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In this session the Teaching Assistants question what the G8 can do to mitigate global financial crises. They discuss two main policy options: reforming the international economic architecture or simply retuning the existing system. They examine which of these options is being taken right now and conclude that the latter policy option dominates the G8's initiatives.
The TAs then question whether reform is the better alternative. They argue that patching up the existing architecture maintains system stability and that reform could collapse the entire system. They do promote that reform could produce a beneficial financial system in the long run. However, the TAs point out that it will be difficult to overcome the short term pain.
The G8 has attempted to help resolve problems in Asia and Latin America, primarily working with the IMF and other international institutions to adjust for glitches in the existing system. For instance, through surveillance, the G8 attempts to find some sort of early warning system that recognizes potential crises and then implements varied contingency plans.
The TAs note that it is difficult to judge whether a major economic shock is necessary for the West to implement drastic reform, similar to that of the post World War II Breton Woods era. They argue that no one is willing to sustain the short term risk. For politicians the short run losses still outweigh the long term gains. States have their own interests in mind, and most are not ready to undertake drastic reform. This stems from the structure of the G8 member countries, whose economies and citizens perpetuate the status quo. Many citizens of the West will be hesitant to worsen their own financial plight for the general well-being of others around the globe.
The TAs then pose possible alternatives to the existing financial system. Regional economic policy has been gaining prominence as a viable option. Under this system cultural differences are addressed in the economic sphere. Such policy initiatives are often overlooked by the current Western dominant system. The TAs argue that the West's economic template works well for most G8 members but is inadequate when dealing with other divergent cultures. They promote greater flexibility that allows for regional adaptation. The TAs concede that countries like United States may argue that other types of capitalism do not work as effectively and need stronger regulations.
Finally, the TAs question whether the G8 should even be focusing on reforming the system? Observing changes and re-evaluating the system is important. There is no obvious solution, and it is not reasonable to let a free hand reign.