International Monetary Systems - Calls For A "New Bretton Woods"

Calls For A "New Bretton Woods"

Leading financial journalist Martin Wolf has reported that all financial crises since 1971 have been preceded by large capital inflows into affected regions. While ever since the seventies there have been numerous calls from the global justice movement for a revamped international system to tackle the problem of unfettered capital flows, it wasn't until late 2008 that this idea began to receive substantial support from leading politicians. On September 26, 2008, French President Nicolas Sarkozy, then also the President of the European Union, said, "We must rethink the financial system from scratch, as at Bretton Woods."

On October 13, 2008, British Prime Minister Gordon Brown said world leaders must meet to agree to a new economic system:

However, Brown's approach was quite different to the original Bretton Woods system, emphasising the continuation of globalization and free trade as opposed to a return to fixed exchange rates. There were tensions between Brown and Sarkozy, who argued that the "Anglo-Saxon" model of unrestrained markets had failed. However European leaders were united in calling for a "Bretton Woods II" summit to redesign the world's financial architecture. President Bush was agreeable to the calls, and the resulting meeting was the 2008 G-20 Washington summit. International agreement was achieved for the common adoption of Keynesian fiscal stimulus, an area where the US and China were to emerge as the worlds leading actors. Yet there was no substantial progress towards reforming the international financial system, and nor was there at the 2009 meeting of the World Economic Forum at Davos

Despite this lack of results leaders continued to campaign for Bretton Woods II. Italian Economics Minister Giulio Tremonti said that Italy would use its 2009 G7 chairmanship to push for a "New Bretton Woods." He had been critical of the U.S.'s response to the global financial crisis of 2008, and had suggested that the dollar may be superseded as the base currency of the Bretton Woods system.

Choike, a portal organisation representing southern hemisphere NGOs, called for the establishment of "international permanent and binding mechanisms of control over capital flows" and as of March 2009 had achieved over 550 signatories from civil society organisations.

March 2009 saw Gordon Brown continuing to advocate for reform and the granting of extended powers to international financial institutions like the IMF at the April G20 summit in London, and was said to have president Obama's support . Also during March 2009, in a speech entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China came out in favour of Keynes's idea of a centrally managed global reserve currency. Dr Zhou argued that it was unfortunate that part of the reason for the Bretton Woods system breaking down was the failure to adopt Keynes's bancor. Dr Zhou said that national currencies were unsuitable for use as global reserve currencies as a result of the Triffin dilemma - the difficulty faced by reserve currency issuers in trying to simultaneously achieve their domestic monetary policy goals and meet other countries' demand for reserve currency. Dr Zhou proposed a gradual move towards increased used of IMF special drawing rights (SDRs) as a centrally managed global reserve currency His proposal attracted much international attention. In a November 2009 article published in Foreign Affairs magazine, economist C. Fred Bergsten argued that Dr Zhou's suggestion or a similar change to the international monetary system would be in the United States' best interests as well as the rest of the world's.

Leaders meeting in April at the 2009 G-20 London summit agreed to allow $250 Billion of SDRs to be created by the IMF, to be distributed to all IMF members according to each countries voting rights. In the aftermath of the summit, Gordon Brown declared "the Washington Consensus is over". However in a book published during September 2009, Professor Robert Skidelsky, an international expert on Keynesianism, argued it was still too early to say whether a new international monetary system was emerging.

On Jan 27, in his opening address to the 2010 World Economic Forum in Davos, President Sarkozy repeated his call for a new Bretton Woods, and was met by wild applause by a sizeable proportion of the audience.

In December 2011, the Bank of England published a paper arguing for reform, saying that the current International monetary system has performed poorly compared to the Bretton Woods system.

In August 2012 in an International Herald Tribune op-ed, Harvard University professor and director of the Committee on Capital Markets Regulation Hal S. Scott called for a global response to the Euro-zone crisis. He wrote that two failures to address European problems around German power had led to world wars in the 20th century and that the current crisis was also beyond the capacity of Europe, with Germany again at the center, to solve on their own. Accepting that leadership transitions were underway in both China and America, Scott called on all concerned—with Japan included with China and America—to begin organizing a global restructuring through the International Monetary Fund with possibly a Bretton Woods II conference as part of the process. MarketWatch commentator Darrell Delamaide endorsed Scott's idea but concluded "unfortunately it’s not likely to happen". He added first the example of the failure of Europe to address successfully the breakup of Yugoslavia without outside assistance as a reason for his endorsement. But he found U.S. presidential and Treasury Department leadership and IMF leadership dramatically lacking in the capacity to mount an initiative such as Scott proposed.