In the history of economic thought, the debate for more than 200 years is based on whether there is a general equilibrium at the level of economic activity, independent of time and place. In this context, the concepts of economic balance and imbalance have great importance. In the history of industrial capitalism, a balanced and stable growth trend never occurred, and general abundance and scarcity followed each other. These expansions and recessions, which are being observed along the history in capitalist production system, constitute the main subject of the literature of business cycles. Two basic views dominate the literature of business cycles. The orthodox view represents the mainstream economics, and the heterodox view stands opposite the former. In this study, the opinions of both regarding the causes and effects of business cycles were addressed, and the measures that they deem required to be taken for re-stabilizing the economies were examined.
TopGlobal Public Goods
Global public goods are goods and services whose benefits or losses spread to the whole world by going beyond the borders of countries, and whose optimum provision depends on the cooperation and common action of numerous countries besides their characteristics of non-excludability and non-rivalry in consumption. While some of these services, that create externality, create external benefits, some others arise as global public loss. Global warming, wars, epidemics, global poverty, international terrorism, and financial instability to name a few. The incapacity of nation states in the provision of global public goods, that concern all the countries in the world due to the externalities that they create at global scale, requires the engagement of international institutions. They are services provided in common and equally to member states by the organizations affiliated to United Nations such as UNESCO, WHO, WLO, Red Cross and UNICEF.
Defining global public goods is made up of three criteria. First, for the goods to be global public goods, they should cover more than one country group. If public goods are affecting only a specific region (e.g., South America), then they are regional public goods, and they may be expressed club goods. Second, for the goods to become global public goods, their benefits or hlosses are required to reach different sections of world’s population at the same time as well as reaching a wide country spectrum. And finally, the definition of global public goods should cover the externality arising among generations. The nuclear energy, put into the use of actual generation, forms nuclear waste in the long-term. Then, it shouldn’t endanger the future generations while meeting the requirements of a present generation (Kaul et al.,1999, pp. 10-11).
Considering the characteristics of global public goods, financial stability is also among global public goods. Especially, the economic instability, which arises in one of the developed countries, takes hold of the whole world in a short while by the effect of globalization.
Financial stability, and financial efficiency may not take place at the same time. In order to ensure efficiency in financial markets, it is required for the financial markets to be stable. But the financial markets may not operate effectively in each instance of financial stability. In addition, financial stability may not be ensured in each instance of financial efficiency. For instance, the participation of new banks in the market increases the competition and efficiency. But the increase of competition among banks may increase the risk of financial fragility by dragging them to excessively risky actions. For this reason, many countries try to preserve the oligopolistic structure of the banking sector, and limit the market-entries. The purpose of this practice is to limit the competition in financial markets, and to enable the banks to undertake less risk. As is seen, there is a conflict between the efficient operation of financial markets, and the policies adopted for financial stability. As the result of measures taken for limiting the competition, efficiency in the allocation of resources is unable to be ensured, and on the other hand, the competition, arising in the systems in which such measures were not taken, triggers the behavior of taking excessive risk, and thus it harms the financial stability (Akyol & Varlık, 2010, p. 149).