Strengthening global economic institutions

Reforming global economic management institutions

Context

The process of creating a more closely integrated world economy is likely to continue during the next 10 years, and with increased globalization will come greater interdependence of all aspects of economic life. National economies will gradually lose their separate identities and become closely linked into an international economic system. This transformation through globalization and close interdependence will not necessarily occur smoothly. Adjustments will be required and sometimes these adjustments will be painful. On the other hand, the transformation of the world economy will create numerous opportunities for mutually beneficial change and development. The task is to minimize the pain of adjustment while taking full advantage of the potential benefits that are created. This is easier said than done.

Claim

The world now finds itself in a situation where there is a pressing need to strengthen and reform existing global institutions of macro-economic management for the benefit of the international system as a whole. Three points in particular deserve attention by statesmen in the near future. First, there is a need to design improved co-ordinating machinery for international economic co-operation between developed and developing countries. Neither the UN Secretariat nor UNCTAD nor the World Bank was intended to play such a role or is capable of doing so. Yet without machinery for policy co-ordination, it is difficult to see how an international development strategy can be implemented.

Secondly, there is a need to increase substantially the resources of the multilateral financial agencies so that they can begin to play a role not too dissimilar from that played by their national counterparts. The lending capacity of the World Bank, the regional development banks, the International Fund for Agricultural Development (IFAD) and IMF (preferably by the issue of special drawing rights) should be raised so that they can contribute in a significant way to the implementation of the next international development strategy.

Thirdly, a mechanism should be found that will make it possible in a highly interdependent world to introduce international accountability for national economic policies. National policies have international as well as national consequences. In effect national actions have widespread externalities, both positive and negative, and the time has arrived to recognize this explicitly by developing appropriate international institutions. One of the tasks of a new institution would be to establish a system for monitoring trade policies with a view to early detection of unfavourable consequences on trading partners.