Expected August 1: Time for an Institutional Shake-up

Now that it’s behind us, we can say without hesitation that August is an odd month, which may have prompted writer Sylvia Plath to call it an “odd unequal time.” The Hiroshima and Nagasaki bombs were dropped in August; Saddam Hussein invaded Kuwait. August 1990. On a slightly more joyful note, August 1969 saw the historic Woodstock Rock Festival staged. August 2021 has not disappointed either; This has forced it into open controversial multilateral fault-lines.

The need for comprehensive United Nations (UN) reforms re-emerged this August when the Taliban captured Kabul, after a mysterious deal with the US, parts of which remain secret. Ideally, the United Nations should have been there during this bizarre regime change, but was clearly missing. This is strange, given the conditions surrounding the founding of the United Nations in 1945 after World War II, when representatives from 50 countries met in San Francisco to finalize a charter. The first paragraph of the first chapter reads: “For the maintenance of international peace and security, and to that end: to take effective collective measures to prevent and remove threats to the peace, and for the suppression of acts of aggression or other violations.” For peace…”

It has been clear for some time that something is wrong with the position of the United Nations, given how it has repeatedly failed to deliver on its charter promises. To be fair, the United Nations has some decent work to its credit and the 12 Nobel Prizes won by its agencies and personnel are a testament to it. Nevertheless, its chronological structure – such as the Security Council hardened over time, oblivious to a changed world – and its inability to act against rogue regimes raise questions about its relevance. The failure of the United Nations to enforce vaccine equity during the past 18 months has only served to intensify that debate. But hope emerges anew: UN Secretary-General Antonio Guterres is calling for a reset of the agency and has released a document called ‘A Common Agenda’ to address the challenges of the future.

August also had a special relationship with former US President Richard Nixon: the Watergate scandal forced him to resign on 9 August 1974. Three years before that, on August 15, 1971, Nixon made another landmark announcement: he cut the dollar cord from gold. known as the Bretton Woods Exchange System. This single act is believed to have caused a stalemate in the US during the 1970s, but once these calmed down, the dollar solidified its position as the world’s reserve currency, as did Bretton Woods. was decided in. This was a momentous occasion for the international financial system.

Another important moment may now come upon us. The dollar’s dominant position as the world’s reserve currency is under threat and the pandemic has heightened that risk perception. A study by the International Monetary Fund (IMF) shows that the share of the dollar in the foreign exchange reserves of all central banks has fallen from about 71% in 1999, when the euro was launched, to 59% in September 2021. While the world has gradually moved to a multiple reserve currency system, there is no certainty whether a single currency – be it bitcoin or the yuan – will ever replace the dollar.

The Bretton Woods Dialogue was held to discuss global economic coordination and reconstruction after World War II. Although the meeting was attended by over 700 delegates, Harry Dexter White of the US and John Maynard Keynes of the UK monopolized the proceedings. All currencies were made convertible into dollars, with gold having a fixed rate of $35 an ounce. But the American economy soon ran into problems. Rising public debt to finance the Vietnam War, a shrinking share of global output due to post-war reconstruction in Germany and Japan, a growing balance of payments deficit, and the Federal Reserve’s monetary policy left the dollar overvalued. Nixon had no choice but to wield an axe.

The Bretton Woods meetings also established two multilateral institutions: the World Bank and the IMF. The bank recently announced the dismantling of its Doing Business rankings following an alleged manipulation in the process following an external audit. In the cross-hairs is IMF Managing Director Kristalina Georgieva, who in her previous role at the World Bank has been accused of pressuring allies to boost the rankings of China and Saudi Arabia. Nobel laureate Joseph Stiglitz has run for his support: he sees a hatchet job by conservatives, who are outraged by Georgieva’s support for poor countries during the pandemic and her efforts to reinvigorate the IMF on climate change, conservatives a garden for (bit.ly/3AixaAeThe truth will someday be revealed, but it focuses on how these institutions need profound reforms, whether in their internal practices, their unequal shareholding structures, or by politicians on Washington’s Capitol Hill. How their operating philosophy is determined.

Op-ed signed by six world leaders (bit.ly/3AlDqH7) recently stood for Multilateralism 2.0: “We must therefore modernize our multilateral institutions, make them fit for purpose and better equipped to deal with global and cross-generational challenges.” The first step towards reviving multilateralism would be to erase the traces of benign unilateralism that hardened in the victorious aftermath of World War II. The upcoming COP-26 will be the first test.

Rajrishi Singhal is a policy advisor, journalist and author. His Twitter handle is @rajrishisinghal.