They are problems not limited in importance to foreign exchange traders and bankers but are vital factors in the flow of raw materials and finished goods, in the maintenance of high levels of production and consumption, in the establishment of a satisfactory standard of living for all the people of all the countries on this earth.” 3 These wisely spoken words are as relevant today as in 1944. When the IMF and the World Bank were established, it marked the beginning of a period of international economic and financial cooperation which over time embraced virtually all the countries of the world. The Bretton Woods Institutions have served their membership well. When needed, their policies have adapted promptly and timely to changes in the world economy and the global financial system. The IMF, with its crucial competence, has been a key forum for policy collaboration. Its surveillance and lending activities are unique. I strongly believe that global  3  Cited inter alia in Harold James: International Monetary Cooperation since Bretton Woods, The International Monetary Fund, Washington D.C., 1996. 2  BIS Review 22/2010  governance is best served by a statutory-based international economic order, with effective and legitimate multilateral institutions where all countries are represented. In the recent decade, the rapid expansion of many large emerging economies has greatly altered the global economic landscape. Most dramatic is the re-entry of China as a major economic power.
At the same time, the growing imbalances in the world economy became and continue to be a source of instability, in addition to spurring protectionist tendencies. It is perhaps time to honor some fundamental principles, such as the one noted in an IMF Pamphlet from 1992: “The philosophy of the Articles of Agreement is based on the superiority of free trade as the organizing principle of international economic interaction.” 4 Lessons from the crisis The joint, massive, and unprecedented policy responses that were put in place as the crisis unfolded surely deserve due credit. As Mr. Subramanian here at the Peterson Institute noted in the Financial Times in late December 2009: 5 “What is striking about the influence of economics is that similar policy responses in the fiscal and monetary areas, and non-responses in relation to competitive devaluations and protectionism, were crafted across the globe. They were evident in emerging-market economies and developing countries as much as in the industrial world; in red-blooded capitalist countries as well as in communist China and still-dirigiste India. If ever there was a Great Consensus, this was it.” A key lesson from the crisis is the need for multilateral cooperation and collective action. It relates to the framework for polices on prevention, resolution, reform and implementation. It also relates to the institutional set-up.