It goes without saying that as the world becomes more globalized, the economies of nation-states go hand-in-hand. In the early 2000s, it became quite clear just how quickly open economies could grow; business was booming as American and British banks expanded in developing countries that opened their borders to investment. However, with the recent worldwide economic crisis, many of those same countries that were so willing to welcome investments have been hurt as the crisis has spread. Because they saw the possible success of welcoming investments, countries like Iceland lowered their regulations and succeeded wildly for a while, then crashed back down when the market turned. Floyd Norris, a New York Times economist, compares it to the metaphor of a “large ship. A single-hull ship will cost less to build and operate than a similar ship with a double hull. It will therefore earn more money on every trip, but it is more likely to be sunk if it encounters a severe storm or large iceberg.”
Of course, this begs the discussion of where the regulatory NGOs were to prevent such a storm. Interestingly, Norris cites a journal article written by several prominent I.M.F. economists who encourage open markets for development, so long as countries have regulate strongly. In the recent crisis, the banks
were at fault, as they took advantage of countries wishing to open their markets. However, Norris is quick to ask, would this not all have been avoided had countries been more careful and fewer economies had opened to international investment? Would more stringent economic borders have kept this crisis to a purely American/British recession rather than a full-fledged worldwide crash? Globalization has brought many advantages as it has pushed to hyper-speed in recent years. But maybe sometimes the best option is to just say no and slow the roll when one can. Iceland would surely appreciate that option right now.