Bretton Woods II

Robert Zoellick, president of the World Bank Group, has called for an accord to be formed that would be Bretton Woods II to promote pro-growth reforms, open trade and exchange rate co-ordination. To do this, he has pointed a few pointers for the G-20.

1. The G20 countries need to agree on parallel agendas of structural reforms, not just to rebalance demand but to spur growth. China, for example, should transfer attention from export industries to new domestic businesses, and the service sector, provide more social services and shift financing from oligopolistic state-owned enterprises to ventures that will boost productivity and domestic demand.
2. G20 countries need to agree to forgo currency intervention.
3. Emerging economies would then be able to rely on flexible exchange rates and independent monetary policies. Capital controls can still be used to curb short-term hot money flows.
4. G20 also needs to help the private sector development in developing countries.
5. A co-operative monetary system needs to be built to reflect emerging economic conditions. This system should consider using gold as an international reference point of market expectations about inflation, deflation and future currency values.