Monday, October 4, 2010
Who's In (in International Development)
Editorial extract from New York Times
As the global economic balance shifts, the United States and other of the post-World War II powers say they’re ready to make room. The Group of 8 rich countries ceded to the Group of 20, where the interests of Germany and France must vie with those of India. Despite that, the maneuvering before this week’s meetings of the International Monetary Fund suggest that the big players may not be as ready as they claim.
The I.M.F. is not as significant as it was 50 years ago, when it policed a system of fixed exchange rates. It still has a major role to play, with hundreds of billions to prop up countries that run into financial trouble. Developing countries — which have long resented the fund’s demands that they open up their markets — are eager to have more of a say in its deliberations.
Last year, leaders of the G-20 agreed to shift at least 5 percent of the fund’s quota share (akin to shares in the fund’s capital) from overrepresented countries, like Canada or Belgium, to underrepresented ones, like Turkey or Brazil. Brazil, Russia, India and China are pushing for a 7 percent shift. European Union countries — they account for a fifth of the world economy yet have more than a third of the fund’s quota share, and name 9 of its 24 directors — have been especially reluctant to cede. The United States has been willing to give up some of its roughly 17 percent stake, but has balked at proposals that would cut it to 15 percent and deprive it of its veto (decisions need 85 percent of the vote to pass).
This process has also set off fierce haggling — all around — about how clout should be defined. Should G.D.P. be measured at market exchange rates, which make rich countries like Japan look bigger, or using “purchasing power parity,” which favors countries like China where things are cheaper? Should it include population, as India demanded?
Since the end of the cold war, even the old Western allies have lost some of their shared sense of purpose. That, in part, explains why Belgium isn’t eager to let France represent its interests at the table. There is more than self-interest at play. The new powers clamoring for a place don’t necessarily share the institution’s values — especially the I.M.F.’s passion for free capital markets.
That is not an argument to keep the newcomers out. Bringing them into the room is the best chance of persuading them to assume the full responsibilities of their new power, and of building a new global consensus.
A version of this editorial appeared in print on October 4, 2010, on page A26 of the New York edition.
Posted by KNO at 1:10 PM