IMF Annual Report and reform

[Picciotto, Sol]

As Chris Burford points out, the continuing financial panic has finally forced world 'leaders'
to start talking about ways to improve regulation of international capital flows. However, they
appear unable to come up with anything they could agree on other than a vacuous commitment to
Strengthening the Architecture of the Global Financial System (the title of the report by
finance ministers to the G7 last May). This seems to be the point about the Third Way: when it
comes to concrete proposals going beyond neo-liberal deregulation, they come unstuck.

One proposal of interest is a paper which has been mentioned in the press, by John Eatwell
(=Lord Eatwell, Labour peer, former advisor to Neil Kinnock, but I think less in favour with the
Blairites) and Lance Taylor, on International Capital Markets and the Future of Economic Policy.
They argue that the last 20 years has shown that complete liberalisation of capital flows is
inefficient, due to volatility and contagion, and suggest the setting up of a World Financial
Authority, which they interestingly propose should also supervise the IMF and WB ! They also
state "Campaigns to rewrite the IMF articles to require full capital market liberalisation by
all nations, and OECD proposals to write full capital liberalisation requirements into a
multilateral agreement on investment, are without sound intellectual foundation and should be
abandoned".  Yet the MAI negotiations are due to reopen next month, and the word is that the
negotiators are still gung-ho for it.

This paper was produced as part of a series on this broad issue by a research project at the New
School for Social Research in NY, and can be found on their website at
www.newschool.edu/cepa/papers

cheers

sol

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Sol Picciotto
Dept of Law
Lancaster University
Lancaster LA1 4YN, UK
phone (44) (0)1524-592464
e-mail s.picciotto at lancaster.ac.uk

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