Bretton Woods forum: “Plenty of conversations, no consensus”
10 Apr, 2011 17:25
The financial dominance of Europe and America is coming to an end, with developing economies taking the leading role. That is one of the main themes of a summit being hosted by billionaire tycoon George Soros in the American town of Bretton Woods.
It was here that allied nations came during World War II, searching for stability in a crisis. Here, they formed the International Monetary Fund, which today is the World Bank, and established the US dollar as the global reserve currency.It is also here that decades later and in the wake of another financial crisis that a group of influential economists and former policy-makers have gotten together to rethink that framework in response to a different world."We've got to have a serious plan to reconstruct the international institutions for the times we're in, not the times that are gone," former British Prime Minister Gordon Brown said to the conference.The centuries of American and European dominance, says Brown, are bygone times. With the BRIC nations of Brazil, Russia, India and China fueling more global growth, they need a bigger seat at the table.Critics say that in with the new, should mean out with the old orthodoxy of Bretton Woods – the IMF for one."I think the IMF has mostly played a very destructive role by promoting financial liberalization in many parts of the world, which has contributed tremendously to the financial meltdown," says Gerald Epstein of the Political Economy Research Institute.And a handling of that meltdown in the United States, with the billions to bail out banks that are still ‘too big to fail’, is just one reason some of these critics give for questioning the US dollar as the global reserve currency."If you have crony capitalism and you lose confidence in US institutions, which has happened since 2008, the quality of the dollar and of New York as the financial center can deteriorate very markedly," Robert Johnson, INET’s Executive Director, told RT.And deterioration in political will for tough banking reform has many concerned we may be heading for another crisis."Depends on what you'd call a crisis but I'd have to say yes, the concentration of power in finance is greater today than it was before this crisis," former JP Morgan executive John Fullerton agrees.But with mostly Western academics talking shop it is hard to say if the world will take any new roadmap away from Bretton Woods. According to the man who still has Obama’s ear, his former top economic aid Larry Summers, no one is going to run to Washington and pass legislation next week.“Over time, these kinds of ideas in sphere after sphere have had very important effects," he said.Effects hard for some to see at this point, in this sphere."What's your alternative? Where's the political will for reshaping the world economy? Who has a proposal that’s actually workable?” Professor Simon Johnson of the MIT Sloan School of Management has asked. “There’s plenty of conversations on the role of the dollar – but no consensus on how to replace that.”