On May 21, 2014, two hundred Bretton Woods Committee members and friends – leaders within the private sector and across the international policy community – convened in Washington for the 2014 Bretton Woods Committee Annual Meeting. The program featured perspectives from the U.S. Congress on U.S. global leadership, discussions on the priorities of the Bretton Woods institutions and the role of the private sector in global development and finance, and a speech by former Federal Reserve Board of Governors Chairman Paul Volcker on the state of the international monetary system. Committee leadership also formally announced the formation of a new Advisory Council and the transition of Jim Kolbe to Co-Chair, with Co-Chair Bill Frenzel stepping back from nearly two decades of leadership service with the Committee.

In the opening segment moderated by former Congressman Jim Kolbe, Senator John McCain offered a compelling discourse on the value of the international financial institutions (IFIs) and why the United States needs to display greater leadership in global affairs. He spoke of the inseparability between security and an enduring economy, and how the failure of one leads to the failure of both. He cited the current security and economic instability in Ukraine as an example, and congratulated Tunisia for its sound economic reforms contributing to the stability of the country, which stood in contrast to other Middle East countries which lack generalized economic progress. McCain expressed concern that Islamic radicalism will further take root in the region because of the lack of jobs and opportunities. In this regard, he lauded the contribution the IFIs make not only to the economic outcomes of individual countries, but to world security – and encouraged the United States to be more active in leading these institutions.

McCain called for stronger Executive leadership on international economic issues – in particular regional trade agreements – and expressed disappointment that Congress did not pass the IMF quota reform legislation earlier this year, blocking the Fund’s efforts to reform its governance and undermining its legitimacy. He surmised that Americans – in part because of war weariness from the conflicts in Iraq and Afghanistan – seem especially skeptical now about the need for the country to engage internationally, but that policymakers should respond by being more proactive, lest we avoid passive U.S. engagement in international institutions and disappointing U.S. allies.

In the following segment, Inter-American Development Bank President Luis Alberto Moreno, former PIMCO CEO Mohamed El-Erian, and Citigroup Senior Advisor Bill Rhodes discussed the role of the private sector in global development and finance, with BWC International Council Chair Dick Debs moderating the panel. Moreno offered an overview of Latin America’s development challenges. One of the main issues, Moreno said, is that the continent is not connected enough to the world’s economy. Despite several trade agreements, the actual commercial flows and foreign investment levels are relatively low. He also asserted that Latin America lags behind in terms of labor productivity and small and medium enterprise (SME) financing, and needs to double its investments in infrastructure, from 2% of GDP to 4%. He suggested the private sector was best equipped to foster economic growth and job creation, and illustrated Haiti as a positive example where investment poured into Haiti after its devastating 2010 earthquake is make a more profound economic impact than aid flows.

Mohamed El-Erian spoke about shifting global economic trends and their implications and risks. He raised concerns about the structural issues of high unemployment and inequalities across the world to warn that we are missing the opportunity to prepare a better future. He noted that at a time when we need multilateralism and strong U.S. global leadership the most, we have the least: “We have come from a world of ‘Gs’ (e.g. G-7, G-8, G-20) to a world of G-0,” he said. He commented on the incredulity among other countries caused by America’s failure to pass the IMF quota reform legislation, but concluded that the United States should not be the only country to be blamed for the current IMF status quo because European countries are also not willing to give up their current position.

Other major risks El-Erian discussed include navigating the transitions of systemically important developing economies (e.g. China, India, Brazil), global implications of the massive fiscal stimulus occurring in advanced economies, and the notion that markets already seem to be taking on more risk and forgetting lessons learned after the recent financial crisis. He also spoke of opportunity – in particular the ability to make leapfrog economic advances through technological innovation – and urged the United States and the Bretton Woods institutions to approach these advances, along with public-private parternships, with a change in mindset.

Bill Rhodes also assessed the global economic outlook. He expressed skepticism on what some see as the “Eurozone recovery”: high unemployment and lack of growth are still two common problems across the Eurozone, with the exception of Germany, he noted. Rhodes warned that the Parliamentary elections could see the far-right progress and ask for more protectionist policies, which could in turn further diminish the growth of trade flows, already weak in recent years (2% in 2013). Like the previous speakers, he sees strong multilateralism as the best way to mitigate the high level of uncertainty we live in. Rhodes also discussed the paradigm change occurring within the Chinese economy as it shifts from an export-oriented economy to an economy driven by more domestic consumption. Despite the strong leadership he sees from Xi Jinping, the reforms will come with costs, Rhodes said. The 7% growth objective may be difficult to achieve, which in turn might cause social turmoil. Among other challenges such as corruption and pollution, the government will also have to deal with the rise of shadow banking (10-30% of the country’s financial system) if it wants to see its reforms succeed.

