NEW YORK – The annual spring meetings of the International Monetary Fund and the World Bank have provided a window onto two fundamental trends driving global politics and the world economy. Geopolitics is moving decisively away from a world dominated by Europe and the United States to one with many regional powers but no global leader. And a new era of economic instability is at hand, owing as much to physical limits to growth as to financial turmoil.
Europe’s economic crisis dominated this year’s IMF/World Bank meetings. The Fund is seeking to create an emergency rescue mechanism in case the weak European economies need another financial bailout, and has turned to major emerging economies – Brazil, China, India, the Gulf oil exporters, and others – to help provide the necessary resources. Their answer is clear: yes, but only in exchange for more power and votes at the IMF. As Europe wants an international financial backstop, it will have to agree.
Of course, the emerging economies’ demand for more power is a well-known story. In 2010, when the IMF last increased its financial resources, the emerging economies agreed to the deal only if their voting share within the IMF was increased by around 6%, with Europe losing around 4%. Now emerging markets are demanding an even greater share of power.
The underlying reason is not difficult to see. According to the IMF’s own data, the European Union’s current members accounted for 31% of the world economy in 1980 (measured by each country’s GDP, adjusted for purchasing power). By 2011, the EU share slid to 20%, and the Fund projects that it will decline further, to 17%, by 2017.