Sebastian Mallaby on the Bretton Woods Redux plans

October 20, 2008

Mallaby’s editorial in today’s WP echoes some of the broad points I tried to make in my last post, but goes into greater detail on some plausible concrete outcomes from the proposed Bretton Woods Redux.

The key points are in the following paragraphs:

So what might a new Bretton Woods conference usefully do? Well, it could reform the IMF, which has evolved from its original role into a rescue fund for collapsing currencies. During the emerging market crises of a decade ago, the IMF was central to all the bailouts. Its status has since dwindled…

Reestablishing the IMF as the agreed provider of bailouts would be a worthwhile project. The IMF puts economic conditions on its loans while governments place political ones; we don’t want to revive the cronyism of the Cold War, when countries from Cuba to Zaire could pursue absurd policies and know they would be bailed out because they were strategically useful.

The irony is that Britain and France will be the first to resist a serious effort to revive the IMF. British Prime Minister Gordon Brown talks vacuously about giving the organization the role of creating an early-warning system for crises, even though this is what thousands of economic forecasters already try to provide. What Brown does not stress is that serious IMF reform needs to begin with the modernization of its board. Rising powers such as China and India deserve more say. Declining powers need to give up some influence — and that includes France and Britain.

Like I said, we’re heading for Doha all over again…

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