Summary of a presentation by Peter Venton to the Toronto Region Branch of the World Federalist Movement of Canada, Nov 16, 2022.

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Responding to the financial distress of the Great Depression and World War II, nations came together in 1944 at a conference in Bretton Woods, USA, to create an international monetary and financial system that fostered cooperation rather than the trade wars of the interwar period due to leaving the gold standard and currency devaluations. To achieve financial stability, full employment and open international trade they established the:

• International Monetary Fund (IMF) to promote stability in exchange rates. The IMF established the US
  dollar as the common currency for trade and participating countries’ currencies were pegged to it.
  Countries were required to subscribe to the IMF’s financial capital giving them rights to borrow foreign
  exchange from the IMF if they needed to balance their foreign exchange payments with receipts. Voting
  rights were assigned based on the amount of capital a country subscribed to the IMF.
  • International Bank for Reconstruction and Development, and the International Development Association
  (now known collectively as the World Bank). The World Bank now gives loans and grants to developing
  countries to ease poverty, environmental degradation and communicable diseases. During the Covid-19
  period, the bank allocated $10 billion to supply 78 countries with vaccines.
  • General Agreement on Tariffs and Trade (now the World Trade Organization (WTO)). The WTO reviews
  national trade policies for coherence and transparency, and freedom from tariff and non-tariff barriers.
  WTO provides a forum for settling disputes over trade agreements and cooperates closely with the IMF and
  the World Bank.

Key changes to the original design of these institutions since 1970:

• The Bretton Woods currency peg to the US $ ended in 1971.
• The 1970’s neoliberal capitalism movement, deregulating financial institutions and privatizing government programs and infrastructure, led to financial instability. Since 1985 recessions have been caused by instability of investment and financial speculation in assets, including the:
• early 1990s U.S. Savings and Loan crisis;
• collapse of Japan Inc. after the stock market crash of 1990, and the mid 1990s Asian crisis;
• technology boom/bust cycles at the top of the millennium; and
• unprecedented rise and collapse of U.S. residential real estate in 2007-2008 and the ensuing financial crisis in the US that spread around the world.
• The threat of climate change was recognized in 1992, and started to become a challenge to capitalism.
• The UN’s 2015 Sustainable Development Goals included priorities for climate stabilization and resilience, and reducing inequality within and amongst nations.

Needed Reforms To The Institutions

• Add climate stability and resiliency, and reduced inequalities within and amongst nations to the international institutions’ goals.
• Realign unproductive private finance to funding green infrastructure.
• Massively fund world and regional development banks to make grants and long term loans responding to
  war and climate disaster recovery.
• Eliminate the $6 trillion/year of fossil fuel subsidies which the WTO was supposed to be eliminating.
• Eliminate the trade restriction of intellectual property rights.
• WTO actually behave as the independent mediator to resolve bilateral trade disputes.
• Create democratic UN control over the WTO, such as through the World Federalist Movement’s proposed
  “UN Parliamentary Assembly.”
• Insistence on full transparency in all international financial transactions.
• Introduction of an international financial transaction tax to strengthen the UN and support realization of the UN Sustainable Development Goals.
• Close down tax havens that enable corporations and individuals to avoid tax.
• Develop under the UN a global system of company registration to prevent the flight of capital in search of minimal taxation.
• Develop a global financial regulatory system.

What are the prospects of achieving these reforms? Zachary Carter’s recent book The Price of Peace: Money, Democracy and the Life of John Maynard Keynes made a couple of key points:

• Its time for a “Green New Deal” with public investment to combat climate change.
• Mainstream economists are now starting to talk of moving beyond neoliberalism and holding a new Bretton Woods conference to replace the global order of the 1990s with a new harmony of international
  interests.
• But the question remains of how will the interests of the majority of American people supplant the interests of the global elite?

Q&A Key Notes

Points Arising During The Question & Answer Period

• Mark Carney, on behalf of the UN, has had a hard time directing investment towards green infrastructure due to investor interest in fossil fuels. It was suggested in Canada’s Senate that the boards of directors of
  investment companies should be accountable for their impacts on climate change. But there has been a lot of push-back since its hard to get private investors interested in projects with very long term investments and lower ROI than short term investments. Long term projects, such as for the UN’s Sustainable Development Goals or green infrastructure require investment by entities such as the World Bank that is not looking for profit and can think long term. So governments need to push for IMF, World Bank and WTO reform.
• The IMF could be more effective if it changed the country voting system to make it proportional to population rather than financial strength.
• Elimination of fossil fuel subsidies requires governments to increase royalty charges and/or taxes. Such increases would lead to price increases and inflation, and might induce wage and price controls (as was done in WWII to avoid profiteering by corporations). Norway, following the example of Alberta’s former “Heritage Fund” of a few decades ago, has built up a huge fund for public expenditures through better pricing of the extraction of fossil fuels in Norway.
• Performance measures need to be broader than GDP (which counts military expenditures as positive elements, despite its destructiveness). The USA has a “General Progress Indicator” including social indicators, both positive and negative. It considers variables such as economic inequality, pollution, land degradation. There are a number of such broader indicators. Carbon footprint would also be a good part of any such indicator.
• The UN could implement an international currency transaction tax, though it would impede currency speculators.
• Lower corporate tax and less progressive income taxes have led to huge concentrations of wealth. Corporate after-tax profit increases are not reinvested in new capacity since wages have not allowed demand to increase accordingly. So surplus corporate wealth gets re-invested in non-productive assets driving up prices, particularly housing prices. The reduction of capital gains taxes has enabled creation of more wealth by those who already have it.
• Recently there has been negative intergenerational progress as evidenced by adult children unable to get decent jobs and still living with mom and dad. Fortunately the younger generation is more inclined to be progressive and so they need to vote to get politicians to raise taxes. They should engage in discussions such as these, that are not found in the media.
• Regarding Chrystia Freeland’s recent suggestion of trading with friendly countries. Free trade has been anegative for a lot of countries, once countries chose full employment as a major social goal. There needs to
  be a balance between democratic goals and international trade. Unfair trade came from letting China into the WTO in 2000, taking jobs from North America. Keynes said we should try to make sure most production is done domestically and avoid international trade.

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