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System Malfunction

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System Malfunction

The Global Economy Is Rife with Imbalances that Cannot Be Fixed under the Present International Monetary (Non)System

IMF,

5 min read
5 take-aways
Audio & text

What's inside?

Economist William R. White presents a persuasive argument for harmonizing individual countries’ monetary policies.

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Editorial Rating

9

Qualities

  • Eye Opening
  • Background
  • For Beginners

Recommendation

The pre–World War I gold standard and the post–World War II Bretton Woods agreement were the last exemplars of a globally coordinated monetary system. Today, countries pursue their own fragmented interests, such as by stimulating their economies with lowered interest rates, without regard to the impacts on other nations or on their own long-term interests. Economist William R. White explains how “the present international monetary (non)system” works against the good of the global economic community. getAbstract recommends this brief but worthwhile article to policy makers, who should heed White on the need for a new postcrisis monetary system.

Summary

National monetary policies have led to potentially dangerous global imbalances that could spark future crises. These disparities will continue without an overarching monetary system to which all economies adhere. The International Monetary Fund communicates its concerns to its members about policies that run counter to the interests of the global community, but these admonitions have little effect, particularly on the larger economies.

Current account imbalances – “the difference between what a country spends abroad and what it receives from foreign sources” – are dangerously skewed. They represent net capital...

About the Author

William R. White is chairman of the OECD’s Economic and Development Review Committee.

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