One of the difficulties that British politicians have on the international monetary circuit is that they think they matter. Their views will, of course, be listened to politely. Occasionally some British initiative, perhaps for debt relief in Africa, will generate some resonance and lead to more general action. But I have seen generations of British politicians - from Denis Healey, through successive Tories to Gordon Brown - proudly trotting out their own plans for monetary reform.
The plans were dutifully reported by the British press as though they were terribly important, and then gently ignored by everyone else. The Treasury officials used to dub the proposals the GBI, the Great British Initiative. We always go to international monetary meetings with a GBI and always come out with the same result: nothing much comes of it unless the Americans pick up part of the idea and run with it. Then it happens.
To say that is not to deny that Britain has influence in international monetary affairs. It does. But the influence comes from the perceived successes of UK economic policy - the best example being privatisation - and the importance of the City of London's markets. It does not come from the plans cooked up in Whitehall and presented by a politician, however effective that politician might be, and however important he is thought to be at home. Any leverage we have is through the US. If the IMF and World Bank are to be reformed, and other changes to be made in the world financial architecture, the UK will have a modest walk-on role; nothing more. Harsh, but true.
Do these bodies need reform, anyway? There is a great temptation, particularly among politicians but also among business leaders, to want to reorganise. Whenever a new government gets in it wants to reorganise Whitehall - glue ministries together or pull them apart. Exactly the same thing happens when a company appoints a new chief executive. Some divisions are sold and others are bought, while those that are left are reorganised. Sometimes these revamps work, and sometimes they don't. Meanwhile, reorganising always causes disruption and carries costs.
That does not mean that the IMF and World Bank are ideally designed at the moment. They are not. But it does mean that if you are going to restructure these two organisations you have to be very careful that you are gaining more than you lose. There are changes that would be helpful, but they have to be fed in very carefully. While it would be wrong to damn the British ideas before they have been properly presented and considered, they don't "feel" right.
There does, for example, seem to me to be a powerful case for some form of privatisation of the World Bank. It catches a lot of stick for applying the wrong criteria on its mainstream lending - usually that its terms are too onerous - but that seems to me to misunderstand its function.
If your business is lending money, you need to be as careful as you can that the funds are being applied properly. People who lend money are liable to make enemies. Where the problem seems to me to lie is in the culture of the bank. It has lots of clever people, but its bureaucratic structure stifles their initiative. Its costs are unnecessarily high and it fails to develop new revenue streams in areas such as consultancy. Privatisation would be one way of injecting commercial disciplines into the bank's mainstream work. Meanwhile, affiliates such as the International Development Agency, which lend on "soft" terms to the poorest countries, could remain under the present ownership.
But our idea is not to privatise the World Bank but some kind of partial merger with the IMF. That sounds an utter nightmare. Take two groups of entrenched international civil servants who don't get on particularly well, put them together, then charge them with a slightly important job like regulating the world economic system. Wow! If you want to create a Bosnia on the Potomac that is a great way to start.
Besides, this sort of plan misunderstands where power lies in the world. You can create a greater degree of order in world economic affairs with direct action by the dominant governments, not by trying to beef up useful but inevitably not very powerful international institutions. There is a case for looking carefully at how the IMF is working, in particular whether it could have handled the Asian and Russian crises better. But most of the blame lies in the performance of the various governments, and in the case of East Asia, the excessive "animal spirits" of private sector investors who plunged too much money into the region, then pulled it out too suddenly.
Some of the more detailed changes that the UK is putting forward have merit. The ability of offshore funds to operate without full disclosure of their trading positions appears to be an abuse of the market system. Markets can only operate efficiently if there is transparency. So the more timely and accurate the data, the better they will be able to operate. Better data from some East Asian countries might have enabled the markets to spot the looming problems earlier, and accordingly buffer the damage. But the problem is not just in developing countries. Bad information has been one of the crucial weaknesses of the Japanese banking system, the bad debts of which have been estimated to be up to 30 per cent of GDP.
We are in the early stages of a giant shift in the world economy. It has several aspects. We are going from a climate of inflation to one of deflation. We are going from a world dominated by the mature developed economies to one where their output will soon be exceeded by the output of what we still think of as the developing countries. We are now in a world where almost the entire globe is operating on the single standard of the market economy. True, it is a pretty rough single standard, interpreted in very different ways in different places, but it is a standard that has enabled world trade to become a higher proportion of world output than at any previous time in human history.
And all this has happened under the present, sub-optimal financial architecture of the Group 7, the IMF and the World Bank. There is always a great temptation among politicians to think that "leadership" is what matters. In politics that may be so, but in economics it is different. Would the new GBI significantly improve the competence of the world monetary system? I doubt it.