REBUILDING THE INTERNATIONAL MONETARY ORDER: THE RESPONSIBILITY OF EUROPE, JAPAN AND THE UNITED STATES

One of the principal conditions to assure the long-term development and success of the liberal international economic and political order is the return to a stable, equitable and rule-based international monetary order. This is in the interests of large and small, rich and poor and "emerging" countries alike. In fact, the absence since the 1970s of a universal monetary order and the prevailing monetary nationalism and regionalism at a time of globalization and global finance have been responsible for a lack of equitable adjustment mechanisms and of effective checks and balances on financial and fiscal excesses in the world economy. The recurring financial crises have been hurting the economies not only of the poorer but by now also of the richest economies. The task of designing, negotiating and implementing a new international monetary order is clearly a combined political and economic and security challenge. A possible approach for a new design could be inspired by the original "European Monetary System" (EMS). The responsibility for this initiative for an "Extended EMS" belongs first and foremost to the three principal market economies: the United States, the European Union and Japan. From the start this "Extended EMS" would benefit the entire world economy - including the major new powers such as Brazil, China and India, and the weaker economies that suffer the most from the recurring financial crises. In the long run it would also be open to new members in order to become a truly universal system. But it is only the commitment and active participation of the three main pillars of the liberal international economic order, the US, Europe and Japan could be the guaranty of success: the absence of either one of the three would inevitably lead to failure with dire consequences for the outlook for an integrated and prosperous world economy.