Final Push for World Government

Bank of England Governor Mervyn King Calls for Merger of G20 and IMF

The G20 should effectively merge with the International Monetary Fund, under a radical proposal to overhaul management of the international economy issued by the Bank of England Governor.

January 19, 2010

Telegraph - Mervyn King said that unless politicians act to create an international body with the authority to reform the monetary system, the world would be consigned to another crisis in a matter of years. He warned that although much attention was being paid to efforts to overhaul the financial sector, in the meantime the global economic imbalances which fuelled the crisis were worsening.

The Governor has often voiced concern about these imbalances, under which rich countries have been reliant on borrowing to pay for cheap exports from overseas. In his speech at Exeter University last night, he indicated that in order to fix them, politicians would have to transform the multilateral institutions responsible for monitoring the global economy.

Pointing out that with so many economies involved in the global trading system, the idea of another Bretton Woods conference is "wholly impractical." Mr King suggested the G20 may be the ideal forum to push through the necessary reforms, urging exporters to spend more and deficit economies such as the UK and US to save more. He said:

"The legitimacy and leadership of the G20 would be enhanced if it were seen as representing views of other countries too. That could be achieved if the G20 were to metamorphose into a Governing Council for the IMF, and at the same time acquire a procedure for voting on decisions."

Mr King has frequently expressed his frustration with the IMF, which repeatedly warned about the scale of global imbalances in the years running up to the crisis, without achieving any notable reforms in creditor or debtor nations. However, his plan may be opposed by the US, which holds the balance of power at the IMF.

David Blanchflower has called for the Monetary Policy Committee (MPC) he formerly sat on to be "disbanded." In a column in the New Statesman, he claimed that it failed to see the recession coming and made it worse by acting too late.

"The MPC's days are numbered, certainly in terms of its remit and probably its membership," he said. "After the election we are going to have to reconsider who sets monetary policy."

He added that the committee had failed adequately to communicate quantitative easing. The Bank declined to comment.