several have talked grandly of a sequel to the 1944 Bretton Woods conference, which created the post-war system of fixed exchange rates and established the International Monetary Fund and World Bank. That is nonsense. The original Bretton Woods lasted three weeks and was preceded by more than two years of technical preparation. Today’s crisis may be the gravest since the Depression, but global finance will not be remade in a five-hour powwow hosted by a lame-duck president after less preparation than many corporate board meetings.The meeting turned out to have just a little beef, especially when it comes into the ambitious plan for a new global financial architecture. But was it really a waste for Indonesia to join the group?
Maybe not. We have two concerns regarding the current crisis: to maintain sensible balance of payment (and exchange rate) and to secure financial sources for the state budget --you know, to fund basic infrastructure, pay salaries, and poverty reduction related actions. The former might not be solved by, predictably, the inability of the meeting to agree on above new global financial structure, but there is an opportunity to ease the latter. And here is how.
It is now widely argued by key policy makers and some prominent economists that a world fiscal stimulus (tax cutting or more government spending) and, some say, higher liquidity through lower interest rate are needed to boost the otherwise slowing world economy. But we don't have the money to do so, because the market sources for state budget financing, the government bonds, is now becoming very expensive. We need different sources.
If Indonesia went alone in asking this to the developed countries, it is likely that we'd meet with no response for two reasons: we're too small (yes, contrary to some of you believe, we're a small open economy) and those big boys don't have lots of money either. The best option available is to join forces, mainly with developing countries, to tap the money -by the way, China and Saudi Arabia now has the money - and to elevate the bargaining position before those big boys to give more money to either bilateral scheme or multilateral agencies like the IMF and the World Bank. At the same time, it'd be also the right time to ask IMF to be less strict on their conditionalities, the sources of domestic discontent and political unpopularity in many countries, including Indonesia.
Of course, it is now more international politics than economics.