Modest and radical proposals to reform IMF governance

• Pages: 381

Page 381

At the IMF Economic Forum on September 17, the other panel members who weighed in on IMF governance were Ian Clark, formerly an Executive Director of the IMF and currently president of the Council of Ontario Universities in Canada; Vikash Yadav, lecturer at the University of Pennsylvania; and Martha Finnemore, associate professor of political science at George Washington University in Washington. Moderator James Boughton, Assistant Director in the IMF's Policy Development and Review Department, guaranteed the discussion would "generate some fireworks."

Until very recently, Boughton observed, the IMF would not have felt comfortable discussing its governance in a public forum. "It is a welcome and positive sign that we are now able to have an open discussion," he said. He then raised two fundamental issues that had to be addressed in any discussion of reforming the IMF.

First, how can such an institution be governed in a way that is politically legitimate without sacrificing its efficiency and effectiveness in doing what it was set up to do? Second, how can poor countries and developing countries, as well as the borrowing countries that are most affected by IMF decisions, be assured of adequate representation without sacrificing the interests of the creditor countries that provide the IMF with the financial resources it needs to operate?

According to Vikash Yadav, the financial crises of the 1990s called into question the IMF's ability to carry out its mandate.

He pointed to several recent IMF initiatives designed to strengthen the international financial system but noted that their efficiency depended on members' compliance. Further democratizing the IMF, he argued, would make the organization's initiatives more effective because decisions produced through the democratic process have greater legitimacy and credibility.Yadav said that the distribution of power within the organization had to "adapt to reflect the growing weight of developing and emerging market countries."And this makes reform of the quota system essential.Members' contributions should be based on their stake in the global economy and their ability to pay; access to IMF resources should be based on gross financing need; and basic votes should have more weight in determining voting power, he concluded.

Ian Clark, however, suggested that modest reform was the answer to governing the IMF. He reminded listeners that the IMF is a membership-based institution and that "we...