyering styles of large international American law firms mentioned by Kelemen and Sibbitt in 2004.

THE INDONESIAN ECONOMY: GROWTH, CRISIS AND RECOVERY

Indonesia, Southeast Asia's most populous state and its largest economy, was deeply affected by the economic crisis of 1997–1998. Its economic contraction in 1998, of over 13%, was the sharpest among all four crisis-affected East Asian economies. This followed three decades of virtually uninterrupted, rapid economic growth. The country's economic crisis was accompanied by regime collapse, resulting in the departure of then President Suharto after 32 years of authoritarian rule. This paper examines the country's socioeconomic development in the decade since the crisis, in the context of the earlier growth, and the very different institutions of economic governance operating under the new democratic regime of weakened central authority and many more economic policy actors. The main conclusions are that growth and macroeconomic stability have been restored surprisingly quickly, but that microeconomic policy and the investment climate are less predictable.

Politics, power, and institution building: Bank crises and supervision in East Central Europe

ABSTRACT Over the past 10–15 years the debate about the creation of economic governance institutions has shifted from an emphasis on the state rapidly implanting optimal incentives to a state capable of acting strategically and regulating. But how a government with little prior relevant skills or resources actually achieves the latter is still unclear. This article examines how different political approaches to transformation shape the creation of new institutional capabilities by analyzing bank sector reforms in the 1990s in three leading postcommunist democracies—Hungary, Poland, and the Czech Republic. Politicians create different political strategies that shape the organization of policymaking power, which, in turn, can facilitate or hinder the ability of relevant public and private actors to experiment and learn their new roles. With its emphasis on insulating power and rapidly implementing self-enforcing economic incentives, the ‘depoliticization’ approach creates few changes in bank behavior and, indeed impedes investment in new capabilities at the bank and supervisory levels. With its emphasis on distributed authority and rules of information sharing, the ‘participatory restructuring’ approach appears to have fostered innovative, cost-effective monitoring structures for recapitalization, a strong supervisory system, and a stable, expanding banking sector.

See the Forest through the Trees: Social Trust and Human Capital

This paper explores a new perspective in understanding social trust and its formation in a game theoretic setting. Evidence from experiments and real life suggests individuals differ in predisposition to cooperate, which is essentially a component of human capital that is costly to cultivate but yields a stream of returns in the future. When more people acquire a stronger cooperative tendency, they are in general more trustworthy and hence the social trust is higher. In this sense, the individual cooperative tendencies are the trees of the social trust forest. How many trees are planted and how tall they grow are affected by the effectiveness of education, information transmission, and economic governance institutions. Multiple equilibriums and inefficiency exist due to positive externalities. The main findings are consistent with relevant evidence.

Explaining Australian Economic Success: Good Policy or Good Luck?

Australia and some European countries experienced economic “miracles” in the 1990s that reversed prior poor export, employment, and fiscal performance. The miracles might provide transferable lessons about economic governance if it were true that economic governance institutions are malleable, and that actors deliberately changed those institutions in ways that contributed to the miracles. This paper analyzes Australian policy responses to see whether remediation should be attributed to pluck (intentional, strategic remediation of dysfunctional institutions to make them conform with the external environment), luck (environmental change that makes formerly dysfunctional institutions suddenly functional), or just being stuck (endogenous or path-dependent change that brings institutions into conformity with the environment). These distinctions help establish whether actors can consciously engineer institutional change that is “off-path.” While pluck appears to explain more than either stuck or luck in the Australian case, the analysis suggests that both off-path behavior and policy transfer are probably rare.

NESG BOOK REVIEW: Jonathan. A. Aremu's book - Attracting and Negotiating Foreign Direct Investment with Transnational Corporations in Nigeria

faults the negotiating procedures in foreign direct investment and highlights the failure of the global economic governance institutions to protect the interests of developing economies from the operations of transnational corporations and the globalisation process. NESG Economic Indicators Vol. 12 (3) 2006: pp. 52-53

Investment as the Achilles Heel of Globalisation?: The Ongoing Conflict between the Rights of Capital and the Rights of States

Efforts to extend global trade and investment governance seem at an impasse. Many disputes, including over investment rules, the focus of this article, and continued controversies over inequality and fairness in the global economy have contributed to the collapse of various trade and investment initiatives. Especially in the investment area, the collapse of mulilateral initiatives has led to bilateral “solutions” – the number of bilateral investment treaties (BITs) and investment chapters included in bilateral or small group free trade agreements has increased. These are frequently depicted as evidence that the investment protection goals of the capital exporting states, especially the US, are being achieved by bilateral means. However, this article shows that while the bilateral route does enhance capital's rights at the expense of state autonomy, the process is far from an inexorable, linear progression. There has been more contestation and the results are more uneven than is often conceded. In particular there is considerable variation in the contents of BITs and most continue to leave space for states to design economic development policies and retain some leverage over the uses of foreign investment. The US model of investment protection may have made inroads but in its full form it is the exception rather than the rule. The struggle between relative rights of capital and of states remains intense and is one of the central factors that explain the impasse in extending the reach of global economic governance institutions.