WAIT! Do We Really Want Those Who Got Us Into the Financial Crisis to Plan Our Way Out?

Center of Concern | Tue, Oct 21, 2008

By Aldo Caliari
Source: Center of Concern
The latest word out of U.S. and European capitals is a call for a series of Economic Summits beginning in late November to look deeply into reforms of the international financial system.  Some speak of a "Bretton Woods II" after the conference in the mid-1940s that created the global financial architecture we have today.

With small variations, U.S. and European plans all seem to be based upon the same model: either a G8 Summit or a G8-“plus” (which would be the G8 plus some of the larger emerging markets). In any case, it seems clear: if developing countries participate at all, it will be only by invitation from the wealthy nations.

Such an exclusionary approach for decisions on the global financial system may have had some credibility in the late 1990s. Then many thought the only threat to the international financial system was posed by developing countries’ outdated institutional structures, unable to cope with the growing mobility of capital flows.  But it is hard to believe that perspective can fly today when many of those developing countries resent being silent victims of the crisis they clearly had no part in creating.

There is another process where the words “Bretton Woods II” have been resounding.   Indeed, also at the end of November, leaders of the world will meet in Doha, Qatar, to review progress in implementation of the International Conference on Financing for Development (held in Monterrey, Mexico in 2002). The reform of the international financial system is a key item on the agenda. The current draft outcome, released in late July, contains breakthrough language calling for a major review of the “international financial and monetary architecture, and global governance structures.” This is a proposal that enjoys broad support by the developing country governments and that some diplomats have been informally calling “Bretton Woods II.”

Unfortunately, not one of the G8 leaders backing a "Bretton Woods II" has mentioned the Doha meeting and agenda. One is tempted to think the worst: that the hasty calls for a G8 summit are designed to take the steam away from the Financing for Development process. At the very least, they are a clear signal that the wealthy nations that created the crisis want to have full control in shaping the future structures needed to resolve it.  They don't want to do it where all nations have a voice and vote.

Will the G8 have the vision and courage to start putting into practice the “new multilateralism” that Robert Zoellick, the President of the World Bank, recently called for? A truly "new multilateralism" will require the courage to subject ideas to scrutiny by more than a few wealthy-nation's elite leaders. A truly "new multilateralism" has to start with the voices of all nations being heard.  It should start and be carried forward in the framework created democratically within the United Nations System at the Doha meeting next month.