Gordon Brown, many in the European Union and the media have been calling for a “Bretton Woods II” as the next step toward preventing future meltdowns of the international financial system.
This article provides a series of arguments against this:
1. Collaborating the World Bank with the IMF is not a good idea because unlike the IMF, the World Bank has no mandate to establish rules for the international financial system. While the World Bank has competence in fostering financial sector soundness in emerging market countries, they cannot not in the advanced countries where the current turmoil began.
2. Nothing useful can emerge from the Bretton Woods II system until the United States is ready to stop using the IMF as an instrument of U.S. policy.
3. Checks and balances -- If we consider the IMF to be a public health physician, then it has the responsibility to prevent diseases in addition to just identifying them or treating patients. The IMF has to look at the system as a whole, detect weaknesses and recommend corrective action.Today, the United States is not politically or emotionally ready to listen to, let alone adopt, the IMF's advice.
4. The article says that domestically, the United States advocates for checks and balances. But internationally, the United States, having won against communism, behaves as if it alone knows best how to deal with every other global challenge. After fighting enemies in Afghanistan and Iraq, with victory still elusive, Americans are beginning to comprehend the difficulty of trying to re-make the world in their image. But moving into listening mode represents a 180-degree turn.
5. The election of Barack Obama as the next President of the United States provides some basis for optimism, but there are other measures to be considered like giving up the U.S. veto and supporting a large capital increase.
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