15 NOVEMBER 2008


MONEY IS A COWARD. It runs away at the first sniff of risk.

Every economist knows that. Also every economist worth his/her seminar knows that the current meltdown is too huge to be left to one, two or twenty countries. Handling it requires a coherent comprehensive intra-national multinational agreed plan.

The 20-nation meeting in Washington, like the European one a day before in Nice, could issue a consensus on principle: the need to review the deteriorating situation, the need to set-up better global financing regulations and the need to streamline international financial institutions. That would include the need for smoother and closer co-ordination between central banks, or as it is called in the U.S., the Federal Reserve Boards. A final communique on such meetings could never miss the obligatory references to transparency, accountability, market integrity and -- of course -- international cooperation.

One main point is not yet clearly addressed: What will be the new comprehensive framework?

Heads of state and their senior financial, economic and development officials will obviously avoid harping too long on the breakdown in U.S. economy that triggered the current crisis. Answers will be sought in a multinational framework.

Most pundits seem to overlook the fact that the Bretton Woods agreement, which generally guided the global economic/financial order after the Second World War, was a "United Nations" Financial Conference. President Nixon took measures to break out of it in the mid-Seventies under the financial pressure of the Vietnam War, but Bretton Woods maintained its pillars until the recent crisis uncovered the obscene extent to which that framework had been violated with impunity.

As expected, many thoughtful commentators called for a Bretton Woods II. Regrettably, a nostalgic imitation of the original, if at all attainable, would not produce the same results. To begin with, the 1944 agreement was drawn after a world war. Even then it took at least two years to shape it. There was a consensus on all points. The U.S., its host country, offered the main premise. Today, its economy is part of the problem. Sixty-four years ago, a very few number of countries, mainly the winners of the war, decided. Now there is a wider number of interested and effective players like China, Brazil, Indian, Saudi Arabia, Qatar, Algeria, Nigeria, South Africa, Australia, among others.

Another qualitative difference is in the calibre of the main players. At the time there were government leaders like Franklin Delano Roosevelt and Winston Churchill working on advice from economists like Henry Morganthau and John Maynard Keynes. They dealt with current issues of the day not with long press communiques. As Keynes would quip: "In the long term, we'll all be dead"! British current Prime Minister Gordon Brown seems to agree. He is playing a real leadership role in dealing urgently with the expanding crisis.

The most likely consensus, then, would be to review, improve, regulate, stimulate, inspire and generally build on the basic pillars within the widest available framework. That normally would mean the United Nations.

The International Bank for Reconstruction and Development, popularly known as the World Bank, and the International Monetary Fund (IMF) were created at Bretton Woods as an integral part of the U.N. system. They have their own governing bodies and specific objectives, yet they fell within that international galaxy. That connection was deliberate, not haphazard. The Founding Fathers sought to highlight without any doubt the link between international peace and security and economic/social development, as was inscribed in the U.N. Charter. They also realized that a unified approach will be more effective than a fragmented one.

The problem is: What happened to the World Bank and IMF? And how could they recover their formerly impeccable reputation? By the time the controversy about Mr. Wolfowitz in the Bank was about to be forgotten, the new IMF Director hit the ground running with a sexual scandal for which he publicly apologized to the world and to the Fund's female staff.

Additionally, as a sign of the times, it is generally forgotten that the U.N. Secretariat has a substantial Department of Economic and Social Affairs. There are also other programs and funds like U.N. Development Programme and several others -- they vary from 35 to 55 whose budget is devoted to financial or human development issues. Naturally, the Millennium Goals sections should have a clue. Our inevitable Professor Jeffrey Sacks is always active in spots like Davos or in the company of Bono; he must be able to contribute something beyond that photo-op meeting between the Secretary General and Nobel Laureate Joseph Siglitz.

Actually, give Secretary General Ban Ki-moon his due. He was outspoken from day one. He raised the issue with heads of state and went to Washington especially to press his urgent views on the needs of the developing countries and the commitment to the Development Goals. He speaks not only with conviction but with confident clarity. He is limited, however, with the need to deal with other pressing issues. He needs to have all those other senior officials or possibly a working group to focus fully and entirely on that daunting global crisis. He could not and should not do it alone. Where are all those senior economic and financial officials now that the world really needs them?