On November 15, George W Bush has invited various leaders to meet in Washington to discuss the present financial crisis and ways to restore stability. This has led Gordon Brown and others to talk about a new Bretton Woods, a new architecture of international financial regulation and so on. Is that the right idea? Was the first Bretton Woods such a success?

By about 1942, the Allies knew they were going to win the World War and started planning the post-War order. They had learnt during the Depression that currency fluctuations and imbalances in trade deficits and surpluses had led to protectionist policies which had lengthened the Depression.

The Americans and the British were the main players. The intellectual leadership was provided by Keynes but the financial muscle was with the US. Keynes wanted above all to avoid deflationary policies after the War. So, he proposed a system in which countries with balance of trade surplus would lend freely to those with deficits.

The Americans had most of the gold reserves, a strong economy and an ambitious agenda to take over the leadership in trade and capital flows from the British. They did not wish to part with their surpluses automatically and wanted control over the policies of debtor countries.

What emerged was a compromise with IMF at its centre. There were to be fixed exchange rates but in terms of the dollar which in turn would be fixed to gold at the price of $35 per ounce. Devaluations required IMF permission, especially if you also needed some help with your trade deficit. The IMF was supposed to supervise how countries were managing their currencies and their economies.

It worked superbly for 25 years. The developed countries whom the IMF policed slowly emerged from the War and made their currencies convertible. Keynesian policies were followed in the UK and to some extent in the US and in many European countries. But soon inflation became widespread and the dollar, being a key currency the US, went on spending money abroad and piling up deficits which it paid for in terms of dollars. It got so bad that on August 15, 1971, the US abandoned the system of fixed exchange rates and its obligation to sell gold at $35 per ounce.

At that stage, the IMF lost its raison d?etre. But it continued to police developing countries which kept on getting into trade deficits and unstable currencies. It bullied borrowers into macro policies which dismantled public sector activities and caused much misery. Developed countries stopped listening to the IMF once exchange rates became flexible and capital movements unrestricted.

The IMF has been ineffective in this crisis until last month. It failed to see the crisis coming or warn about the dangers which were inherent in the behaviour of banks and hedge funds. Since August 2007 when the crisis began to break, governments have relied on their national central banks and finance ministries to tackle the problems. The problem of toxic assets, recapitalisation of banks, the illiquidity and lack of confidence among the banks have all been tackled by coordinated intervention. Only since the middle of October has the IMF begun to bail out Hungary and Iceland and perhaps Pakistan.

The question is, what kind of new IMF do we need? The IMF is always headed by a European and it would be better run by the best available person of whatever national origin. It should be stronger in warning about global imbalances and kinder to developing countries whose difficulties are not always of their own making. But beyond that, what can we say? Surely, we can?t get back to fixed exchange rates nor can we reverse capital market convertibility in the many countries which have it.

Today, the surplus countries are China and Japan and other Asian countries. There are also sovereign wealth funds which have the reserves to recapitalise the global financial system. Surely, they should be allowed to shape the new IMF. The deficit countries which have over-consumed and run lax monetary and fiscal policies (the G-7) cannot and should not be in the lead when a new architecture is constructed. We need the rich countries to start saving again and to provide the poorer countries with flows of capital at reasonable price and without unsustainable conditionalities. We need an IMF which is run on a one country one vote principle as the WTO is run. We need an IMF which will serve the cause of development and of financial stability but with the burden shared proportionately by the rich countries and poor ones. It is time once again for China, India and Brazil to combine and lay down their blueprint for the new IMF.

The author is a prominent economist and Labour peer