The report, "Managing the Crisis - A Comparative Analysis of Economic Governance in 14 Countries”, showed however, that quick and short-term responses by far dominated sustainable long-term innovations and adequate structural changes in most countries. Germany was no exception to that rule - despite short-term successes, the bailout plans and stimulus packages have not been tackling the long-term structural weaknesses of the country's economy.
The emerging markets' effective crisis management indicates that their governments are today much more adept at preventing and tackling crises than in the past. This can be attributed primarily to effective policy learning and the implementation of institutional changes in reaction to former downturns like the 1997/98 Asian crisis.
The report concludes that major emerging countries took advantage of pre-crisis prudent regulation of the financial markets and banking systems as wells as sound fiscal and monetary policies to deal adeptly with the worldwide economic downturn. Therefore, emerging economies did not have a large amount of toxic assets in their domestic financial systems, their financial markets proved to be more shock-resistant and given their solid financial situation their governments had more latitude for stimulus policies when the crisis hit their real economies in fall 2008.
Due to fewer institutional and budgetary restraints, many emerging countries today seem to have a comparative advantage over their industrialized counterparts. In year two after the outbreak of the global financial and economic crisis, emerging countries like China, India or Brazil are stimulating the global economy and differ profoundly from advanced Western economies in important parameters: by solid growth, lower debts, a rebounding domestic demand and a stable banking and financial system.
"Many emerging economies have done their homework in the past and have now proven that crisis prevention does not only enhance response options to tackle new crises, but can also lead to genuine economic advantages," says Sabine Donner, project manager at the Bertelsmann Stiftung.
The crisis outcome thus far confirms and gives an added boost to the rapid rise of emerging countries and a global power shift in their favour. Emerging markets are not only catching up with advanced economies with regard to economic performance. They have also displayed impressive skills of politically managing the global shock according to the study. In order to deal with the consequences of the downturn and to tackle future crises, it will be of utmost importance if advanced economies will be equally adaptive, draw the necessary conclusions and implement structural reforms in the aftermath of the crisis.
The study's analysis of national crisis management reveals numerous commonalities. While the perception of the crisis and its concrete impact varied widely from country to country, the current global recession has been handled more swiftly, pragmatically and comprehensive than any such previous downturn.
As soon as the potentially devastating impact of the crisis was recognized, resistance against swift emergency measures and fiscal expansion evaporated, at least temporarily and national crisis management went into overdrive during the first phase of the crisis examined in the study (from September 2008 to September 2009).
Therefore, all cases included in the study show the emergence of strong executive leadership and mostly uncontested stimulus packages. In "crisis mode", each government relied on its individual governance style and leadership skills - be it the highly centralized administrative apparatus such as that present in China, the technocratic, top-down management style observed in South Korea, or the pragmatic moderation that relies on the personal leadership skills of its president as was the case in Brazil.
The swiftness of crisis responses has been given precedence in nearly all countries irrespective of the political system. Time constraints limited the usual consultation processes with intermediary organizations about the focus of the measures taken. Civil societies were subsequently not actively involved in agenda setting and policy formulation. Only the South African government engaged in a comprehensive consultation process with social partners about the scope and priorities of the crisis response.
Aspects of a sustainable economic and structural policy have also taken a backseat in the first stage of the crisis. All countries included in the study showed extreme short-termism and "expansionism" in drafting stabilization and stimulus policies both in emerging and advanced economies. Only a few governments identified and used the crisis as an opportunity for a considered and purposeful restructuring. Even fewer, eg South Korea, China or the United States can claim a boosting of the "national innovation system" through technology, education, research, "green" policies or tackling structural economic bottlenecks.
Regarding the often-stressed claim for more international adjustment of crisis responses, the study draws a sobering conclusion. Hauke Hartmann, project manager at the Bertelsmann Stiftung says, "Instead of strengthening global governance in reaction to the global crisis, the management of the crisis and the drafting of stimulus packages took place almost exclusively on the national level." The most effective and profound coordination of policy steps occurred, according to the study, among central banks and monetary authorities. Within the G-20 framework, government leaders merely reassured themselves about the timing and extent of their national stimulus packages strictly in line with their domestic policy agendas. However, they did not enter into concerted, fine-tuned programs of action. At least the opportunity for an exchange among the most important economies of the world has never been so ample, and never have emerging markets been included so comprehensively. It has yet to be seen if this leads to any serious attempt for more global governance in financial markets.
South Africa was one of the countries that considered itself to be well-equipped to weather the global economic storm owing to its strong regulatory framework, low levels of debt, and banking system that hardly had any exposure to toxic assets. The government's optimistic tone in the early stages changed when it became obvious that the impact on the economy would be severe. Indeed, South Africa was pushed into its first recession in 17 years, as declining commodity prices and lower growth in major trading partners lowered demand for South African exports and employment decreased for the first time in almost four years. Although South Africa was slower to implement decisive crisis management measures than other countries, its process of drafting an economic crisis response framework benefited greatly from the institutionalized and inclusive multi-stakeholder approach that is the procedural hallmark of the country.
The deliberation process drew upon existing structures that had been set up in 1994 to ensure that social dialogue accompanies the development of economic policies. The National Economic Development and Labour Council (NEDLAC) convened a task force of government, labour, business and community representatives, which negotiated the final framework and retained responsibility for its monitoring and implementation. The framework has been praised at the international level for bringing together a broad range of social partners to forge a common response to the crisis. Nevertheless, NEDLAC remains a quasi-governmental institution and the government has been criticized for not consulting with civil society actors not included under the NEDLAC umbrella.
The study evaluates the quality of political decision-making in response to the global financial and economic crisis in advanced economies such as Germany, Sweden, the United Kingdom and the United States, as well as in the emerging economies of Brazil, Chile, China, Hungary, India, Indonesia, Russia, South Africa, South Korea and Turkey. Based on 14 detailed country reports, the study focuses on the quality and effectiveness of political management during the first stage of the crisis at the peak of the global recession 2008-2009: from agenda-setting and policy formulation over the specific policy contents to the implementation of stimulus and stabilization packages. An in-depth summary of the main findings highlights the similarities and differences among the measures taken. The summary includes a special focus on comparing economic governance in advanced and emerging economies.
The study was conducted in cooperation with Sebastian Heilmann, Professor for Comparative Government and the Political Economy of China and director of the Center for East Asian and Pacific Studies at the University of Trier and Rolf J. Langhammer, vice president of the Kiel Institute for the World Economy.
Go to www.bertelsmann-foundation.org for more details.
