CAMBRIDGE – The US Congress has now carelessly blocked a long-awaited reform of the International Monetary Fund. That would be bad enough if it were an isolated episode. But this is just the latest in a series of self-inflicted blows since the turn of the century that have needlessly undermined the United States’ claim to global leadership.
The IMF reform would have been an important step in updating the allocations of quotas, which determine member states’ monetary contributions and voting power. The US was not being asked to contribute more money or lose its voting weight, which has always given it a unique veto power. Instead, the proposed increase in quotas for China, India, Brazil, and other emerging economies would have come largely at the expense of European countries.
The change in IMF quotas is a partial and overdue response to the newcomers’ rising economic weight and Europe’s outdated dominance. Indeed, the principle of matching representation to countries’ contributions – sometimes known as the Golden Rule (“He who has the gold, rules”) – is probably one of the reasons that the IMF has usually been more effective than other international organizations (for example, the United Nations General Assembly).
To be sure, US President Barack Obama has tried to exercise global leadership. He pushed for the agreement to reform the IMF at the G-20 summit in Seoul in November 2010 (the first meeting to be hosted by a non-G-7 country), and he prevailed over understandable European reluctance to cede power.