On Wednesday, April 18, Lord Skidelsky, Emeritus Professor of Political Economy at the University of Warwick and Andrew D. White Professor-at-Large at Cornell University, gave a talk entitled "The Impact of the Global Economic Crisis on the Future of International Relations." The talk was given in Lewis Auditorium, Goldwin Smith Hall as part of the Einaudi Center's Foreign Policy Distinguished Speaker Series.
After an introduction from Einaudi Center Director Fredrik Logevall, Skidelsky began his remarks by saying that policy has often been "deformed" to match theory, and that the theory that market structure is infallible unless touched by government regulation obviously has had policy impacts. In the view of Francis Fukuyama, he continued, democracy plus markets equals peace and prosperity, and this conclusion necessitates a rather exclusive definition of democracy. Skidelsky then asked, "What happens to international politics if the guarantee of international welfare is discarded?" By examining the global impacts of economic collapse through the lens of economic theory, he hoped to use examples from the past to help predict what the future would bring.
Skidelsky first discussed the global economic collapse of 1929, pointing out that in contrast with the collapse of 2008, there was no massive stimulus spending and therefore a slower recovery. It was too simple to say that the Great Depression had caused World War II, but that in conjunction with the state of international relations at the time it was among the reasons that conflict was inevitable.
Skidelsky next invoked the systems theory of Kenneth Waltz to explain how states behave, and pointed out that despite a huge variety of political systems, something systemic makes states behave in a similar manner in the international arena. He views this theory as the analogue to Keynesian economic theory, and said that, "World order is the product of global public goods that share the system as a whole."
Skidelsky argued that public goods theory is how economists explain the existence of the state and that "an orderly world has to be secured by surrogate sovereignty." He continued that world systems theory is a good place to start an explanation of political responses, saying, "System stability depends on public goods that are provided internationally." In the context of the late 1930s, Skidelsky said, Germany, Italy, and Japan developed politically to favor economic expansion.
Next, Skidelsky discussed the impact of the 2008-2009 economic collapse in the international realm. In contrast to the 1929 collapse, he said, domestic output has declined more than international trade. Skidelsky attributes this relatively smaller decline in global trade to the existence of the IMF and WTO, saying, "Nothing like that existed in the 1930s." However, he cautioned that many tariffs have been raised from 2009 to present, stating, "Bilateralism is on the rise, at the expense of multilateralism."
Much as the 1930s was the era of currency wars, continued Skidelsky, and currency is on the rise as a "policy weapon" in the current era too. Governments maintain their economic stability by driving down the value of their currency against the dollar, for example with the unbalanced credit positions of Germany and China, as well as what he described as "proxy trade imbalances." There has been an increase of controls on the movement of capital, when in 2011 the IMF and G20 came up with a new framework to regulate financial transfer. This rise of capital controls is favored by Brazil, India, and China as a way of guaranteeing internal financial stability. "Brazil has risen as the spokesperson of currency wars," he said.
To conclude, Skidelsky stated, "We are in the midst of a systemic decline, the end of which is not in sight." The question remains whether or not the political foundations, or surrogate sovereigns, are strong enough to sustain a recovery. Finally, Skidelsky cautioned that the set of global regulatory tools that could be used to provide increased stability are inadequate.
After this conclusion Skidelsky responded to questions from the floor. One attendee asked if the United States had lost the moral authority to create and lead the "New World Order" it had identified as its mandate after the fall of communism. Skidelsky answered that a country's power depends not just on military power but intellectual and moral authority as well, and that the intellectual and moral authority of the United States isn't as widely accepted as it used to be. If China sorts out its looming domestic problems, it will surpass the United States to become the largest economy. However, he continued, "Kindleberger thought that the world economy disintegrates without a single surrogate sovereign, but I don't think so. If you accept the thesis that the spontaneous order of the market doesn't produce stability you have to look at whether or not the political foundations are strong enough to do so."
Another member of the audience asked Skidelsky to identify the biggest error that economic reformers are committing. He replied that globalization was pursued over-enthusiastically, as was the Euro Zone. Problems such as the manufacturing capacity that was being lost by outsourcing jobs, for example, were swept under the carpet. In his evaluation, the process should have occurred more slowly and institutions should have been built along the way. Skidelsky said, "If you're against regulation, you go global. There has been an unmoral willingness to sacrifice millions of people on the altar of abstract theory and corporate greed."
A preeminent economic historian, Lord Skidelsky is perhaps best known for his award-winning three-volume biography of John Maynard Keynes. The volumes received numerous prizes, including the Lionel Gelber Prize for International Relations and the Council on Foreign Relations Prize for International Relations. Lord Skidelsky's other works include The Road from Serfdom: The Economic and Political Consequences of the End of Communism (1997) and Keynes: The Return of the Master (2009). Currently, he is in the process of writing How Much is Enough? The Economics of the Good Life jointly with his son Edward Skidelsky.
Since 2003, Lord Skidelsky has been a non-executive director of the mutual fund manager, Rusnano Capital. From 2003-2011 he was a non-executive director of Janus Capital, and from 2008-2010 he sat on the board of Sistema JSC. He is a director of the Moscow School of Political Studies and was the founder and executive secretary of the UK/Russia Round Table. Since 2002, he has been chairman of the Centre for Global Studies. In 2010, he joined the Advisory Board of the Institute of New Economic Thinking. Lord Skidelsky earned his D.Phil. from Nuffield College, Oxford.
The Foreign Policy Distinguished Speaker Series features prominent leaders in international affairs who can address topical issues from a variety of perspectives. The Speaker Series is part of the Foreign Policy Initiative at Cornell led by the Einaudi Center to maximize the intellectual impact of Cornell's outstanding resources in this area.
To read Cornell Chronicle's coverage of the event, please click here.
To view the Cornell Cast video of the event, please click here.