The next segment, Priorities for the Bretton Woods institutions, was moderated by Paul Volcker and featured a dialogue with Christine Lagarde and Jim Yong Kim, heads of the International Monetary Fund (IMF) and the World Bank Group, respectively. Building on Thomas Piketty’s much discussed book, Capital in the 21st Century, Kim seized the opportunity to discuss how the World Bank addresses inequalities. The Bank seeks to promote economic growth, but an inclusive one, based on the diffusion of knowledge and the investment in people’s productivity – the two factors identified by Piketty that make people converge wealth-wise. Kim also discussed the internal reforms taking place within the World Bank in order to present their objectives and defend them. He referred to them as being “Management 101”, in accordance with the staff’s long-existing desire for change. The new Global Practices will gather experts in one field in order to share the best techniques and innovations with the different World Bank’s geographical branches. He acknowledged the difficulties of reforming such a large institution but showed optimism and stressed that it will allow the Bank to stay relevant to its clients. In the end, it will also be easier to implement large, transformational projects, a key comparative advantage for the Bank.

Lagarde began by thanking the Bretton Woods Committee for its support toward the IMF quota reform effort. She told the audience that after three years at the IMF, “adapting” was the best word to describe the Fund during this period and its three main business lines – lending, surveillance work, and technical assistance. New dimensions have to be taken into account in the policy-making process: climate change and its fiscal implications, rising inequalities and the risks associated with them, the quality of growth in terms of job creation, etc. After downsizing its resources, the IMF came under huge pressure to lend after the 2007-08 financial crises, and its special lending facilities were designed to match the new circumstances and needs. Second, the Fund has pushed for multilateral surveillance instead of the more classical bilateral country surveillance. Finally, the technical assistance dimension has expanded with 150 member countries now asking for the IMF’s services. Finally, novel circumstances such as the creation of the “troika” (a decision body made of the European Central Bank, the European Commission and the IMF) required the IMF to adapt to meet Europe’s needs through its debt crisis.

During audience question and answer time, Lagarde referred to the necessity of identifying “spillovers and spillbacks”, especially in a context of innovative monetary policies. Lagarde used the example of the Fed policies and how it impacts other countries’ economies (the “spillovers”). Because central banks have a local mandate, they are tempted not to consider those effects. It is the IMF’s task to assess and share these implications, and as needed remind countries that a negative impact on others’ economies will eventually hit them back (the “spillbacks”). This is why discussing domestic economic policies with other nations is important, and the IMF can provide a structure for more effective multilateralism.

The luncheon segment of the Annual Meeting entitled Time for a New Bretton Woods??? featured a keynote speech from Paul Volcker, a former Co-Chair of the Bretton Woods Committee. Volcker presented a brief history of economic multilateralism and the evolution of the international monetary system, and tied it to the current state of global economic “imbalances,” such as the excesses that have occurred both in the U.S. and Chinese economies. He surmised that the evidence of our history indicates that liberal markets support growth, but they are also prone to crises. Volcker explained that beyond economic reasons (the high volatility of currency values for instance), human greed and the lack of regulation were two main problems.

Volcker acknowledged the G20 countries’ efforts to coordinate their policies during and after the recent financial crisis, but also warned that we need to go further and implement continual structural reform of the global economy if we want a much more stable system. “Multilateralism is needed because governments do not debate enough with their counterparts and lack a true worldview,” he concluded. The former Chairman of the Federal Reserve worried that economic cooperation does not go far enough: although the G20 and the IMF reform themselves and adapt, how useful are they if they do not tackle today’s most important, substantial issues? He deduced such multilateralism is harder to achieve nowadays than in the past because more countries are involved. Political innovation and stronger leadership are needed to achieve deep reforms and revive our multilateral framework, he noted.

Read the prepared remarks from former Federal Reserve Board of Governors Chairman Paul Volcker to the 2014 Annual Meeting of the Bretton Woods Committee here.

A few key Bretton Woods Committee leadership transitions were announced during the program. Bill Frenzel will be stepping back from his Co-Chair duties, and Jim Kolbe was formally introduced to the broader membership as a Bretton Woods Committee Co-Chair. Additionally, Dick Debs announced the formation of a new Advisory Council to help provide guidance and support to the Committee as it rises to meet the challenges of today of today and the next generation of Bretton Woods Committee issues. Members of the new Advisory Council include: Mohamed El-Erian; Bill Rhodes; Ruth Porat, Executive Vice President and Chief Financial Officer at Morgan Stanley; Jean-Claude Trichet, Chairman of the Group of Thirty and European Chairman of the Trilateral Commission; and Sir David Walker, Chairman of Barclays.