Darling Needs a College Refresher

J.D. Foster / March 13, 2009

In his piece “International Cooperation is the Way Out of the Financial Crisis” Wall Street Journal, March 13, 2009, U.K. Chancellor of the Exchequer Alistair Darling makes three recommendations, the first two of which are wrong-headed and the third threatens much the same.

Mr. Darling observes correctly that we are in the midst of a deep, global, synchronized contraction. His first two prescriptions for the recession are the dual follies of fiscal stimulus (read: more spending) married to monetary stimulus, and increased funding for two of the least useful institutions on the planet: the World Bank and the IMF. Enough said there.

The more interesting and important recommendation is for the nations of the G-20 in particular to work together to reform the world’s financial regulatory architecture. The need for reform, and for consistency of reforms across countries, is plain. But just as plain is the need for reforms to be effective at preserving the safety and soundness of the financial system while simultaneously preserving the full functionality of the financial system in advancing economic growth broadly. It is on this latter point, especially his reference to a “college of supervisors”, that Mr. Darling’s thinking threatens to join his other two recommendations. (more…)