Even as the world’s political leaders try to cooperate on policies that support economic growth, they must win support from both domestic constituencies and global markets. Even as diplomats devote more time to questions of trade, banking and investment, politicians often struggle to shore up continued backing for these policies both from citizens who vote and investors who buy bonds. If the field of economics is not renowned overall for its inherent sense of drama, international financial policy is more often than not where money, power and politics collide.
This Study Group explores the craft of financial diplomacy, which is above all a continuous battle of ideas. More than troops or money, U.S. influence in the world depends on the ideas it champions and the coalitions it builds to support them. Nowhere is this more true than in economic policy, whether rallying a common response to the global financial crisis, setting fresh standards for international banking or imposing financial sanctions on global pariahs. We will examine these global financial conversations from the perspective of key governments, journalists and investors, drawing on the experience of prominent guests with first-hand involvement.
For students interested in international politics, these sessions offer the chance to explore the economic issues that increasingly dominate all governing agendas. For those contemplating careers in finance, the discussions will highlight the important work of the policymakers who shape how money moves around the world. Beyond the issues themselves, the conversations will explore how current debates are shaping the global economy that new generations of leaders will inherit over the next decades.
I. U.S. Financial Diplomacy in the 21st Century (Feb. 18)
This session will review the wide range of topics that crosses the desks of the President’s top economic team, how these issues are coordinated within the U.S. government and how strategies are developed to engage with other countries. Beyond standard issues of global growth and trade, a partial list might include negotiating limits on carbon emissions, formulating economic assistance packages to Egypt and Pakistan, reviewing national security concerns around Chinese investments, protecting trans-Atlantic data-sharing regimes, reforming the International Monetary Fund and boosting electricity investment in Africa.
II. The Daily Verdict of Global Markets (Feb 25)
On most issues, governments worry mainly about the views of voters and key constituents. On financial matters, however, policy makers are often far more concerned with the judgment of financial markets, which is delivered instantly and quantitatively. When Prime Ministers and Presidents explain their plans to tax and spend and create jobs, they are often talking straight to bond investors who lend them the money for these plans. This session will examine how investors and policy makers understand, and often misunderstand, one another.
III. Cheaters, Exchange Rates and Trade (Mar 3)
While most countries commit to cooperate on global economic policy, not all motives are pure and suspicions often run rampant. Currency policy and trade are often the most contentious conversations among economic officials, since exchange rates and commercial regulations can have immediate consequences on the profits of firms, on the outlook for jobs and the mood of voters. This session will explore the Obama Administration’s efforts to enforce international commitments to market-based exchange rates and to negotiate new free-trade agreements under intense scrutiny from business, labor and a long list of interest groups.
IV. Faster Financial Flows and Faster News Cycles (Mar 10)
Global news organizations provide much of the context and interpretation of global financial policy, whether through instant analysis of Fed statements or more extensive reporting on economic developments. The political debate is often intense and emotional, while even the most sophisticated investors must take into account the fear, greed and “animal spirits” that often drive markets. This session will explore how journalists report and analyze government economic policies for both voters and investors. Guest: Steve Liesman, CNBC Senior Economics Reporter
IV. All the King’s Horses: Picking Up the Pieces After the Global Financial Crisis (Mar 24) After World War II, global leaders tried to bring order to the international economy through the Bretton Woods system of fixed exchange rates and later assembled in groupings like the G-7 to coordinate economic policy. In 2008, with the global economy collapsing, U.S. officials scrambled to include a more representative group of economies in the discussions, including China, India and Brazil. This session will assess how the G-20 succeeded in bolstering confidence at the depths of the crisis, and how its agenda has developed since. Guest: Daniel Price, former international economic adviser and Sherpa to President George W. Bush
VI. Why Everyone Hates Bankers (Mar 31)
More often than not, politics drive conversations about financial policy out of the traditional confines of economics and deep into the realm of moral philosophy. Who is rich and who is poor becomes an assessment of who “deserves” to be rich and who “deserves” to be poor. In a financial crisis, some concentrate on restoring stability while others focus first on punishing those who were responsible. This session will examine the politics that shaped the response to the 2008 global financial crisis, with particular focus on the forces that produced the Dodd-Frank Act, perhaps the most significant re-design of U.S. financial policymaking since the Great Depression. Guest: Former Senator Chris Dodd
VII. Finance as a Weapon: Global Financial Sanctions (Apr 7)
The global reach of the dollar means the United States’ ability to freeze assets or block transactions has become an enormously powerful tool, seriously undercutting the operations of key drug and criminal organizations. Over time, and with allied support, the U.S. has put enough pressure on the Iranian economy to negotiate an end to its nuclear enrichment program, while sanctions against Russia have so far delivered more mixed results. This session will discuss the growing use of financial sanctions and mounting resentments that the United States may have abused its financial clout.
VIII. The Largest Economic Relationship in History (April 14)
No single country occupies the attention of international economic policymakers more than China. While still smaller than the United States, China’s dynamism, reach and unpredictability ensure that it enters into virtually every conversation about the future shape of the global economy. This session will review the economic conversation between Washington and Beijing, which ranges across such topics as global growth, trade barriers, currency manipulation, patent protection, investment reviews, cyber security, banking rules, climate targets and more. Guest: Former Governor, Commerce Secretary & U.S. Ambassador to China Gary Locke
IX. How Europe Nearly Failed (Apr 21)
The crisis that nearly sank the post-war European integration project provides another dramatic demonstration of economic policy cooperation as a morality play. While European leaders kept insisting that markets should trust their ability to resolve the crisis, it was also clear that they didn’t really trust one another. Economic and financial policy was subsumed in the rancorous domestic politics of very different countries bound together by the same currency. This session will examine key moments in the crisis and the roles played by top U.S. officials, including the President, to help Europe overcome rivalries and resentments to avoid global economic disaster.