On May 19, 2015 over 150 Committee members and friends – including leaders from both public and private sectors as well as civil society – gathered at the World Bank headquarters in Washington D.C. for the 2015 Bretton Woods Committee Annual Meeting. This year’s program theme – “Bretton Woods and Global Growth: Evolving Stories” – focused on the shifting state of the global economy and the future of multilateralism and the Bretton Woods system. Speakers and participants discussed the current trends in global growth and development and reconsidered the role of the Bretton Woods institutions within the evolving global ecosystem.
The first segment featured a moderated discussion between U.S. Treasury Secretary Jacob J. Lew and Wall Street Journal Chief Economics Commentator Greg Ip. Speaking on global growth, trade, relations with China, and, more broadly, U.S. leadership in multilateral economic institutions, Lew spoke bluntly of several challenges and opportunities for the global economy. He expressed the views of U.S. Treasury that, while moving in the right direction after years of pressure, China’s renminbi still remains somewhat artificially undervalued. He was hopeful about passage of Trade Promotion Authority (TPA) from Congress and a future Trans-Pacific Partnership (TPP) trade agreement, but warned that the insertion of enforceable currency discipline as a requirement would be a “poison pill” for TPP legislation. Lew also conveyed his support for the 2010 IMF governance and quota reform package, indicating that the tone of the quota reform conversation in the U.S. Congress has shifted in the right direction, and passage has become a question of “when” rather than “whether.”
In response to audience questions, Secretary Lew voiced his support for the emerging Asian Infrastructure Investment Bank (AIIB), stating that there was a great need for infrastructure development in Asia, and hoped that the AIIB would partner with existing multilateral institutions to ensure good governance and safeguard practices. When asked about his stance towards the use of cryptocurrencies, Lew expressed his broad support for such innovation, but only when the goods and services for which they are being used are legal.
In the second segment, Jim Kolbe, Co-Chair of the Bretton Woods Committee, interviewed Sri Mulyani Indrawati, Managing Director and Chief Operating Officer of the World Bank Group on the Bank’s priorities in a changing development landscape. The center of the global economy has shifted, Indrawati said, as has the face of global poverty. Middle income countries such as China and India compromise more than one-third of global GDP, yet also hold nearly three-fourths of the world’s impoverished within their borders. The World Bank needs to adjust its methods to better address the pockets of poverty that exist within these middle-income countries, as the methods used in the poorest countries are often not as applicable or effective in middle-income countries. She indicated that global poverty has been cut in half since 1990, but that makes the remaining impoverished harder to reach. Additionally, she stated that the Bank’s diverse clients are seeking development learnings from across the globe, which has driven the Bank to reorganize from its more traditional regional approach to align against global practices. She acknowledged that “change has been radical” and Bank leadership can always manage it better, but the Bank is rebuilding to provide more transparency in decision-making as well as how it measures performance.
In the next segment, moderated by Bretton Woods Co-Chair James D. Wolfensohn, IMF Managing Director Christine Lagarde called for a “New Multilateralism” to address the complex challenges facing the global economy. Lagarde described the current economic climate as growing moderately, but unevenly. She believed that macroeconomic risks were lessening on the whole, but that other risks had shifted across sectors. She described the “high-high, low-low” scenario – a difficult situation where an economy suffers from high unemployment, high debt, low inflation, and low growth – as particularly problematic in several emerging market countries. Lagarde urged support for demand wherever possible, calibration of fiscal policy to balance growth needs and minimize debt, and implementation of structural reforms across products, services and labor markets. To strengthen global growth and cooperation Lagarde’s call for a “New Multilateralism” featured four dimensions: renewed commitment to global public good; greater inclusion of new networks of influence (e.g. non-state actors, new media); partnerships between multilateral institutions, including AIIB; and revitalization of the existing IFIs. She also gave a special thanks to the Bretton Woods Committee for its strong support of the 2010 IMF quota reform legislation which has yet to pass the U.S. Congress.
The fourth segment featured a panel of experts on global growth and development and was moderated by International Finance Reporter for the Wall Street Journal, Ian Talley. The panel began with William R. Rhodes, President and CEO of Rhodes Global Advisors and a member of the Bretton Woods Committee Advisory Council, making five points about the current state of the global economy: an over-reliance on central banks’ liquidity and the implications this will bring; the continued fragility of the post-crisis financial system (with Greece being the Achilles heel); the danger of mass youth unemployment (especially in the Eurozone); the importance of a trade deal to global growth (and U.S. foreign policy); and the tendency to underestimate both the challenging transition the Chinese economy is undergoing and the role it seeks on the international stage.
Next, Mahmoud Mohieldin, Corporate Secretary and President’s Special Envoy of the World Bank, gave perspective into the Bank’s enormous data and measurement challenges, as well as global leaders’ efforts to wind down the Millennium Development Goals (MDGs) and embark on the new Sustainable Development Goals (SDGs). Mohieldin noted that with 17 goals, 169 targets, and approximately 300 indicators being developed for the SDGs, coupled with the challenge that 57 countries have insufficient development data, tracking results will be a daunting prospect. Finally, Nancy Birdsall, President of the Center for Global Development, gave her “three wishes” for the World Bank: that the World Bank would return to the original vision of its founders as a collective credit cooperative; that it would create a new mandate and instruments to better tackle transnational issues such as disease eradication and climate change; and that the United States would “become a better parent” when working with the World Bank. On the latter, she urged for less “benign bullying” by the U.S. in its relations with other Bank members, and advocated for a more persuasive, cooperative and nurturing stance. A lively discussion among the participants followed in which the relevance and merits of the International Development Association (IDA) within the context of the World Bank were examined.
In the final segment, Chair of the Bretton Woods Committee’s International Council Richard A. Debs moderated a discussion between investor and philanthropist George Soros and Committee Co-Chair James D. Wolfensohn on the future of the Bretton Woods System. Soros depicted the international order as a state of “disorder,” and described the immense impact and implications of the global financial crisis on the Washington Consensus. He remarked that the Bretton Woods institutions have “lost their monopoly,” and the world has broken into two “rival camps.” The extent of cooperation between the new “Beijing Consensus” (e.g. AIIB, etc.) and the existing Western-led institutions will have a profound impact on the world order. Soros also expressed his belief that a stable economic and geopolitical future rested on the transition of China from a production and export-based economy to a domestic consumer and import economy – a transition that the Bretton Woods Institutions and the U.S. should help facilitate by allowing the renminbi to join the IMF’s basket of currencies. In return, China should make concessions to reform including accepting the rule of law. In Soros’ view, this will create a “binding connection” between the two camps and is necessary to avoid the possibility of China aligning itself with Russia and the real threat of a third world war.
Wolfensohn then responded with observations and trends about the changing demographics of the global population, the emergence of middle-income countries, (where most of the world’s poor will reside) and the role of technology in connecting the world. “We are at a moment, a period of change, which is unlike anything we’ve seen before,” he remarked. These global changes are creating a “new reality” for the next generation with an entirely new set of issues to address. Wolfensohn advocated for a “long-term view” and noted that the World Bank can play an important role in making the world more conscious of such mega trends especially in regards to shaping future investment in education, healthcare and infrastructure systems. He challenged each participant to educate and prepare future generations to identify where the issues are likely to be and ways in which they can address these trends.
Please click here for audio of Segment 5.
Please click here for the written transcript of Bill Rhodes' opening remarks.
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