Addressing Government Failure Through International Financial Law

Abstract

This article discusses the recent financial crisis and argues that the government’s actions contributed to the collapse as much as market failure did. The article also notes that preventive and cleanup measures need to be instituted and the economy needs to be made more resilient so that it can survive temporary credit crises. These goals can be accomplished by increasing competitiveness, renewing trade liberalization, eliminating subsidies for domestic products, and avoiding demagoguery. Finally, international institutions should play a role in financial regulation; specifically, the international community should some of the WTO and ILO’s techniques. I conclude by noting that effective regulation of financial markets must address both market and government failure.

Keywords: financial crisis, market failure, government failure, regulation, WTO, ILO, Dodd-Frank Act

JEL Classification: G18, K20, G10