Perspectives on better global economic governance (3)
by
KEMAL DERVİŞ*

With the transformation of the IMFC into a governing council of ministers, the role of the IMF board would change. It would no longer be a "policy maker"; it would rather advise and supervise. The board would continue to approve individual programs, but do so reflecting a systemic rather than a case-by-case approach. The council would make policy and decide on the types of programs and facilities, with the board checking whether individual programs meet the broad parameters of the policies set. The managing director would continue to chair the board, while the council would be chaired by an elected and rotating president.

In addition to these formal governance mechanisms, the IMF's legitimacy and effectiveness would benefit from more institutionalized peer review and opening to broad expert advice. It would be desirable to establish a "policy advisory group" made up of 15 to 20 eminent outside experts, geographically diverse and drawn from academia, civil society and people with proven track record in the private sector -- and NOT all from the financial sector. This group would have to work closely with the evaluation department, but it would focus on the future and make recommendations on specific policies and programs. The recommendations would not replace the normal functioning of governance arrangements, but the work of the group would provide a forum for vigorous debate, the possibility of thinking about unorthodox approaches and the inclusion of different perspectives in the policy debate. Too often in the past the debates in the IMF have had too much of a purely financial sector perspective, narrowing their scope in a manner that has made it more difficult to fully appreciate the weaknesses in the financial sector itself and making it harder for the IMF to communicate more broadly with civil society and all kinds of stakeholders.

Global financial regulation

Finally, the communiqué of the G-20 Washington Summit held in November called on the IMF to work with an expanded Financial Stability Forum and other regulatory and standard setting bodies in advancing the financing regulation agenda. The extent to which the IMF itself should be involved in financial regulation is an ongoing debate, not dissimilar from the debate taking place inside nation states: Should financial regulation be entrusted to national central banks or should it be with a separate financial regulatory authority? What is not in doubt is that while financial regulation needs to be anchored nationally, much stronger international cooperation will be needed in the future. This calls for making regulatory and standard setting bodies such as the Basel Committee and the Financial Stability Forum, working in cooperation with a reformed and more effective IMF, much more inclusive and participatory.

Conclusion

There is a vast agenda of reform ahead of us which should be debated, designed and implemented carefully. The L-20+ London meeting at a time of threatening crisis can give a strong impetus to reform of the actual global economic governance, without which decisions taken at various summits remain symbolic and lack follow up and resources devoted to their implementation. The L-N or G-N type meetings -- and an annual L-N meeting should be institutionalized -- can complement and reinforce the reform dynamic in the international institutions and their more binding and more formal decision making processes. Global issues management requires both types of governance and networking mechanisms. The "best," even as a target, will evolve with time. The challenges the world faces are huge, but being ambitious should not make us forget that action will have to be based on compromise and, to paraphrase a well-known saying, that "the best can be an obstacle to achieving the good."