World Bank President Robert Zoellick’s suggestion to create a new architecture of multilateralism to achieve a greater balance among the world’s leading economic powers comes at a time when the entire West accepts the need for more coordinated efforts to overcome the present financial crisis.

Viewed in the backdrop of November 15 summit (billed as Bretton Woods — II) his suggestion, outlined in a speech on October 6, coincides with similar remedies being put forward by other stakeholders. Since the world economy is undergoing a major power shift in which the United States is fast losing its hegemony over the global financial system, there is an urgent need for sharing power with the emerging economies such as China, India and Brazil to infuse fresh vigour into the western capitalist system.

Zoellick’s vision is not entirely restricted to what is now a common knowledge and a common desire. He goes beyond that in formulating his concept. Being a leader of a multilateral body that functions under the umbrella of Washington Consensus, Zoellick is not expected to repudiate the free market ideology. But he is frank enough to admit the failure of the West’s institutional instruments to effectively tackle contentious issues. The West has so far been reluctant to embrace new realities and accord a befitting status to new economic powers.

As Fareed Zakaria, editor of Newsweek, argues in his new book “The Post-American World” that in the past decades the western industrial states have been on the retreat or slow in growth, but the non-western world has been on the rise. In 2006 and 2007, 124 countries grew their economies at over four per cent a year. They include more than 30 countries in Africa. While there have been booms and busts, the overall trend has been unambiguously upward.

The existing multilateralism, Zoellick asserts, is not working any more. The G-7 is not working. International financial system is not working. International institutions are in need of service and repair. Doha talks are just gasping on life support. So, the way the world tries to solve its economic problems needs to be rethought.

The World Bank chief says that for over 20 years he has been involved in trying to make international system work. Now, he has come up with his vision of modernising multilateralism and markets.

The events of this year are a wake up call. The multilateralism and markets, now facing storm clouds, failed to work on several occasions. For instance, when international food prices soared, the agricultural markets broke down and nations were left on their own to fend for themselves. Some 40 countries imposed bans on food exports, others broke contracts and halted trading. And the poor nations are still struggling to feed their populations.

If the global system for agriculture ran aground, the trading system drifted into dangerous waters because of the West’s continuing hegemonic role. The Doha mandate which the western states had promised in 2001, remains unfulfilled, nor is there any hope of a consensus on making the system work. And the climate change negotiations will be made more difficult by the WTO’s discord.

While needs are growing, the international financial system is not keeping pace. Lenders bring ideas, energy, and resources, but they also bring interference, favourable changes in local laws and privatisation of national assets of the developing countries. In 2006, there were more than 70,000 financial transactions with an average project size of only $1.7 million. Last year, the average developing country hosted 260 ‘donor’ visits. Governments tend to provide credit with their flag, not through multilateralism.

So, the international architecture designed to deal with such circumstances is creaking. Even if the West gets to grips with the present crisis, Zoellick contends, there is still need for a new multilateral network for a new global economy. It has to be a flexible network, not a fixed nor unitary system. It must accord due respect to state sovereignty, be pragmatic, must have a sense of shared responsibility for the health of the global political economy.

The former US diplomat, trade negotiator and financial executive says economic multilateralism must be beyond its traditional focus on finance and trade. Energy, climate change, and stabilising fragile and post-conflict states should be treated as economic issues and not just part of the global dialogue on security and the environment.

However, Zoellick’s major proposal which he calls ‘modernisation of multilateralism’ is creation of a core group of finance ministers. For that purpose, a new steering group be established which should include ministers from Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa, and the current G-7. Such a group would bring together over 70 per cent of the world’s GDP, 56 per cent of world population, 62 per cent of its energy production, the major carbon emitters, the principal development financiers, large regional actors, and the primary players in global capital, commodity, and exchange rate markets.

But this group would not be a G-14. It should be numberless and flexible, should meet and videoconference regularly. “We will not create a new world simply by remaking the old. We need a Facebook for multilateral economic diplomacy.”

Zoellick’s another proposal is a “global bargain” between energy producers and consumers so that both sides could share plans for expanding supplies, improving efficiency and lessening demand.

But Zoellick is silent about the need for changes or improvements in the functioning of the IMF which is also part of the multilateralism and has been subjected to severe criticism by the Third World countries for giving loans on unfair and harsh terms which require the borrower states to open their markets to western multinationals. In fact, there is a greater need for restructuring this organisation and reshaping its policies in favour of the developing countries.

German Chancellor Angela Merkel, who has been more conservative in dealing with the crisis, favours a stronger International Monetary Fund, giving it a supervisory role in international finance and making it a “guard” of financial stability. Brtain’s prime minister Brown, too, has proposed making the IMF “an early-warning system” for financial crises. However, Zoellick concedes the need for reforms in his World Bank Group and has announced the formation of a high-level commission headed by former Mexican president Ernesto Zedillo to consider modernising its governance.

The current financial system grew out of a US-dominated meeting of 44 allied nations in 1944 at Bretton Woods after two years’ preparations. Launching a remake of this old model on November 15 in such a short time, and with the participation of many new economic powers outside the West is a daunting challenge at a time when the crisis is still jolting banks and stock markets around the world.