We are honored to have Treasury Secretary Timothy Geithner here with us today to address the future of the G20, the IMF, the World Bank, and America's role in remaking our global financial architecture. It has been almost a decade since a Treasury Secretary last addressed this Committee. Back then, it was to discuss the IMF and the Asian Financial Crisis. While those events unfolded far from our shores, in many ways America has been ground zero for a financial crisis today that nearly resulted in global economic collapse. We're not out of the woods yet, but it is not too soon to start rebuilding and rethinking our international financial institutions. The global economy has changed, quickly and profoundly. Twenty years ago, worldwide
capital flows were less than twenty percent of what they are today. Ten years ago, much of Asia was in economic disarray. Today, the old order has been shaken up by new realities, emerging powers, and entirely new financial entities. Increasingly, the economic policies of any single nation, no matter how powerful, are inadequate to meet the demands of a world where both risk and capital move globally. Alongside our financial challenges, we are pursuing new development priorities such as mitigating and adapting
to climate change, protecting food supplies, and empowering women--all of which we increasingly view as fundamental to future security and stability.
We need institutions designed and equipped to thrive in this changed environment; organizations with stronger multilateral levers, empowered to monitor and protect the global monetary system; and development banks actively engaged with a new set of priorities consistent with the continuing goal of ending poverty. When President Obama announced from Pittsburgh that the G20 would replace the G8, Singaporean Prime Minister Lee Kuan Yew called it an implicit acknowledgment that the post-World War Two order had come to
an end. It is certainly true that rise of the so-called "BRIC countries," Brazil, Russia, India and China, represents a fundamental global economic shift. Twenty years ago, the President's most important global financial trip would have been to Europe. Today it is to Beijing. Clearly, the developing world needs a legitimate seat at the table so that all of us can better address our shared challenges. We have already begun this process by recognizing the G20 as the premier economic coordinating forum, and it has made encouraging progress since. A year ago, at the height of the crisis, it convened for the first time at the
leaders level and launched the largest and most coordinated fiscal and monetary stimulus ever undertaken. My Senate colleagues and I worked to make good on our G20 commitment last spring to dramatically increase the IMF's lending capacity to contain the crisis. Without legislative action, in keeping with your request and the
President's, the world economy would still be in a much more precarious place.
The International Monetary Fund and its sister organization, the World Bank, must also evolve to reflect a changed world. After World War Two, a handful of developed countries understood that an international framework was necessary to avoid repeating the chaos of the 1930s, and so they put one in place. In 2009, the IMF's and World Bank's continued legitimacy and effectiveness depend on transcending their origins to offer underrepresented countries an increased voice. We need to explore how these changes will affect American interests, and how we can lead within these new frameworks. To be sure, the IMF and the World Bank have evolved, responding to the end of the gold standard, incorporating decolonized countries around the world and eventually taking on board the countries of Eastern Europe. However, as the rate of global economic change accelerates, we need to ensure that our global economic architecture can keep up. Today, the World Bank and other multilateral development banks are seeking more capital contributions from member states to address the current crisis. These institutions have been vital in protecting vulnerable people and countries, and supporting development. This Committee has a long history of working with them, and we should be sensitive to their requests. But we should also be prudent in our response. Capital is flowing back into many emerging markets, and the budgets of many donor nations around the world are strained. We must ask ourselves: Do these institutions truly need additional funds right now? If so, how much is appropriate? And finally, should new funding be provided temporarily or permanently?
Any increase in funding must be coupled with a reevaluation to ensure that these institutions are actually fulfilling their mandate to focus on the world's poor. Our own funds and development spending are limited, and our focus should not be on the needs of middle income countries. The G20 has singled out climate change and food security as challenges demanding greater attention, and I agree. Banks deciding whether to fund major energy projects in developing countries, particularly middle- income countries, should take care not to lock them into a high-carbon future that will be costly for all of us-- and especially devastating for the world's poorest. Instead, we must help countries to craft well-balanced energy strategies. Our efforts to address energy poverty and climate change must not work at cross purposes. That means we must persuade our institutions to focus their investments on building energy efficiency and renewable energy capacity in the short run and carbon capture and sequestration and other advanced technologies as they, too, become viable. Secretary Geithner, we understand the tremendous responsibilities that you have taken on at a moment of
enormous strain and transition, and we appreciate your presence here today. I look forward to hearing your insights into the future of the G20 and our global financial policy.