Response to the global economic crisis: is there a consensus, is it being applied, are the goals of expert’s recommendations broad enough to establish
Response to the global economic crisis: is there a consensus, is it being applied, are the goals of expert’s recommendations broad enough to establish

Summary/Abstract: The current global crisis and endemic recession, initiated by the bankruptcy of the investment bank Lehman Brothers in 2008, has prompted numerous analyses from experts, politicians and philosophers across the world, presenting their views and offering solutions to end the crisis and prevent its recurrence in the future. Hervé Hannoun, the deputy General Manager of the Bank for International Settlements, is the “insider” expert. In this paper we review some of the root causes of this crisis and related selected policy recommendations advocated by both an insider expert of a financial institution and an outsider expert. In order to judge the feasibility of such policies we juxtapose them and introduce additional ideas from both experts of economic institutions and non-experts. e focuses his analysis on the role and shortfalls of central financial institutions and of monetary, fiscal and prudential policies during the present crisis and then advocates clear-cut roles and rules in order to prevent the recurrence of similar crises in the future and to bring what he calls a “global financial stability framework” as promoted by the Bank for International Settlements (BIS). Thomas I. Palley, an economist living in Washington, is the “outsider” expert. In his view, the insiders do not question the monetary policy framework and focus on the role of the central bank as the supervisor of the banking system. His interests, in turn, focus on central bank governance, independence and representation of all interests of the society. Therefore he advocates rethinking the macroeconomic theory, major monetary policy reforms and proposes a more open minded and pluralistic economic philosophy for the central bank with a focus on the mandate to promote policies maximizing employment. He includes a detailed list of concrete tools to achieve such goals.He recognizes that there are overlaps between the insider and his reform programs but he questions the substance of insider’s reforms which do not promote necessary deeper philosophical changes. Our analysis shows that the outsider’s views are correct in challenging the goals of financial institutions before regulating the means that they apply to achieve these goals as it becomes apparent that financial dominance without the proper goals in place could bring social or political disasters and therefore not be sustainable or not prevent future crises. But the outsider does not challenge deeply enough the possible goals of financial institutions, so we define what could be a wider framework within which financial institutions should operate and we also give hints about how they could operate.

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