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The IMF's Madisonian Future

Viewing today’s international organizations in a negative light is increasingly commonplace. We see this in growing concerns about the value of the G20 and the United Nations. We also see this in fears that our world is entering a “Global Zero” phase in which no country has both the means and the motive to order international affairs. But we are not destined to live a world in which the international organizations that previously steered the world economy become inconsequential overnight. As global power diffuses, the future of the International Monetary Fund may be based less on dystopia and more on the American founding. The diffusion of global power will reshape many international organizations, as countries with rising influence obtain voting privileges commensurate with their new levels of power. While this may make the IMF more unwieldy in the future, it will bring the age of predominant US influence over the Fund to a close.

This argument stems from one trend and two findings. First, it is almost universally accepted that the global distribution of power will continue to shift away from the US and Europe and toward emerging markets in the coming years. The emergence of the BRICS countries was just the beginning. A report commissioned by the US National Intelligence Council suggests that China will surpass the US in terms of economic size before 2030, though it will still trail the US in terms of per capita incomes. A middle tier of emerging markets known as the Goldman Sachs “Next Eleven” may also be larger than the EU by 2030.

The second piece in this argument comes from history. Many international organizations are created based on the premise that with disparity in contributions comes disparity in influence. For the IMF, weighted voting was the cost of getting larger economies to put additional resources into the Fund in the first place. Thus, the United States currently controls 16.7% of the votes in the Fund, and Japan, Germany, France, and the United Kingdom each control between 4.8-6% of the total votes in the Fund.

With the advent of the global economic crisis, this deal has come under serious pressure from the BRICS countries. The BRICS countries’ posture is not hard to understand. They seek additional votes at the Fund commensurate with their growing international influence. Despite a public pledge to implement a package of voting reforms at the Fund that was reiterated at the recent G20 summit, the United States has yet to deliver. Japan, Germany, France, and the United Kingdom have all done their part. Thus, we have a flattening of the global power hierarchy coupled with demands by rising powers for more voice in international organizations.