It is a concern that IMF reform appears to be low on the G20 agenda, particularly as the weakening grip of the US over the global economy makes change easier. The era of the unipolar world dancing to the tune of the Washington consensus lasted a scant two decades between the collapse of communism and the collapse of Lehman Brothers.
Proposal 4: Make the global financial system more progressive
The humbling of Wall Street and the City of London has made them dependent on support from the taxpayer and opened up the prospect for reform. The most pressing need is for action against tax havens, not just because the money lost to national exchequers could be better used but because the big financial institutions can move offshore if threatened with tougher regulation. There seems to be greater G20 unanimity on tax havens than on any other issue, and the summit should insist on tax havens providing information to any government that asks for it. The G20 should also back a currency transaction tax — set low initially — that would provide the money to hit the UN millennium development goals.
Proposal 5: Tougher global regulation
Brown should forge ahead with his plans for an international college of supervisors to provide cross-border oversight of multinational banks. The G20 should start work on an international agreement to split retail and investment banks — an updated form of the Glass-Steagall reform in the US in the 1930s. The capital adequacy regime for banks should be toughened up; credit-rating agencies should be made statutorily independent of the companies they monitor; the more exotic forms of derivatives products should be subject to the same sort of licensing regime as new drugs. We will know governments are really serious about reform when they link the pay of regulators to the pay of bankers.
Larry Elliott is the Guardian’s economics editor.
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