A global financial regulator won’t work, is perhaps an easy thing to say. Union finance minister P. Chidambaram repeated this received wisdom to reporters on Friday.
Are there alternatives to a global financial regulator? The problem is devilishly hard to come to grips with. National regulation of financial markets in a globalized world has not worked. A crisis in one country can, and often does, spread quickly to other countries. There are external factors that national regulators can’t contain.
At the same time, a global regulator will run into problems of the kind that unhinged Soviet central planning. It is almost impossible for a single entity to regulate millions of decentralized economic agents.
The point is to recognize these extremes and then arrive at a solution that makes it meaningful to talk of global coordination.
Chidambaram should know better. There is no point muttering about global standards when India is years behind implementing even widely implemented global regulatory standards.