Governor of Central Bank of Norway, Svein Gjedrem, purpose to merge the activities of G20 and IMF in creating a new financial architecture. In a speech held at the Peterson Institute for International Economics in Washington, Thursday, Mr Gjedrem said that a “statutory-based and representative global order” should be one of the main objectives of the discussions on changes in the international financial markets.
“The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs. When the good times return, we must avoid memory failure and remember these facts of life.”
A Multilateral approach is needed to deal with the global challenges. That was the main message from governor Svein Gjedrem of Central Bank of Norway in his speech at the Peterson Institute for International Economics in Washington, Thursday. He draws a picture of a new global financial world with the International Monetary Fund, IMF, in the center.
“At the end of the Second World War, 45 countries agreed to establish a new international financial and economic order with the Bretton Woods Institutions, the IMF and the World Bank, at its center. In his inaugural speech to the Bretton Woods Conference in 1944, US Treasury Secretary Henry Morgenthau noted the following:”
“We know that economic conflict must develop when nations endeavor separately to deal with economic ills which are international in scope. To deal with the problems of international exchange and of international investment is beyond the capacity of any one country, or of any two or three countries. These are multilateral problems, to be solved only by multilateral cooperation. They are fixed and permanent problems, not merely transitional considerations of the post-war reconstruction. They are problems not limited in importance to foreign exchange traders and bankers but are vital factors in the flow of raw materials and finished goods, in the maintenance of high levels of production and consumption, in the establishment of a satisfactory standard of living for all the people of all the countries on this earth.”
“It is perhaps time to honor some fundamental principles,” Mr Gjedrem said in his speech at the Peterson Institute.
The governor of the Central Bank of Norway did stretch as far as to paint a picture of how he thinks a new global financial world should look like.
Mr. Gjedrem’s new world would revolve around the IMF.
“During the crisis, the IMF proved its ability to respond promptly and effectively to very challenging developments.”
“I therefore submit that a statutory-based and representative global order should be one of the main objectives of the discussions on changes in the international financial architecture.”
“I have presented my view on the prevailing international economic order which I find deficient in important respects. The G20 played a vital role in the response to the global crisis and the rest of the world depends on its successful cooperation. With the world recovering from crisis, the G20 should merge its activities with those of the IMF. That will give them both wider acceptance and legitimacy.”
“I’ve described some characteristics of Norway and emphasised our history of active support of multilateral institutions and collaboration. Currently, we do not participate where decisive discussions take place on international economic and financial issues and cooperation, including changes in the governance of the IMF. Yet we are called upon to make relatively large contributions to efforts agreed by a non-statutory body.”
Svein Gjedrem emphasize certain key principles:
- First, systemically important countries need to collaborate effectively on consistent economic policies. Their success is vital not only for their own good, but also for that of others, including small open economies.
- Second, this collaboration should be anchored in a multilateral and statutory-based system of representation, for example through constituencies, where smaller countries would participate, even if indirectly.
- Third, the constituencies should have rotating representation, where small countries, at least periodically, could participate directly.
“Without such a global order, the interest in contributing to international efforts is certain to diminish. There can be no taxation without representation.”
“The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs, and in preparing the overall framework for the international policy response.”
“When the good times return, we must avoid memory failure and remember these facts of life.”
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