"More fairly reflecting the size of national economies through increased voting shares is important to retaining the institution's legitimacy as it advises governments on their economic policies, officials at the fund and analysts said."
That's a quote from The
New York Times story on the agreement by IMF members to give more votes to Asia's rising powers. But the real impetus for giving more weight to China and Korea, among others, is not "legitimacy" but the IMF's own relevance. To quote from the
Washington Post story it's about the IMF
"scrambling to maintain influence in a rapidly changing world economy."
It's a new world -- a world in which China and its neighbors don't need the Fund (China's enormous reserves provide self-insurance against a financial crisis) but the Fund and the G-7 increasingly need China's engagement -- in addressing the worrying global account imbalance problem (see Bill Cline's recent book, The
United States as a Debtor Nation and Larry Summers' terrific speech in Mumbai, India:
Reflections on Global Account Imbalances and Emerging Markets Reserve Accumulation), not to mention the mounting demand pressures on world oil prices.The World Bank does not yet face the same crisis of relevance as the IMF - since minimizing global systemic risks is not part of its mandate. And it is the Fund's relevance not "legitimacy" that is motivating the G-7 to finally agree on quota changes. So we cannot expect that changes in quotas (and thus voting structure) at the Fund will translate soon into changes at the Bank. In its communique, members of the Development Committee (which is the ministerial forum most concerned with World Bank issues) referred carefully (and subtly) to the prospective changes at the Fund and their implications for the Bank. "We welcomed the discussion of quota and voice issues in the Fund [read: voting structure] and confirmed our intention to continue our discussions with a view to building the necessary political consensus on the voice issue in the Bank."OK, that’s better than nothing. But note that the communiqué says the Bank will consider only the “voice issue” and not the actual voting structure and broader legitimacy concerns that are increasingly being raised by independent observers. These include CGD’s own working group report,
The Hardest Job in the World: Five Crucial Tasks for the New President of the World Bank; a statement on
Democratizing the World Bank and the IMF released last year by a broad coalition of civil society groups; Ngaire Woods new book and CGD brief on
The Globalizers and Kemal Dervis's fine CGD book:
A Better Globalization: Legitimacy, Governance, and Reform.Sooner or later the Bank will surely have to follow the IMF lead. Sooner would be better for the Bank and for the world. But don't hold your breath.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise.
CGD is a nonpartisan, independent organization and does not take institutional positions.
