IMF workers have joked among themselves for years about when the fund’s statutes would go into effect, requiring them to move from Washington to Beijing. Written with no rival to the US economic leadership in sight, the statutes require headquarters to be in the world’s largest economy.

They don’t laugh anymore.

The underlying story of this week’s IMF and World Bank meetings, held virtually from Washington, is that democratic capitalism is taking dangerous new blows and autocratic capitalism is seeing further gains in the wake of this disruptive year. of Covid-19 which will take 4.4% of the global economy this year or $ 11 trillion in production next year.

China, the country of origin of the pathogen, will be the only major economy to show growth this year. IMF predicted that China, the world’s second-largest economy, would grow by 1.9% in 2020, while the United States would shrink by 4.3% and Europe by 7.2%. China’s growth will accelerate to 8.4% next year, the IMF said, compared to 3.1% in the United States and 4.7% in Europe.

Solving the problem will not be easy.

The IMF’s new global debt figures, presented in Atlantic Council follow-up, show that US debt will reach 130% of GDP thanks to the crisis. This is the highest level since WWII when the country was financing colossal military operations. The US Treasury Department released Friday’s figures show a record budget deficit of $ 3.1 trillion in the fiscal year ending Sept. 30.

The Trump administration’s inability to leverage its stimulus spending this year to invest in infrastructure, education, and research and development is a missed opportunity. Trade disputes with European and Asian allies have undermined solidarity between global democracies when it was most needed.

The risks to the dollar’s continued monetary supremacy may seem far beyond the horizon, but concerns have become more relevant as China gains first-mover advantage through its deployment of digital currency. tests in some cities.

To be sure, the IMF’s current voting share still favors the United States by around three to one, and the statutes dictate that “the main office of the fund will be located in the territory of the member with the largest contingent”. Yet even former IMF Managing Director Christine Lagarde in 2017 dream that the fund’s headquarters could move within a decade.

Current events can speed up its timeline.

The most important question as the location of the IMF is which country or set of countries will write the financial and monetary rules for our times to come. The democracies, rallied by the United States, will they revive and reform their form of capitalism, ascending for more than 75 years?

Or will the future be shaped by China and state-controlled capitalism, which its leaders say has proved more decisive and resilient in this crisis? Or are we entering a period of global and prolonged systemic melee of the type experienced after World War I, which led to global economic depression, currency devaluations, beggar-to-neighbor protectionism, a collapse of the international financial system and ultimately to war.

In a monument speech This week, current IMF Managing Director Kristalina Georgieva called what the world is going through a “new Bretton Woods moment”, dating back to 1944 when the IMF and the World Bank were created with a dual purpose: ” face the immediate ravages of war and lay the foundations for a more peaceful and prosperous post-war world ”.

It is worth considering the enormity of what Mrs Georgieva suggests, as Bretton woods was the first of its kind, a fully negotiated global monetary order, then based on gold and the US dollar. Bretton Woods set the rules and the means for the expansion and sustainability of democratic capitalism, which would ultimately triumph over the centrally controlled Soviet-style economies.

The deal came near the end of World War II at a time when America’s leaders were in a visionary state of mind and had the economic and political leverage to impose their will on others, contrary to current conditions. Cordell Hull, United States Secretary of State from 1933 to 1944, represented the view among many at the time that economic discrimination and trade war were the underlying causes of both world wars.

Bretton Woods was designed to avoid a repeat of this result. After two years of preparation, the United States assembled 730 delegates from 44 Allied nations at the Mount Washington Hotel in Bretton Woods, New Hampshire, July 1-22, 1944, before signing the agreement on the last day.

In the cacophony of the final days of the US presidential election, it would be easy to overlook the historic challenge of democratic capitalism. Few Americans will have heard or read Ms. Georgieva’s speech this week, distracted by the president’s town hall duels Donald trump and former vice-president Joe biden.

Yet whoever is elected on November 3 will be tasked with reversing the trend of public faith in democratic capitalism before it becomes irreversible, and tackling inequality while not sacrificing the irreplaceable engine of growth and development. innovation of capitalism.

What the United States and the world need after the Nov. 3 election is another round of transformational American brand leadership following World War II.

For President Trump, meeting this generational challenge in a second term would require a radical change in attitude towards the creation of international Bretton Woods-type coalitions. For Vice President Biden, his encouraging speech on galvanizing global democratic partners, including plans for a first-year Democracies Summit, should be translated into concrete actions that would reverse current trends.

Both candidates are talking about coming out stronger from Covid-19, but our problems did not start with the virus and they will not end with a vaccine. In the face of a second economic crisis in the space of a decade, the United States has a rare second chance to do things alongside its democratic partners.

If we fail to do this, democratic capitalism may not have another opportunity. The stakes are so high.

Frederick Kempe is a bestselling author, award-winning journalist, and CEO of the Atlantic Council, one of the United States’ most influential think tanks on world affairs. He worked at the Wall Street Journal for over 25 years as a foreign correspondent, deputy editor and senior editor of the newspaper’s European edition. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the World’s Most Dangerous Place” – was a New York Times bestseller and has been published in over a dozen languages. Follow him on twitter @FredKempe and ssubscribe here at inflection points, his look every Saturday at the main stories and trends of the past week.

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