Resetting the International Monetary(Non)System José Antonio Ocampo – Excerpts’: Reforming the System – The Major Issues
7.1 The Major Issues
The recent North Atlantic financial crisis showed how dysfunctional the current international monetary and financial architecture is for managing today’s global economy, and led to calls to reform it.
Under the initiative of the G20 and with the Financial Stability Board, G20 countries to re-regulate finance, this process has been going on at an unprecedented scale in the industrial world in recent years, issues have been partly dealt with in recent years in the context of the IMF and, in that sense, as part of global monetary reform.
The most significant reforms since the crisis have been the largest issue of Special Drawing Rights (SDRs) in history in 2009. Reforms of the international monetary system should obviously take into account the characteristics of the system that emerged at Bretton Woods.
The original Bretton Woods system had four basic features:
- A global reserve system based on a dual gold–dollar standard.
- A system of fixed exchange rates, but adjustable under ‘fundamental disequilibria’.
- Convertibility for current account transactions, which would be achieved in a gradual way for countries that lacked it, but the capacity of countries to manage capital flows to insulate them from speculative capital movements and, therefore, the absence of any commitment to capital account convertibility (liberalization).
- Official balance-of-payments support, financed by quotas, but limited in size, as they were supposed to finance only current account deficits.