Reforming the international financial and monetary system: from Keynes to Davidson and Stiglitz

With the usual debates trumpeting the usual merits of fixed versus flexible exchange rates, or some various incarnations thereof, the authors draw attention to Keynes's original plan for an international clearing union. The paper takes a close look at Joseph Stiglitz's recent suggestions to deal with financial crises along with Paul Davidson's Keynes-Post Keynesian clearinghouse. In the former case, the analysis is left wanting: the author offers nothing more than simple solutions to a system in need of dramatic changes. On the other hand, Davidson's analysis of the current state of affairs requires more than mere "plumbing" and addresses the root causes of the crises. Finally, with reference to the way Keynes once defended his proposal against criticisms, the authors of this paper conclude that the current Keynes-Post Keynesian proposal is not only relevant but also possible today. They conclude by claiming that it remains the best solution to the current international financial mess.