To recover from the ongoing economic crisis and to prevent it from happening again, the world should make way for a new architecture of global governance, the former chief of the International Monetary Fund (IMF) said Monday.
 
Speaking at a forum organized by the Asian Development Bank (ADB), former IMF Managing Director Michel Camdessus said the key building blocks for such reform include a “brand new IMF” and a more inclusive global governance group “to replace all the key ‘Gs’” such as the G-8 and the G-20.
 
“This is the most effective way to prevent the recurrence of crises…To hesitate to adapt to this reform is to accept that the same causes can lead to the same or worse crises,” Camdessus told reporters and finance ministers at the ADB headquarters in Mandaluyong City.
 
The G-8 (Group of 8) is a forum of the world’s most industrialized democracies which was formed to respond to the global recession. Its member states include Canada, Germany, France, Japan, Italy, Russia, the United States, and the United Kingdom.
 
On the other hand, the G-20 (Group of 20 Finance Ministers and Central Bank Governors) is composed of the world’s 20 largest national economies, including the G-8. The group serves as a forum for consultation on global financial concerns.
 
According to Camdessus, emerging countries, particularly Asia, should be at the helm of this proposed architecture. He said Asian nations should be more properly represented, adding that they should “take advantage of the power they hardly recognize to change the world.”
 
“Asia must be in the driving seat, or at least share it with key international centers of the world…This is the hour of Asia,” he said.
 
In a study, the ADB said “over-represented Europe and others” in the G-8 and the G-20 may need to accept the realities of the new world, shift their voting powers to the “new countries” such as Asia, making international financial institutions more relevant to them.
 
Reforms
 
For the IMF to be more effective, Camdessus said it should undergo these basic changes: a new mandate, a high council entrusted with key political responsibilities, and the real establishment of unquestionable legitimacy.
 
Camdessus said amendments should be made to IMF’s articles of agreement: “A new mandate is indispensable…[The IMF] should have full surveillance of financial governance. No institution has before been formally in charge of this.”
 
The IMF, Camdessus added, should also be able to focus more on systemic issues, as well as promote efficiency and accountability.
 
Aside from an improved IMF, Camdessus stressed the need for a new global governance group, where all countries are members and are represented in all levels: “The G8 should be prepared to relinquish some of its responsibilities.”
 
The proposed structure is composed of three layers: the top of the global governance group, a council, and an executive board.
 
According to Camdessus, the top of the global governance group will be composed to 24 to 25 members. He said it will be a “very legitimate, high-level, powerful group where strategy is defined in the real political level.”
 
Placed at the second tier is the council, which Camdessus said will hold political responsibilities instead of mere consultancy roles. The council would take the place of the International Monetary and Financial Committee of the IMF.
 
At the end of the group is an executive board, which will perform the previous tasks of the council.
 
“All countries in proportion of their importance will have a voice. We should make sure that no country is out of place while their destinies are affected,” he said.
 
Even with the proposed global architecture, Camdessus said recovery from the economic crisis can only come from within: “Don’t expect recovery to come from other places.”
 
He also stressed the need for nations to consolidate their efforts so they would all recover quickly and in a regionally coordinated manner.