The System Worked: How the World Stopped Another Great Depression by Daniel W. Drezner

by Daniel W. Drezner

International institutions, from the International Monetary Fund to the International Olympic Committee, are perceived as bastions of sclerotic mediocrity at best and outright corruption at worst, and this perception is generally not far off the mark. In the wake of the 2008 financial crash, Daniel W. Drezner, like so many others, looked at the smoking ruins of the global economy and wondered why global economic governance structure had failed so spectacularly, and what could be done to reform them in the future. But then a funny thing happened. As he surveyed their actions in the wake of the crash, he realized that the evidence pointed to the exact opposite global economic governance had succeeded. In The System Worked, Drezner, a renowned political scientist and international relations expert, contends that despite the massive scale and reverberations of this latest crisis (larger, arguably, than those that precipitated the Great Depression), the global economy has bounced back remarkably well. Examining the major resuscitation efforts by the G-20 IMF, WTO, and other institutions, he shows that, thanks to the efforts of central bankers and other policymakers, the international response was sufficiently coordinated to prevent the crisis from becoming a full-fledged depression. Yet the narrative about the failure of multilateral economic institutions persists, both because the Great Recession affected powerful nations whose governments managed their own economies poorly, and because the most influential policy analysts who write the books and articles on the crisis hail from those nations. Nevertheless, Drezner argues, while it's true that the global economy is still fragile, these institutions survived the "stress test" of the financial crisis, and may have even become more resilient and valuable in the process. Bucking the conventional wisdom about the new "G-Zero World," Drezner rehabilitates the image of the much-maligned international institutions and demolishes some of the most dangerous myths about the financial crisis. The System Worked is a vital contribution to our understanding of an area where the stakes could not be higher.

Genres: Economics, History, International Relations, Politics, Nonfiction

Hardcover

First published January 1, 2014

About the author

Daniel William Drezner

Reviews

[Greg · Rating 4 out of 5]

This book is an excellent corrective to the editorial line of the punditocracy on the Left and Right. The essential argument is that for all their faults, and there are many, the institutions and regimes that govern international economics, performed adequately to avert a second Great Depression in the wake of the sub prime mortgage crisis and the European sovereign debt crisis. The book assumes a basic understanding of micro and macro economics. There is no math in the books, but a wealth of graphs and charts.

[Mark McGuire · Rating 5 out of 5]

The system worked. Interdependence saved us from another recession - only after we let a well networked giant fall and almost take the global economies with it. Are the BRICS as relevant as Goldman Sachs claimed in the 1990s? No. Is the US a hegemon? Yes. Are there other hegemons? Yes. Are we living in a G-Zero world as popularized by Ian Bremmer? No. When the EU is coordinates on an issue they can be leaders. In the 2008 economic recession they were ineffective, allowing other states and household-economics shape sovereign finances. China is a growing power, but is choosing to do so more in terms of the Washington Consensus. China is not seeking full market freedom. Will people acknowledge the system worked? No. Why? Pessimism is more attractive than optimism; easier to be dooms-day sayer than to naively assert everything is fine. Nothing was "fine", but the system's interdependence and cooperation helped save the global economics from a depression.

[Andrew Ritchie · Rating 2 out of 5]

I have a reasonable laypersons knowledge of micro and macro economics and the global financial system.

Unfortunately I feel this book is targeted more at academics or people who work deeply in these arenas and have a deeper understanding of these markets.

My rating reflects the dryness of the writing more than the conclusions Drezner draws from his research.

I enjoyed the second half of the book more, particularly the analysis of the Beijing Consensus as an alternative to neoliberalism and the attitudes to austerity.

2.5 stars.