Dani Rodrik is skeptical about international financial governance:
Global coordination, like global governance, sounds good. But the practical reality is that it cannot deliver the tough regulations, closely tailored to domestic economic and political requirements, which financial markets badly need in the aftermath of the worst financial upheaval the world economy has experienced since the Great Depression.
In a world of divided political sovereignty and diverse national preferences, the push for international harmonization is a recipe for weak and ineffective rules. That is one reason why international bankers love international coordination.
I completely agree: we won't get strict, meaningful international standards any time soon. Moreover, that's probably a very good thing: one-size-fits-all policies seldom work very well, as Rodrik is quick to point out in other contexts, and as he reiterates here:
Democratic accountability would also result in regulatory diversity – different countries doing their own thing – and that is not a bad thing, either. If the US wants to place size limits and tighter capital requirements on banks, it should be free to do so. If Europe wants to devise its own rules for credit-rating agencies and hedge funds, it should simply go ahead.
Fine as far as it goes, although I don't see what "democratic accountability" has to do with it. Does Rodrik really think that voters are dwelling over the minutae of regulatory reform? Of course not. Regulatory policy isn't about catering to the public mandate; it's about satisfying broad public interests and narrow private interests. The logic of collective action essentially dictates that regulatory policy will cater to the interests of the banking sector.
The scary thing is, relative to a world where regulatory policy is truly democratized, that is probably a good thing. International governance would surely be weak, but it might actually be appropriate. Highly-politicized regulatory policy, on the other hand, would surely be disastrous just as highly-politicized monetary policy is disastrous.