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Global Financial Development Report 2013

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Global Financial Development Report 2013

Rethinking the Role of the State in Finance

World Bank,

15 min read
10 take-aways
Audio & text

What's inside?

In the aftermath of the 2008 crisis, what matters is how – not whether – governments intervene in finance.

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Editorial Rating

7

Qualities

  • Comprehensive
  • Analytical
  • Innovative

Recommendation

In the time since the global economic crisis began, much debate has centered on the role of government in the financial sector, but many of these discussions tend to veer off into political and ideological territories. Researchers at the World Bank take an evidence-based approach to the subject, relying on academic studies, field experiments and multicountry surveys to assess, from a developmental standpoint, the successes and failures of government intervention in national economies. While the World Bank’s focus tends to be on developing nations, its analysts and experts juxtapose their primary research with data on developed economies to provide an overall picture. The report is more descriptive than prescriptive, but it concludes that government does work – at specific stages of economic development, for certain lengths of time, and in measured, thoughtful ways. getAbstract recommends this scholarly treatise to policy makers, economists, and students of finance and economic development.

Summary

Getting It Right

The fallout from the 2008 financial crisis opened numerous crucial issues for examination, including government’s role in the management and functioning of the financial sector. Though officials’ quick, decisive actions during the crisis and its immediate aftermath kept the problems from worsening, in the long term states may need to modify their methods and involvement to avoid potentially damaging economic effects.

Arguing that government should have a say in how financial institutions and markets behave is no longer necessary, but the extent and nature of its necessary participation remains in contention. From a socioeconomic development perspective, societies must balance the best interests of investors and the public with the private incentives of business to operate as efficiently and effectively as possible, thereby providing economic benefit to all. In that pursuit, government provides crucial services as a regulator, supervisor and referee. Consider this traffic analogy: State-imposed speed limits seek to minimize crashes while keeping vehicles moving so people reach their destinations safely. Big trucks have the potential to cause more damage...

About the Author

Established in 1944, the World Bank provides financial and technical assistance to developing countries. It works with member nations to fight global poverty.

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