When Treasury Secretary Scott Bessent took the stage at the Institute of International Finance, he issued a challenge: bring the International Monetary Fund and World Bank back to their original missions. In his view, these institutions have drifted too far into the weeds of climate, gender, and social equity—at the expense of macroeconomic stability.
He is right about one thing: global economic governance is due for an upgrade. But his prescription risks mistaking evolution for deviation. The world needs the Bretton Woods institutions to be more focused—but not narrower. The task is not to rewind the clock, but to reform the machine for a more complex century.
The Myth of “Unfair” Trade Deficits
One pillar of Bessent’s critique is the persistence of U.S. trade deficits, which he attributes to an “unfair” global trading system. This is an old diagnosis—and mostly a flawed one. Economists on both the left and right agree that trade deficits are not primarily caused by trade policy. They are a macroeconomic mirror: the reflection of a country’s domestic imbalance between savings and investment.
The United States consumes more than it produces and borrows the rest. Tariffs may alter who it trades with, but not whether it runs a deficit. Blaming external policy choices for internal imbalances is not strategy; it is scapegoating.
Climate and Gender Are Macroeconomic Risks
Bessent’s second critique—that the IMF and World Bank are distracted by social and climate issues—is harder to square with the evidence. Climate volatility is already reshaping fiscal dynamics, commodity markets, and sovereign debt risks, particularly in vulnerable states. If the IMF cannot integrate climate into its risk assessments, it is not doing its job.
Likewise, inequality and gender gaps are not simply moral concerns—they are economic ones. Countries that underutilize half their population’s talent suffer slower growth and greater instability. When the IMF speaks of gender or governance, it is not being “woke”—it is being realistic.
Fixing the Fundamentals
There is, however, much in Bessent’s speech to applaud. The IMF’s surveillance needs sharper teeth, particularly toward surplus countries whose undervalued currencies and suppressed consumption perpetuate global imbalances. The Fund should not be shy about confronting China’s structural surpluses or Germany’s excess savings.
The World Bank, too, must better focus its lending. Graduation rules are long overdue. It is absurd that countries like China—rich in capital and geopolitical ambition—still receive development finance meant for the poor. Lending should be better targeted, more accountable, and aligned with country-led growth strategies.
Energy policy is a test case. Expanding access is vital. But energy abundance must be reconciled with long-term sustainability. The World Bank should invest in least-cost, reliable solutions, whether that’s renewables, gas, or nuclear—depending on context. Dogmatism on either side will fail.
Rebalancing, Not Retrenchment
It is important to recognize both the value of reform and the danger of retrenchment. Yes, the Bretton Woods institutions must refocus on what they do best. But returning them to a 1940s mindset in a 2025 world would make them less, not more, relevant.
The aim should be clear: institutions that are disciplined, data-driven, and globally legitimate—able to address both fiscal imbalances and climate fragility, to call out economic distortion wherever it arises, and to serve the broad interests of all member states, not just the loudest or the largest.
Bessent is right to demand reform. But the reform must be forward-looking. Bretton Woods does not need resurrection. It needs reinvention.