The G-7 Meeting: A Huge Lost Opportunity

All through the financial crisis, governments have failed to act in a powerful, concerted way when markets were susceptible to a signal of a major shift in direction. The nature of market panics is that they don’t necessarily find their bottom when they reach some measures of the “fundamentals”–they reach their bottom when everyone thinks that everyone else believes the bottom has been hit. That is often when some set of governmental actors make what markets actors plausibly believe that other market actors will think is decisive action. In the absence of such a focusing event, things keep spiraling downward. I really think that some non-fudge statement of specific action by the G-7 could have been such a focusing event–a sign that the calvary was coming. As it is, there’s nothing to act as a firebreak in sentiment (the only market that I think is open right now, in New Zealand, is down .7%, which may be a harbinger of further declines worldwide when the markets open tomorrow)

This is a massive, massive lost opportunity. And a failure of political leadership, for which someone must be held accountable. Historians may record that policymakers had their chance this weekend to turn things around, and blew it.

Author: Steven M. Teles

Steven Teles is a Visiting Fellow at the Yale Center for the Study of American Politics. He is the author of Whose Welfare? AFDC and Elite Politics (University Press of Kansas), and co-editor of Ethnicity, Social Mobility and Public Policy (Cambridge). He is currently completing a book on the evolution of the conservative legal movement, co-editing a book on conservatism and American Political Development, and beginning a project on integrating political analysis into policy analysis. He has also written journal articles and book chapters on international free market think tanks, normative issues in policy analysis, pensions and affirmative action policy in Britain, US-China policy and federalism. He has taught at Brandeis, Boston University, Holy Cross, and Hamilton colleges, and been a research fellow at Harvard, Princeton and the University of London.