ABSTRACT
Robert Rubin, the erstwhile Treasury Secretary of the United States, made a speech in 1998 calling for measures to “strengthen the international financial architecture.” The metaphor he used was enthusiastically adopted by the academic and policy-making community, and has since survived in the academic writings on this issue as accepted jargon. However, it was an inapt – if not completely incorrect – metaphor. The global financial system is not quite an architect’s blueprint; if anything, it is an excellent example of what the Japanese call kaizen, meaning an incrementally evolving phenomenon, improving marginally but continuously in stages with time. Pressures from market participants and those from emerging market and Group of 7 (G-7) governments have been responsible for this continual, if marginal, improvement in the global financial architecture. Lessons of the past are the second source of continual improvement in and evolution of the global financial system. Those who created the Bretton-Woods system drew on the lessons of the Great Depression.
