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The Superbubble behind “The Great Moderation:” How the Brandt Report Foresaw Today’s Global Economic Crisis

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Author(s): James Bernard Quilligan

Journal: Integral Review
ISSN 1553-3069

Volume: 6;
Issue: 1;
Start page: 115;
Date: 2010;
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Keywords: Balance of payments adjustment | Brandt Commission | current account imbalances | dollar crisis | exchange rates | global Keynesianism | global monetary conference | global monetary system | Great Moderation | new Bretton Woods system | reserve system | superbubble | sustainable development | Willy Brandt

ABSTRACT
The Brandt Commission Report, published in 1980, broke ground in vital areas. It was the first international body to develop such concepts as interdependence, globalization, sustainable development, and alternative sources of development financing. It grappled with the difficult problem of global monetary imbalances, not in a vacuum, but rather, situated in the Commission’s stance that reforms in poverty, aid, debt, armaments expenditures, environment, technology, trade, and finance will not effectively meet their goals until they are supported by a totally-restructured monetary system. Virtually all sustainable development initiatives since then have missed that need for restructuring. The Brandt Report warrants this first treatment of a full political economic framing because the world continues to operate with those structural imbalances and faces a global economic crisis. Nations with current account deficits are required by the rules of the marketplace and international institutions to adjust their fiscal balances by paying off their loans. Yet nations with current account surpluses are not under similar obligation because there is no adjustment mechanism for recycling their trade surpluses and currency reserves. Compelling examples of this disequilibrium today are the current account imbalances between the surplus nations of China and other Asian states on the one hand, and deficit nations like the United States and United Kingdom on the other. A mitigating factor is the use of the dollar as the world’s reserve currency, which allows the US to avoid adjusting its deficits on a timely basis. A major global financial adjustment is needed to eliminate the financial and monetary superbubble that has been forming as a result of these deep contradictions in the international system. The Brandt Report anticipated that unless these global imbalances were corrected through coordinated international action, there would be a series of sovereign debt crises, resulting in an emergency monetary readjustment. Brandt also demonstrated that any international stimulus program to merge the development needs of the global South, the underused capacity of the global North, and the needs of the entire world for a low-carbon environment, must be directly linked to the restructuring of the international monetary regime, including a new global currency and reserve system. A return to the principles and analyses spelled out in the Brandt Report is needed now to reform the global economic infrastructure. Brandt’s call for an international monetary conference to address these issues is even more pressing and salient today than it was 30 years ago.
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