A New Financial Governance Model for the New Global Economy of the 21st Century

This paper has been included in the publication
“Ideas towards a new international financial architecture?”

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The mission and mandate of economic governance and its accompanying  institutional architecture requires a realignment in order to conform to the realities of the new global economy of the 21st century. Two recent economic events, one foundational and the other cataclysmic, have  precipitated the need for a new vision and a new direction for financial governance. These two defining milestones are: 1.the emergence of the new economy and 2.the aftermath of the financial crisis of 2008.

The new global economy of the 21st century is composed of a trilogy of interactive forces that include globalization, trade liberalization and the information technology and communications revolution. Globalization has melted national borders and redefined economic policy. Free trade has enhanced economic integration and extended the economic architecture. The information and communications revolution has made geography and time irrelevant and enhanced the reach of economic parameters.

The global financial crisis of 2008 took everybody by surprise. Furthermore, the financial crisis had a more devastating effect than simply creating the most significant global economic crisis since the Great Depression of the 1930’s. It revealed the structural fault lines on the contemporary economic landscape.

In consequence, the institutional architecture of economic governance requires modernization as well as transitional and transformational change. This is particularly true since the existing economic governance architecture was designed for the old economy and has proved ineffective and inadequate for the new economy.

The aftermath of the financial crisis has precipitated a more interventionist role for government and has laid the foundations for new institutional and regulatory structures that will impact on the financial landscape of the 21st century. This paper explores the future architectural governance landscape for the financial industry and the scope and substance of regulatory initiatives and mechanisms that should be designed in order to avert a future financial crisis.

Constantine E. Passaris, passaris@unb.ca, Professor of Economics & Onassis Foundation Fellow
University of New Brunswick, Canada.

Keywords: , , , , ,

6 responses

  • Charles Fasola says:

    If the events of 2008 took “everyone” by surprise then the so-called “everybody” where either in a self induced coma or where simply imprisoned within their own ideological cage. The statement is preposterous.

  • David Chester says:

    Where is the model?

  • pasbaxo says:

    Time irrelevance ? Debts relievance urgence and impossiblity: infinite debt equities.

  • pasbaxo says:

    “Growth and full employment as purposes to a new Financial Commission”.
    Growth in total is on short term not reachable , considering the population numbers fromoff 1963 :
    1963 : 3 big milliard = 3000 new mlliard = 3 000 000 000 000 people on the world
    2015 : 70 small milliard = 70 000 000 000 people on the world. Only 2 % is left.
    Growth computed per capita should theoretically be possible, but the population notes-line is predicting a
    complete vacuum. Population of EU deminuated fromoff 2001 (Euro-introduction) to 2015
    from 500 000 000 to 350 000 000 people.
    No indication is given how to bestruggle unemployment. The logical derivable solution lays in
    another approach to labour participation: The offering labour hours are to be divided by the offered
    labourers . If the average wage is not resulting in enough income to pay essential life needs to every
    participant electronic banknotes printing should deliver debtless rest parts. Presupposition: all jobs are payed on the same level.

  • pasbaxo says:

    And at the end jumped the solution out of Passaris’ brainbox: A Financial Commission should control
    the regulation of the total financial household, incl . the creation of a financial firewall financed by bank taxes, the creation and maintainance of full employment , and guarantee to growth. A genial thought.
    But only to be financed by banktaxes on financial transactions? This totally unrealistic thought and consequented practical attempt could of course not cover the tremendous debts originated by an
    insufficient financing system : loans to the production sector and tax income to governmental sector.
    And in this recently practizing system is even hardly place to finance the service tasks of banks , falling in the same loantrap as their borrowing production serving and private clients. The only solution could exist in a legalized financing system of debtless liquidities to all essential sectors , created by Central Bank not pretending ownership in their Statute, and distributed by the Minister of Finance as represenative of the government as public person. Funding the total financial household sectors for 100% to finance their annual budgets could mean a thought in a realistic direction.

    • Constantine Passaris says:

      Thank you pasbaxo for taking the time to send me your thoughtful comments. I will be taking them into consideration for future revisions to my paper.