Whether on account of poor leadership, or the curse of being blessed with extraordinary energy resources, modern Russia has for now lost the only power game that really counts today: the game of globalization.
Despite their proven effectiveness in many cases, these policy tools are prohibited by U.S. trade and investment policies. Particularly in the wake of the worst financial crisis in 80 years, it's an embarrassingly outmoded position.
In the wake of the worst financial crisis in 80 years, I thought it would be a no-brainer for the U.S. government to give up its longstanding policy of banning capital controls through trade agreements.
Governments have five tools to adjust to capital flows: monetary policy, fiscal policy, foreign exchange intervention, prudential tools, and capital controls. The challenge is to find, for each case, the right combination.
The current international monetary system has certainly delivered a lot. But it also has flaws that need to be fixed, especially if the next phase of globalization is to succeed in bringing a strong and broad-based rise in living standards.
Reform of the international monetary system is wide-ranging and complex. Global debate is only just starting. But we must all recognize that this is not something academic or abstract. We need concrete ideas.
In our highly globalized economy, large and rapid flows of money across borders are here to stay. The challenge for emerging economies is to find ways to manage these flows so that they don't exacerbate boom-bust cycles.