The global crisis – which spread to nearly all the developed economies and reduced world growth during the first decade of this new century – is on the way to being brought under control. However, its cost in human and financial terms has been considerable: unemployment has reached an unacceptable level, financial institutions and markets have been shaken and budget deficits are threatening to become unmanageable.
The aim of this report is not to put in the dock all the factors that contributed to the crisis, be they the relative importance of erroneous economic policies, the structural weaknesses of financial institutions, failures in regulation and supervision or the shortcomings of international monetary mechanisms. It is true that progress has recently been made, but a great deal has yet to be done in the financial sector. The present report will set out to reform the international monetary system (IMS). Indeed, we do not think sufficient attention has been given to the importance of the IMS.
At the Toronto summit, the G20 leaders set themselves a common goal: “to build a more stable and resilient international monetary system”. The inherent risks in the current system (a “non-system”, according to many observers) are in fact too significant to be overlooked. They include a retreat into a fragmented economic system vulnerable to protectionist pressures and recourse to incompatible national or regional policies. In a word, progress towards open, competitive markets on a global scale – which has brought so many benefits for such a large section of the world’s population – is now under threat.
As former ministers, central bank governors and leaders of national and international institutions, we are only too well aware of the weaknesses and failings of the current system. This document sets out our diagnosis, and a few reform guidelines for more cooperative governance of the global monetary system which may ensure the discipline and stability necessary for sustainable growth that creates jobs./.