Gordon Brown yesterday warned that there was "bad news still to come" about the world economy and called for radical change in the world's international financial institutions – the International Monetary Fund (IMF) and the World Bank.
The Prime Minister told participants at the World Economic Forum that the IMF, World Bank and the United Nations were not suited to the 21st century, having been founded to meet the challenges of the 1940s, a world of 50 nation states and sheltered economies.
The world, Mr Brown told his audience, had "no proper mechanisms" to deal with climate change, failed states, health pandemics, and globalisation. Mr Brown said that there was "not enough globalisation" when it came to world bodies, and that organisations such as the IMF needed to work better as "early warnings systems" of problems in the financial system.
He said that there had not been sufficient transparency in markets, which had led to a mispricing and misunderstanding of risk; and that there had been too much off-balance sheet activity and too little independent valuation of write-offs. Regulators, meanwhile, had paid too much attention to solvency rather than liquidity, said Mr Brown.
The Prime Minister said that he wanted to see the IMF become more like an independent central bank, and for the World Bank to be a World Bank for the environment as well as development. In this role it would fund investment in new green technologies in the developing world: "I cannot see why we do not move immediately for the World Bank to become a world environment bank. We need an institution that is global, that can provide for countries that want to move to alternative sources of energy but who will simply build coal-fired power stations without an institution that is prepared to loan or give grants."
Mr Brown told the WEF participants that "This is indeed a testing time for the global economy, for all of us who believe that globalisation is about free trade. There is a real danger that we fall for the familiar responses that we have seen in past decades, the first is ... heavy-handed regulation, the second thing is to resort to protectionism – and I see it in America and parts of Europe – and the third is to be paralysed into inaction." He rejected calls to regulate more closely sovereign wealth funds.
A rapid response force to integrate international peacekeeping, stabilisation, reconstruction and development activities was also urged on the UN by Mr Brown.
In a separate session Mr Brown also implicitly accepted that the millennium development goals he launched in 2000 were unlikely to be met at the current rate of progress: "If we do not act now we have no chance of meeting the goals." He urged private business, the NGOs and faith groups to help governments in forcing the pace towards meeting the goals. Mr Brown issued a "unique call to action" to deal with the "emergency" of poverty. "If not us, who: if not now, when? If not together, how?"Reuse content