Tuesday, 4 November 2008

Beyond Bretton Woods

Gordon Brown's tour of the Gulf, seeking money to bolster IMF funds, suggests his plans for a Bretton Woods II conference are less ambitious than the occasion requires.

Brown says he's confident that the Saudis will assist with bolstering the IMF coffers – allowing it to lend to more cash-strapped economies like Iceland, Hungary, Pakistan and Ukraine. Good news for the IMF, which has suffered dry years as emerging lenders sprung up in the developing world and potential recipients shun the fund, justly frightened and indignant by the economic policies that will be foisted on them as a result of borrowing.

But resuscitation of the fund – and the wider Bretton Woods system – is decidedly not good for a more stable and equitable world. When joined other world leaders in calling for a Bretton Woods II conference, many hoped that this might signal fundamental reform of the "Washington Consensus" ideology which lies behind the international financial institutions and which has landed us in the current mess. The fear is now that what Brown and others mean by such reform is simply acknowledging the new global balance of power by allowing a handful of new countries "into the club".

Last week over 700 organisations from around the world signed a statement calling for fundamental reform of the Bretton Woods institutions (notably IMF and World Bank). This must include reform of tax, lending, banking and trade systems – and a total re-think of the role of the state in the economy. The actions of western governments' intervening to prop up their own economies is alone surely proof of the bankruptcy of these policies.

But in order to achieve this, it is essential to include those who have suffered most and had least say in the economic system up to now: poorer developing countries and representatives of citizens groups, social movements and trade unions.

The G20 meeting in Washington DC on November 15 has been posited as the first step on the path to reform. Unfortunately, most countries in the world won't be there. As such the conference can only be a first step towards what is needed, but it would be worthwhile nonetheless if it helps western leaders see what a critical condition the economic system is in.

It isn't a matter of resuscitation, the Bretton Woods institutions as currently constituted must be consigned to history and a new economic system be created on a very different sort of power dynamic.

This article first appeared on Comment is Free.

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