The test is whether member countries are ready to make genuine commitments to each other. Without that the institutions lack any real purpose. So the subject of my talk today is why we need rules of the game to govern globalisation, and the institutions that are necessary to oversee those rules. 2. Is the post-war settlement still relevant today? At the end of the Second World War, a new global order was put in place by the United States, Britain and their allies. One of those primarily responsible, US Secretary of State Dean Acheson, described his time as being “present at the creation” of a new global order. A range of new international institutions was created – the United Nations, the two Bretton Woods institutions (the IMF and World Bank), the OEEC that implemented the Marshall Plan (and later became the OECD) , NATO, and GATT (which has subsequently been succeeded by the World Trade Organisation). Those institutions are now, for the most part, past their 60th birthdays. And there has been much heartsearching over the past few years as to their role and governance. Unless the spirit of the original founders is rekindled, there is a real danger that the present institutions will wither on the vine leaving us with a more unstable and fragile international environment. As Martin Wolf pointedly wrote, “To defend a liberal world economy is not to defend the International Monetary Fund, the World Bank, the World Trade Organisation or any specific institution.
In my view, there are five principles that should be followed. First, create international institutions only when there is a need to do so. International institutions should focus on those areas of global governance where we need to tackle problems collectively – whether on trade, the environment, or large spillover effects of changes in macroeconomic policy. Second, ensure that the commitments countries enter into are clear. The job of institutions is to support those commitments. In many cases, like an umpire, their job will be to uphold them. That will only be possible if the players – countries – are very clear about the agreed rules of the game. Without that, any further design is pointless. Third, provide institutions with the necessary tools to umpire the commitments of nation states. But, just as umpires are accountable for their performance to the whole community of cricket-playing nations through the International Cricket Council, the staff and management of the international institution should be accountable to the whole community of nation states for their performance in upholding the rules. Fourth, recognise that we do not start with a blank sheet of paper. We must accept the constraints of history. Existing institutions have an institutional memory, talented staff and much of the infrastructure that will be needed in the future. But that is not to say reform will be easy – there are far too many vested interests for that to be the case. Fifth, avoid unnecessary duplication.