Fifty Years After Bretton Woods The Future of the IMF and the World Bank Proceedings of a conference held in Madrid, Spain September 29-30, 1994 James M. Boughton and K. Sarwar Lateef Editors International Monetary Fund World Bank Washington • 1995 ©International Monetary Fund. Not for Redistribution <91995 lnternationalMonetary Fund and World Bank Reprinted June 1995 This book was designed and produced by the IMF Graphics Section. Front cover photographs: The Mount Washington Hotel, Bretton Woods, New Hampshire, U.S.A., IMF archives: and Palacio Municipal de Congresos, Cam po de las Naciones, Madrid, Spain, IMF photo by DenioZara. Cataloging-in-Publication Data Fifty Years after Bretton Woods : the future of the IMF and the World Bank : proceedings of a conference held in Madrid, Spain, Septem­ her 29-30, 1994 1 jamesM. Boughton and K. Sarwar Lateef, editors. -Washington:International Monetary Fund :World Bank Group, 1995. ISBN 1-55775-487-X ı. International finance-Congresses. 2. International Mone­ tary Fund- Congresses. 3. World Bank-Congresses.I. Bough­ ton, james M. Il. Lateef, K. Sarwar. HG388l.F4 1995 Price: US$21.00 Please send orders to: InternationalMonetary Fund, Publication Services 700 19th Street, N.W., Washington, D.C. 20431,U.S.A. Tel.: (202) 623-7430 Telefax: (202) 623-7201 Internet: [email protected] ©International Monetary Fund. Not for Redistribution Foreword The Bretton Woods conference of July 1944 was of incalculable impor­ tance for the world economy. It demonstrated and gave life to a remark­ able spirit of international economic cooperation; produced agreements that made possible the reconstnıction of war-torn economies and an un­ precedented growth of output and trade in the following decades; and created two institutions, which we now have the honor to lead, that have been central in the effort to achieve those goals. It was thus natural for the International Monetary Fund and the World Bank to join forces to help their membership commemorate the fiftieth anniversary of that important milestone in the evolution of the world economy. That this anniversary was a time for celebration was clear, but more importantly it was an opportunity for reflection and for reassessing the roles of our institutions as we approach the twenty-first century. The Cold War has ended, and with it have vanished the divisions that long prevented the Fund and the World Bank from becoming truly global in scope and in membership. International markets in goods and financial assets have grown dramatically. Throughout much of the developing world, a "silent revolution" has brought increasing acceptance of the benefits of financially disciplined and outwardly directed economic policies. The operations, though not the essential purposes, of the Fund and the Bank have changed considerably over the past SO years to re­ spond to these developments, but much more adaptation is and will continue to be required. We chose the occasion of the 1994 Annual Meetings of the Boards of Governors of the Fund and the World Bank in Madrid, Spain, to hold a conference on the future of the Bretton Woods institutions that would bring together policymakers, academic economists, representatives of nongovernmental development organizations, and many of the journal­ is ts who have covered the institutions over the years. For two days be­ fore the meetings officially opened, several hundred of these eminent individuals gathered at the conference to speak, to listen, and to dis­ cuss. In our view, they succeeded wonderfully in stimulating thinking and in bringing good and practical ideas to the fore. At the end of the conference, while there may not have been agreement on all of the key issues, we believe that, as this volume shows, we were in many ways closer to a cansensus than might have been expected. We would like to take this occasion to thank all of those who came from around the globe to participate in the Madrid conference and who contributed to this book: the keynote speakers, the panelists, the session chairs, and members of our distinguished audience. Our thanks also to the staff who made it all possible. U nder the general directian of iii ©International Monetary Fund. Not for Redistribution iv Fareword Leo Van Houtven and Armeane M. Choksi and with the assistance of many others &om the Fund and the World Bank, James M. Boughton and K. Sarwar Lateef organized and ran the conference and were the principal editors of this volume. Finally, we offer our heartfelt thanks to the Spanish Government, which not only was our gracious host in Madrid but whose officials also participated so actively in the conference. MICHEL CAMDESSUS Managing Director International Monetary Fund LEWIS T. PRESTON President World Bank Group ©International