On the evening of 23 September 2009, Dr. Kemal Derviş, Vice-President for Global Economics at the Brookings Institution, Washington, DC delivered the Opening Year Lecture entitled Global Economic Governance and the IMF: From Bretton Woods to the Crisis of 2008-2008 to a captive audience made up of new students, members of the faculty and the Geneva international community.

Dr. Derviş began his lecture by remarking that the G20+ leaders were meeting the following day and that the subject of his lecture, the role and relevance of the IMF in the global economy in the 21st century, was particularly timely. He then pointed out that the great global crisis of 2008-2009 has echoes of 1929 and the Great Depression. As with its 20th century predecessor, there seems to be agreement that many of the causes of the current crisis are the result of failures of global economic governance. While the turmoil of the 1930s and 1940s led to the creation of the Bretton-Woods Institutions, the current financial crisis has once again shone the spotlight on global economic governance and the international monetary system. In this, the IMF has a particularly important role to play. Yet, Dr. Derviş noted, if it is to fulfil its function as an effective and legitimate tool of global governance, reforms will be needed. He singled out three areas in particular.

To begin with, the IMF needs once more to become an institution involved in the world economy as a whole. Originally envisioned by Keynes as an "International Clearing Union" to manage a fixed exchange rate system and provide temporary financing to countries experiencing balance of payment difficulties, the IMF initially focused on industrialised nations. Then, after the collapse of the gold standard and the fixed exchange rate system in the early 1970s, the Fund's focus shifted to developing countries and to crisis finance; it became an institution overseeing developing countries, with no role to play with respect to the advanced economies. The 2008-2009 crisis showed more starkly than ever that the world's economies, developed and emerging, are interlinked and underlined the need for coordination of economic policy at the global level; a global role for a renewed IMF. Second, while the IMF was set up to oversee the global economy, its own governance failed to keep pace with changes in the global economic landscape and the growing weight of the emerging market economies. The fact that Belgium still has greater weight than Brazil on the IMF's board is just one extreme example of this lagging governance. Finally, Dr. Derviş noted that the IMF has to allow more policy space to its member countries and recognise the legitimacy of greater diversity in the policy mix countries adopt. This cannot mean that any policy should be endorsed. It does mean, however, that the balance between policies that restrict demand and policies that try to stimulate supply needs to be rethought, that the interests of creditors should not get absolute priority and that systemic recommendations for the world economy as a whole should not reflect the quasi-ideological views of one school of thought, but take into account diverse viewpoints. He gave the example of the Asian Crisis of 1997, in which excessive volatility of private capital flows played an important role; he noted that immediately prior to this, the IMF was still recommending full capital mobility as desirable for development!

Dr. Derviş noted that if these three areas, global scope of the institution's activities to cover developed and emerging economies, governance which matches 21st century realities, and policy advice that recognises diversity, are reformed, there will once again be a truly global role for the IMF which will be accompanied by strengthened legitimacy.

Dr Derviş concluded his lecture by noting that the management and staff of the IMF have recognised these imperatives and that the reform process has started. Successive G-20 meetings have strengthened the role of the IMF and proposed increasing the resources at its disposal. If the momentum created by the crisis can be maintained, and if the advanced countries finally agree to real governance reform as well as a real global surveillance and policy advisory role for the IMF, the institution could become a central instrument of global cooperation and economic governance. He ended by expressing his hope that the needs of the Institution would be met so that in turn better global economic governance could be achieved which would strengthen the recovery and diminish the chances of another devastating crisis.

A Turkish national, Dr. Kemal Derviş has had a long and distinguished career to date. He earned his Bachelor's and Master's degrees in Economics from the London School of Economics before completing his PhD at Princeton University. From 1973 to 1977 he was a member of the economics faculty of the Middle East Technical University before joining the faculty at Princeton University. In 1977 he joined the World Bank where he held several positions including Division Chief for Industrial and Trade Strategy and, after the fall of the Berlin Wall, Director of the Central Europe Department. He later went on the coordinate the World Bank and donor community's support to the Balkans peace process. In 2000 he was named Vice-President for Poverty Reduction and Economic Management. In 2001 Dr Derviş returned to Turkey where he was named Minister for Economic Affairs and the Treasury and oversaw Turkey's economic recovery from the financial crisis which had hit the country in starting in February 2001. Once the recovery was complete, he resigned his ministerial position, joined the Republican People's Party and became a member of parliament in 2002. Following the end of his tenure as a parliamentarian, in 2005 Dr. Derviş was appointed Head of the United Nations Development Programme, a position he held until February this year. He has been a member of several global networks, including the Global Progressive Forum and the Global Progressive Network. He is also a widely published author his book, General Equilibrium Models for Development Policy, which he co-authored in the 1980s became a widely used text book in development economics during that decade. More recently he has published a new book entitled A Better Globalization (Brookings Press, March 2005) dealing with global development issues and international institutional reform.

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