Reforming Global Economic Governance: A Proposal to the Members of the G-20

Abstract

First document prepared by The Group of Lecce and submitted to all G20 Leaders. The ongoing international economic and financial crisis has raised the issue of reforming the governance of the global economy. The epochal nature of the undertaking has led many observers to evoke the onset of a new “Bretton Woods” era. Indeed, we hope that the principles of economic and financial multilateralism, which made Bretton Woods so fundamental for the free world after the world conflicts of last century, would be reflected in your decisions. The global economy needs today a system of governance that is both effective and legitimate. Only a body that is perceived as legitimate by most of the world nations and their citizens can ultimately make choices that are accepted and effective. Legitimacy requires (direct or indirect) participation to decision making, and participation to decision making provides the only way to make choices that draw on the views and interests of all. Only those who see their right recognized to participate in decision making are then motivated to “own” the decisions taken and to respect them. These principles inspired the launch of the “Bretton Woods” agreements in 1944, and were again defended in the ‘70s, when the international monetary system needed reform. On the occasion, upon instigation of the United States, international discussions and negotiations took place at the IMF, where all member states were represented, and not within small groups of relevant countries (like the then very powerful G-10) to the exclusion of the less powerful ones. The Committee of Twenty Members of the IMF Board of Governors was established as a ministerial body that was to act as the place for international dialogue. The ministers and governors who sat at its table came from countries that were represented in the Executive Board of the IMF, and were responsible during negotiations vis-a-vis those countries that were not directly represented. It is today fundamental that, as world leaders, you walk the same path that your predecessors traced at Bretton Woods six decades ago, and be willing to renew the same obligation to engage all that they were willing to accept then, precisely not to leave anyone out. Letting strategic decision making to self-selected, exclusive and non representative country groupings, which will set international policy directions with the presumption to determine what is best for all, will likely portend new arrogance of the strongest on the weakest, causing resentment and disenchantment from the excluded and weakening the cooperative spirit that Bretton Woods was meant to engender and that today needs to be revitalized. Participation and voting power may be asymmetric, but need be universal.