A challenge for policymakers is to reform the international organizations created in the past century so that they will be positioned to meet the challenges of the current one. The US Congress faces this issue right now, as the Obama administration has asked it to support historic reforms of the International Monetary Fund. These reforms deserve the full support of both houses, and a failure to act weakens global economic governance at a time in which it is sorely needed.
These reforms, which were agreed to by the members of the G20 in 2010, have two elements. The first is a reform to the IMF’s quota. We can think about the IMF as a global credit union, and the quota represents not only a country’s borrowing rights, but also its voting rights. The quota reform is designed to reshape the Fund’s representation so that rapidly growing emerging economies have voice commensurate with their economic power. China will become the third largest quota-holder at the Fund (second only to the US and Japan), and Brazil, Russia, and India all become top-ten quota-holders as well. The rationale behind the quota reform is simple. Not all economies are the same size, and one would expect those countries that bear a greater burden of managing the global economy to have disproportionate voice in decision making. This was exactly what the US sought in forming the IMF in the first place. The only thing the emerging markets are doing in lobbying for this quota reform is paying attention to history.