BOE’s Bean Says Global Policy Coordination Is Not Always EasyFergal O’Brien
Bank of England Deputy Governor Charles Bean said coordination among global policy makers is often difficult because of differences of opinion on the causes of economic problems.
“Why has it in practice proved so difficult to achieve?” Bean said in London today, referring to the commitments by Group of 20 nations at the Pittsburgh summit in 2009. “First and foremost, the actors have not always shared the same diagnosis of the underlying problems.”
Bean said that while coordination “could generate a better outcome by helping policy makers to internalize the consequences of their actions,” implementing this “turns out not to be so easy.” This is partly because of asymmetry in the global economy, he said.
“In addition, because multiple actions by multiple actors are needed, there is a genuine difficulty in ensuring that agreements are stuck to and free riding is avoided,” he said. “And that is more of a problem, the weaker are the political ties between countries.”
He added that there are some aspects of the international policy process that have “worked well,” including strengthening global financial regulation.
Bean also said “we are still a long way short of seeing a full recovery in the advanced economies.”
“That sluggishness in the recovery reflects the fact that, unlike a normal cycle, substantial real adjustments are also required,” he said. “These include not only the repair of over-extended balance sheets, especially in the banking sector, but also the need to shift the composition of demand and production towards more sustainable patterns.”