TIMU proposal as sent to IPRA GlobalEconGroup

Obama's international monetary challenge in the TIMU proposal
Monday, December 01, 2008

Though I have mentioned on www.change.gov and www.change.org the essentials of the Terra International Monetary Union (TIMU) proposals I have not yet sent president elect Obama a letter or a correspondence of letters as Howard Richards has imaginatively been doing. It is my intention to find the right entry points into his economic and international teams to propose this monetary system transformation proposal that would integrate in an international balance of payments system both the economic and ecological, particularly carbon emissions, accounting of nations in the global North and South. After receiving feedback from this IPRA Commission and other, including the IPRA Earth Charter Commission of which I am the convenor/coordinator, I intend to improve the article on the context, contours, constraints and challenges of TIMU and prepare spin-off products such as an OPED piece to the NY Times and other major publications. So, let your comments flow!

Though I support Obama's choices of economic and international team members--their centrist positions and technical know how will be challenged and directed by Obama's vision of a transformational change for the US--I believe that his focus on the integration of national and global economic issues is weak. It could be a question of strategy, given that you cannot do everything at the same time and that priorities have to be set. Notwithstanding this possible reason, I still tend to believe that his focus should be stronger on concerted international planning to stop and reverse the global recession which impacts more heavily on people in the global South and on people in the global North.

Part of this concerted international action is the need to transform the present international monetary system which means not only to reform the Bretton Woods Agreement, but to transform the nations’ balance of payments by including the ecological debts and credits that nations hold toward each other.

One of the major characteristics of such transformed international monetary system is the adoption of new accounting unit that would replace the dollar. It was during the waning years of World War II that the major nations at that time came together in Bretton Woods and established the IMF and the World Bank with the dollar as the accounting unit. It is less well known that Lord John Maynard Keynes had a superior plan of making “bancor” the accounting unit of new global bank (http://www.monbiot.com/archives/2008/11/18/clearing-up-this-mess/), given that the new monetary system should not be based upon the currency of one nation. US Treasury Secretary Dexter White prevailed on account on the polico-economic condition of the time. It has to be remembered, however, that the FDR Administration refused to participate in the 1933 International Conference in London where monetary and economic matters were planned to be resolved in a concerted way. FDR’s overemphasis on national needs with the exclusion of international efforts to address the global recession is considered to be one of the contribuants to Hitler’s rise to power and World War II. Robert Hormas and David Kennedy correctly spell out in the NY Times of Sunday November 30 the real need for concerted international action now. “It took a depression and a war to transform an older order. If we act swiftly and smartly, ours may be happier fate. We have what may well be a once-in-a-life time opportunity to build an international architecture for a new century and in the process bolster our security. If we don’t seize it, we may be doomed to repeat some pretty nasty history.”

Part of that international economic architecture for a new century is a monetary system that settles accounts between nations not only in terms of trade payments, capital flows and invisibles such as insurance and shipping payments, but also in terms of carbon payments. For the Obama Administration proposing such integrated monetary system for the April 20, 2009 Summit would signal a transformational change in US foreign policy that would bring the deepening climate crisis together with the economic challenge of a global recession.

How can such international monetary system come into being?

An example on a regional scale is presented in the three phases proposed by the Delors Commission that led to the European Monetary Union with the ecu as accounting unit and the Euro as legal tender. The first phase was the establishment of a Cooperation Fund, the second phase resulted in a monetary institute and the third phase ended in a monetary union. For TIMU proposal to come into existence nations, under the leadership of the Obama Administration, is to establish an international monetary commission which might be headed by Joseph Siglitz of Columbia who has been advocating the substitution of the American dollar by “global greenbacks.” This Commission would be charged to integrate both economic and ecological accounting into one accounting unit which I propose to be called Terra, Latin for Earth, the home of all nations where all economic and ecological activities take place. So proceeding from April 20 a Cooperation Fund could be established, followed by an Integrated Monetary Institute, followed by an Integrated International Monetary Institute, followed by Payment Union which may be called the Terra International Monetary Union indicating its integrated balance of payments.

Such international cooperation in integrating the accounting of economic and ecological payments will be greatly facilitated by new thinking on the integration of social and ecological values. For almost a decade millions of people and thousands of organizations have endorsed a people’s covenant or a Community of Life Charter which has become known as the Earth Charter. Hopefully, many governments are going to follow Costa Rica, UNESCO and other governmental actors in applying its values to their economies, climate policies, cultures, so that humanity becomes a member of the community of life rather than its master.

Though there are many and complex dimensions to the TIMU proposal, its overall philosophy is simple: construct a monetary architecture that integrates a balance of payments between nations that not only includes their economic—trade and investment—activities but also their ecological ones, particularly given the momentous challenge of humanity to reduce its climate impact to 350ppm as soon as possible. What is not being measured in the balance of payments between nations is not taken very seriously. If humanity, particularly the nations in the global North, is serious in pursuing the MDGs for the benefit of people and planet, its monetary house is to be in order. If humanity is to accomplish a human transition to the needed sustainability revolution in stead of recessions, depressions and wars, it is all important to learn its earlier lessons from the transitions into the agricultural and industrial revolutions which took place spontaneously and haphazardly.