Monetary Fund. Not for Redistribution Preface This voluıne is the record of a conference held at the splendid setting of the Palacio Municipal de Congresos, Campo de las Naciones, Madrid, Spain, on September 29-30, 1994. The conference was spon­ sored jointly by the International Monetary Fund and the World Bank, and it was held in conjunction with the Annual Meetings of the Boards of Governors of the two institutions. All delegates, special guests, staff, and visitors attending the meetings were invited to attend the confer­ ence and to participate in the general discussion; that several hundred did attend made the conference a great success. The speakers were cho­ sen from among the policymakers, academic economists, and other in­ fluential teaders from all regions of the world who have been actively involved in the key issues facing the Bretton Woods institutions. The papers and statements included in this volume are based on the presentations made at the conference; each chapter corresponds-in chronological order-to a conference session. In addition, Chapter 1 in­ cludes an overview of the d iscussion on major issues; in many cases, the same issue arose in more than one session, and the overview is intended to help guide the reader to the appropriate chapters that follow. The contributions took a variety of forms: keynote addresses, formal papers, panel discussions, statements by session chairs, and comments and questions from the audience. Where no written statement was sub­ mitted, the text has been derived from the verbatim transcript When presentations were not made in English, the text was derived either from versions submitted by the authors or from translations made by the conference secretariat.1 Regardless of their source, all statements have been edited with the aim of assembling a comprehensive perma­ nent record, and several authors revised their statements after the con­ ference to clarify specific points. The views expressed in this voluıne are those of the individual au­ thors and participants, subject to any misinterpretation that might have crept in through the editorial process, for which we alone are responsi­ ble. The opinions expressed are not necessarily those of the Interna­ tional Monetary Fund, the World Bank, or any institution with which an individual author is affiliated. Both the conference and this voluıne were the product of many peo­ ple in addition to the authors. We extend a special note of thanks to 1The statements of Felipe Gonzalez and Pedro Solbes Mira were translated from Span­ ish by the secretariat. English translations of Liu Zhongli's statement (delivered in Chi­ nese) and that of Pedro As pe Armella (delivered in Spanish) were provided by the minis­ ters' offices. Allother presentations were made in English. V ©International Monetary Fund. Not for Redistribution vi Preface Armeane M. Choksi and Leo Van Houtven for their guidance in direct­ ing this project; to Angel Torres, our liaison with the Spanish authori­ ties, and to Joaqufn de la Hemin and Isabel Riano of the Spanish Ministry of Economy and Finance; to Chris Clarke for his tireless and invaluable service at every stage, including as rapporteur for the conference discussion; to Sonia Benavides, Mary Helen O'Brien, and Kristen Schubert for their work on the conference and on this volume; to Paul Rabe and Marta Vindiola for greatly valued and varied assis­ tance; to the members of the Fund-Bank working group that was re­ sponsible for the initial planning of the conference, notably including (in addition to ourselves) Morris Goldstein and Ian McDonald, from the Fund, and to Joehen Kraske, Timothy Cullen, and Michael Walton, from the Bank; to Erik Friis, Patricia Davies, Enrique Alejo GonzıHez, and the rest of the Annual Meetings secretariat and the Madrid '94 Task Force for their assistance in the smooth running of the conference; and, finally, to Elin Knotter for her skillful job of s tyle editing the manuscript and to Tom Walter for seeing the book through to publication. ]AMES M. BOUGHTON K. SARWAR LATEEF ©International Monetary Fund. Not for Redistribution CONTENTS FOREWORD iii PREFACE V CONFERENCE PARTICIPAN1S xi 1 INTRODUCTION AND ÜVERVIEW 1 James M. Boughton and K. Sarwar Lateef The Issues 6 Strengthening Surveillance and the International Monetary System 7 Economic Reform and Conditionality 9 Management of the Transition to a Market Economy 12 Sustainable Poverty Reduction 13 Finance for Development 14 Governance of the Institutions 15 Conclusions: The Global Roles of the Bretton Woods Institutions 17 2 GLOBAL PERSPECTIVES ON THE lSSUES 21 M. Saifur Rahman 21 Michel Camdessus 24 Lewis T. Preston 27 Felipe Gonztilez 31 3 THE IMF AND THE WORLD BANK IN AN EvOLVING WORLD 35 Manmohan Singh 35 C. Fred Bergsten