Global economic governance

Speakers: Barry Eichengreen, Zhu Min, George Soros, Governor Guillermo Ortiz, Choongsoo Kim
Moderator: Maria Bartiromo

Summary of discussion

• Lots of risks today, weak demand and there is a need to support growth and create employment
• G20 meeting in Seoul will tackle key issues for emerging economies – global safety nets, development issues
• Need some patience to devise more solutions and implement them – i.e. getting rid of regulatory arbitrage; but some things should be done quickly such as governance reform
• Legitimacy is a key thing to make sure the Fund can play a role to mediate and implement policies

Specific points by speakers

George Soros

• Austerity debate is reminiscent of the 1930s; austerity voices are winning, we are coming to a wrong consensus; Imbalances are worse now than before
• G20 should ask for independent assessment of needs and ideas; I have to compliment IMF for being better place to discuss global issues
• From outside we see division between IMF staff which is more innovative, and IMF board which is conservative and outmoded

Governor Kim

• It is too soon to judge impacts of G20 efforts and reforms; don’t emphasise the downside risks too much
• We have been dealing with issues as Basel committee and FSB, they are coming up with improved solutions; some issues have been overlooked – but we will look at them over time; need some patience, need to consult with non G20 members
• As new players have entered into decision making (G20), need more time to get agreement
• At G20 role of IMF will be strengthened; we can’t go back to past – need to link IMF to regional arrangements, IMF can set global standards and work with regionals on country specific problems

Zhu Min

• Interconnectedness is key – governance and coordination is important
• Common sense can be a result of cooperative action for the world; IMF has a role here, but not easy to get a common strategy with different national interests
• We are trying to both facilitate and implement policies; we have new tools – facilities, FSAPs, LIC lending, spillover reports
• Now trying to work with regional arrangements – on both lending and surveillance

Governor Ortiz

• At best capital controls work on a temporary basis, or are counterproductive
• No rules for exchange rate arrangements – so this isn’t going to be solved; because some floating, some fixed; need renewed spirit of cooperation
• Latin America was better prepared, now need domestic financial systems to absorb capital flows

Barry Eichengreen

• Don’t need cooperation – we need common sense; people can act in their own interest and global interest
• If we put fiscal policy back on the table, then we don’t have to worry so much about monetary policy mismatches
• Let’s be impatient about governance reform – both at the IMF and G20
• IMF is walking a fine line of pushing countries, but not pushing too hard; legitimacy would help them get good policies adopted

Questions

Questioner from Chile – how does talk of governance really change any economic policy? IFIs are very ponderous
Soros – relevance of IFIs is at stake, an alternative is bilateral relations by state capitalist powers; it is important to preserve multilateral system; China plays a passive role in the IMF
Zhu – with changing economies, then need to change structure of institutions; need more legitimacy and effectiveness
Eichengreen – get IMF management and board more independent; then get more legitimate political matters

Jo-Marie Griesgraber – Governors instructed a new formula; but now board tells us there is no time for a new formula
Zhu Min – issue is transforming political will into results; hard to link political G20 to all international institutions with good implementation

Toure Nee Fatouh of PNOWB – can increasing cooperation between IMF and parliaments improve governance?
Zhu Min – we are happy to work with parliaments; i.e. quota increase didn’t go through parliament
Ortiz – even after 2008 reforms, there are still problems with representation

Moderator: what should the priorities be for the G20 in Seoul
Kim – we are talking about the currency issues, including macro issues under the Framework; need to link views of non-G20-members to the G20 meeting

From American University: Doha round and its impact on financial markets
Eichengreen – trade deal could be constructive

Mr. Henry, Ugandan parliamentarian – what about corruption in resource rich countries
Soros – move to work on corruption is ongoing, EITI, etc – needs more support to improve the governance through international standards for behaviour; need China to join as well
Kim – need to have knowledge sharing on development agenda, best solution is open market policy
Zhu Min – transparency is very important, research on this in resource-rich

Alan Woods from Jamaica – too big to fail, and corporate governance
Soros – we haven’t solved that issue, work in process
Zhu Min – we have some guidelines on too -big-to-fail, living wills, extra capital, etc; mostly too connected to fail is the problem
Ortiz – There is no solution to this problem, don’t expect that the measures like living wills would work; not even begun to tackle cross border issues

Moderator: priorities for the IMF in the coming 5 years?
Zhu Min – need to complete quota and voice and board seats issues in the short term; need to enhance our surveillance capability including spillovers; faster and better liquidity support