Economic Underpinnings of Global Governance and Desired Reforms

Abstract

The global economy with ‘non-system’ post-Bretton Woods system continues to be fragile. Amongst the major countries of the world, budget deficit of the federal government of the USA has been increasing every year. The leverage to borrow with ease from both internal and external sources places the US federal government in a unique position. This ‘exorbitant privilege’ of the USA to borrow from rest of the world emanates from the US$ being the dominant international currency. This is, in a way, the result of ‘the White Plan’ that got accepted at the Bretton Woods conference (1944). Along with the budget deficit, the US trade deficit has also been growing over the years, particularly so with China and Japan. The counter balancing trade surpluses of China and Japan have been rising with no system in place to rectify such a trade imbalance between these countries. This is indeed not sustainable, and needs reforms in the existing (neo-liberal) world economic order. The article argues that both the G-20 and the IMFC (IMF) may give a fresh look to the proposals of ‘the Keynes Plan’—as enunciated at the Bretton Woods conference for the desired reforms.