Oh no, it's him..

["Ian Murray" <seamus2001@xxxxxxxx>]

[FT]
Back to Bretton Woods
The anti-globalisation protestors have a point, argues Felix Rohatyn.
It is time to reform the IMF and the World Bank
Published: August 19 2001 18:54GMT | Last Updated: August 19 2001
18:57GMT

Ever since the failed World Trade Organisation meetings in Seattle, it
has become apparent that the now-familiar protests accompanying such
events merit serious attention. I believe they have three components.

The most visible is a radical, violent and nihilistic type of
movement, which uses media coverage of these international meetings as
an opportunity for violence and destruction. These are fringe elements
but they do require a heavy security response.

There are two other movements that are deeply felt, non-violent and
require a different response. The first is the movement against
globalisation, which is viewed by some as a process in which rich
countries exploit poor countries and increase the disparity between
rich and poor. Separate but related to this is an increasingly vocal
environmental movement. These movements targeted the spring meeting of
the World Bank and the International Monetary Fund in Prague and, more
recently, the Group of Eight industrialised countries' meeting in
Italy as symbols of what they oppose and as the agents of the world's
rich nations.

So far, the answers to these protests have essentially focused on the
security side: more police, shorter meetings, more remote locations.
That is not a very promising response to what is, at a certain level,
a challenge to western capitalism as the best system to deal with
global poverty. And it is a response that will fail because it is
devoid of intellectual content.

I have believed for some years that the time has come for a new
Bretton Woods conference. The role of institutions created 50 years
ago needs to be updated to suit the needs of a world that has changed
beyond all recognition. Both the World Bank and the IMF have been
indispensable but it is essential to review their role in a world
where the economic agenda is now set by the movement of private
capital coupled with rapid technological innovation and the primacy of
intellectual property.

In spite of strenuous efforts over the years by the international
financial institutions and the leading industrialised countries,
poverty and disease are still rampant among most of the world's
population, and wealth differentials seem to be increasing rather than
narrowing. I strongly believe in the benefits of globalisation and of
modern capitalism but I also believe these are not obvious to
everyone. Furthermore, they are not available to many people
throughout the developed and developing worlds.

It is easy for some to view globalisation as a process that benefits
capital at the expense of labour; that imposes austerity on developing
countries to protect western bondholders; that benefits the private
sector while discriminating against the public sector; and that
preaches open markets for rich-country exports while demanding
protection from poor-country imports.

A new Bretton Woods, convened by the president of the US with the
secretary-general of the United Nations, would include representatives
of the developing world as well as of the developed world; it would
also include representatives of non-governmental organisations and
private sector leaders. It would have a number of aims. First, it
would determine the facts behind the assertions of anti-globalisation
protesters. Second, and based on the findings, it would recommend
policies to address the most contentious issues, particularly the
impact of globalisation on developing countries.

Fortunately, world leaders are beginning to show a change of thinking.
The Bush administration, for example, has signalled one aspect of
possible reform by suggesting that World Bank lending to poor
countries be switched to grants as opposed to loans. The political
problems created by debt forgiveness plans suggest that grants are a
superior alternative.

To many, loan forgiveness appears to be foreign aid given twice: once
when the loan is made and once when it is forgiven. Grants, by
contrast, are a one-off exercise and can be tied to a number of
conditions to make them more effective for the recipient country.

Even so, grants must be accompanied by a new and acceptable way to
finance the World Bank and enable it to accomplish its aims. And that
would almost certainly require a new operating structure. These are
some of the issues that need to be reviewed - while the answer to
protest is to be firm with the hooligans, it is vital to recognise
that the status quo has many faults.

A new Bretton Woods conference with broad participation of the private
sector and NGOs would help stop a trend that will surely get worse if
no action is taken. True, such a meeting would be controversial but it
would be a serious response to real issues. It would also challenge
the protesters to be constructive.

That is very different from holding ever-smaller meetings in
ever-remoter locations while insisting that what we are doing is best
for everyone. Historically, such an ivory-tower mentality has
invariably led to the most serious consequences.

The writer is a former US ambassador to France