This chapter examines the demand for global financial governance in the wake of the massive financial crisis of 2007–9. The global financial meltdown acted as a catalyst for a dramatic boosting of the International Monetary Fund's (IMF) resources and the creation of the Financial Stability Board (FSB), both which took place at the G20 leaders’ second summit in April 2009. These initiatives appeared to signal a heightened demand for global-level institutions in the areas of liquidity provision and financial regulation emerging from the crisis experience. But the limitations of that demand also quickly became clear as these global institutions found themselves working with and alongside strengthened regional, plurilateral and national authorities in complex ways. The result is neither a strengthening nor weakening of the demand for global governance, but rather a change in the content of the demand. A new kind of “cooperative decentralization” in global financial governance is emerging, driven by the preferences of both dominant powers and Southern countries.

The first half of the chapter describes this argument in the case of the IMF. While the IMF's funding boost was dramatic, its significance was immediately called into question by the fact that its new money remained unused in 2008–9 partly because of Southern borrowers’ distrust of the institution. In the end, it was US authorities – not the Fund – that played the most important role in providing international liquidity during this period. Demand for the Fund's resources did, however, grow with the outbreak of the euro crisis, but as a way to supplement European regional arrangements. Lingering distrust of the Fund among Southern officials – reinforced by Northern resistance to governance reform – has encouraged them to strengthen and/or build alternative regional and plurilateral financing arrangements that also work either with or alongside the Fund.

The second half of the chapter explores the FSB's creation. This development turned out to be less significant than it initially appeared because the institution was given very little formal power. This design feature reflected both Northern and Southern concerns about accepting international constraints on their regulatory policymaking. The crisis and post-crisis experience only reinforced their commitments to regulatory sovereignty by increasing the domestic political salience of regulatory issues and their fiscal implications, and by revealing the failures of international cooperation relating to the management of failing institutions.

Global financial governance is marked by a paradox: while financial markets are among the fastest evolving economic activities, their governance is most often reactive rather than forward-looking. As the previous chapter (Germain) in this volume confirmed, dramatic changes in the patterns of global financial governance are most often triggered by major financial crises which politicise the regulatory debate and pressure policy-makers to react. But once the storm has passed, both public authorities and private actors tend to be affected by what Reinhart and Rogoff (2008) have called the ‘this time is different syndrome’. Confidence is restored and complacency sets in until a new storm breaks out, opening a new cycle in the governance of financial markets.

Recent experience has been no exception. Between 1994 and 2001, the world financial system was shaken by a series of major crises emanating from ‘emerging markets’, most notably Mexico in 1994, East Asia in 1997–8 and Argentina in 2001. These crises prompted the leading financial powers of the G7 to launch a set of ambitious regulatory and institutional reforms to create a ‘new international financial architecture’ (NIFA). This reform agenda has been well-documented elsewhere (e.g. Eichengreen 1999; Kenen 2001) though post-2001 results have received less attention. After briefly outlining the NIFA project, we highlight in this chapter how the absence of serious international crises between 2001 and 2007 weakened the urgency of this reform agenda for G7 governments and scaled back the level of ambition, yielding greater reliance on market-based governance mechanisms.

We live in an age when the ideology of economic liberalism is embraced by a growing number of governments in all parts of the world. Not since the early years of the twentieth century has this ideology dominated the global economic order to such an extent. One of the most important thinkers behind the “neo-liberal” economic revolution of recent years was Friedrich Hayek. Among the more interesting of Hayek's ideas was his advocacy in 1976 of a world monetary system no longer centered around exclusive government-issued national currencies. In its limited form, this proposal would allow the co-circulation of foreign currencies alongside domestic currencies in each country's territory. In its more radical form, Hayek's reforms would do away with central banks and encourage private issuers of money to challenge the government's monopoly over currency. Hayek's advocacy of the “denationalization of money” - in both its limited and more radical approach - has attracted considerable attention in academic circles. Among policymakers, his proposal to allow co-circulation of currencies has also generated substantial interest, especially among those concerned with countries in the South and ex-Eastern bloc where “currency substitution” is widespread.

In the 1990s, the focus of the field of International Political Economy (IPE) has come to be centred on the phenomenon of ‘economic globalisation’. It is a phenomenon that seems to both describe and explain many of the momentous changes in the global political economy of the late twentieth century. Although economic globalisation is now at the centre of the field's concerns, its precise meaning and significance remain hotly contested among International Political Economy scholars. This is hardly surprising. In this latest phase of its development, International Political Economy has begun to attract scholars from a wider diversity of disciplinary backgrounds than ever before. No longer is the field restricted to a dialogue between political scientists and economists. Geographers, sociologists, anthropologists and historians have also come to assume a central place within the field's debates. The task of arriving at a common intellectual approach to the study of economic globalisation for scholars from such a broad range of disciplinary backgrounds is obviously a daunting one.

As the definitional and conceptual debates surrounding the phrase ‘economic globalisation’ have heated up, one response has been to advocate the abandonment of the phrase altogether on the grounds that it is contributing more to confusion than to understanding. Although under contributing more to confusion than to understanding. Although understandable, this response is likely to be a futile one; ‘economic globalisation’ is a phrase that will not quickly disappear from academic and policy debates.