Reform of the International Economic System

Abstract

Introduction The current international economic system, which was first established in the mid-1940s, contains three key features. First, the United States is a dominant leader in designing and enforcing the international economic rules. Second, the US dollar has been the cornerstone of the international monetary system, both before and after the breakdown of the Bretton Woods system. And finally, three international organisations—the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO)—are responsible for maintaining international economic order. For more than half of a century, this system facilitated steady growth of the global economy. Recently, however, there have been growing calls for reform of the international economic system. Two important events, in particular, have strengthened these demands. The first has been the ascendancy of the emerging market economies, which naturally calls for some of these to move from the periphery to the centre-stage of international economic decision making. The second was the sub-prime crisis in the United States, which has raised serious questions about the future international roles of the United States and the US dollar.