and look impossible absent a world government. but an arbiter of the international monetary system can play a more limited role – not so much the referee brandishing the yellow and red cards of the football pitch, more the cricket umpire warning the players not to attack each other verbally and making it clear publicly when they believe the players are not abiding with the spirit of the game. invoking the mcc ’ s “ spirit of cricket ”, when a country knows that a policy such as an exchange rate regime requires modification, the player should walk. indeed, the players might in time come to realise that most games benefit when played according to a clear and agreed set of rules. so although it is not an international central bank, and the sdr is not a currency, the imf still has a role to play. given that most systemically important countries allow their exchange rates to float, the fund cannot have an independent remit for global monetary stability. hence, the fund ’ s role should be to support national policy makers by providing expert analysis about external risks to their domestic monetary policy objectives. national policies which appear sustainable in terms of countries ’ own objectives may interact and, through the resulting balance sheet effects, create risks to those same countries further ahead. the fund should be a forum in which countries can discuss these risks. it should also hold countries to account. in these ways, it can indirectly support global monetary stability. with countries naturally reluctant to cede any control over their own monetary and fiscal policies, it is likely that the imf will have as instruments only the powers of analysis, persuasion, and, in keynes ’ own favourite words, “ ruthless truth - telling ”. that phrase does not conjure up many memories of any of the many international meetings i have attended. but unless the imf has the self - confidence to play that role, its deliberations and statements will carry little weight. the fund requires an independent, respected and clear voice. the fund should focus its work on the international monetary system around three tasks. first, it should provide and share information about the balance sheets of all major countries, their composition and size, and the links between them. the fund has been in the forefront of the analysis of balance sheets for emerging market economies, and it needs to extend this approach to its surveillance of the industrialised world. in conducting this analysis, the fund must look at countries ’ exchange rate choices. but no one price is a sufficient statistic for the

- 1946 : shaping thepost - war world ”, p. 216. could slip into obscurity. just as in savannah, the responsibility for the ideas and impetus for radical change lies firmly with all the shareholders around the world. it is encouraging that the fund and member countries are putting forward concrete proposals for reform. but unless we consider the fundamental question of what the fund is for, then any such suggestions risk being piecemeal and ineffective. that is the issue i want to discuss with you this afternoon, and i shall try to answer three questions. first, in what way is the world of today different from that of bretton woods? second, what role, if any, do we want an international monetary institution to play in today ’ s world? third, what changes are needed to enable the imf to play that role? what has changed since bretton woods? following the collapse of the bretton woods system in the early 1970s, the imf came increasingly to be seen not as the guardian of the international monetary system but as the international lender of last resort. it hit the headlines as the initiator of large support packages to emerging market economies – so much so, that until the recent repayment of their loans by argentina and brazil, 70 % of the fund ’ s outstanding lending was accounted for by loans to three countries. in turn, the growth of private capital flows and the build - up of massive foreign exchange reserves by many asian economies have made redundant the idea that the primary function of the fund is to be an international lender of last resort. the asian economies, including japan, have increased their foreign exchange reserves over the past fifteen years so rapidly that they are now nearly ten times as large as the combined reserves of the rest of the g - 7. so the fund urgently needs to ask what its main purpose is. in 1944, when the bretton woods system was created, it was understood that sharp changes in capital flows were costly. changes in capital flows can induce changes in trade flows. and to bring about large changes in trade flows often requires not only a reallocation of resources, which itself can be costly, but also in some cases sharp falls in national output. the international monetary system was built around fixed exchange rates and controls on capital movements. each country met its international responsibilities by running a balanced current account. when ‘ imbalances ’ arose and countries were depleting or building their official reserves, a key feature of this system was