Growth gap puts IMF in endless campaign mode
By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It’s not just America’s electorate that’s at risk of campaign fatigue. At the International Monetary Fund spring meetings held this past week, the BRIC nations – Brazil, Russia, India and China – were in full campaign mode even before the ink has dried on previous increases made to their voting strength at the international lending body.
Contributing to the euro bailout fund at the IMF offers a pretext to revive the issue of power. But with developing nations expected to grow twice as fast as rich economies like the United States and Europe over the next five years, haggling over heft can be expected to become a permanent feature of future IMF and World Bank meetings.
Ever since the Washington-based lenders were established 65 years ago, debates over who held the internal balance of power generally took place only twice every decade, when new leaders were chosen. In addition, few questioned the carve-up of leadership – which gives European nations the unwritten right to pick the head of the IMF and America the World Bank chief. In recent years, however, debates over who wears the trousers at the agencies have refused to die down.
Deals on voting power were struck at the fund in 2008 and late 2010, giving developing nations more influence. The last of these – which will elevate China from the sixth largest shareholder to the third – has yet to be ratified. Yet it’s already clear this shift of votes won’t be enough to satisfy fast-growing developing nations.
Emerging countries accounted for two-thirds of global growth over the past five years, the World Bank calculates. This has made the meager voice of the likes of China, Brazil and India look woefully out of date. And the World Bank sees no let-up in this process. If, as the bank expects, poorer nations continue to outpace richer rivals, the status quo power structure at the IMF and World Bank will constantly be lagging.
This makes it all but certain that IMF chief Christine Lagarde and incoming World Bank President Jim Kim will be the last to benefit from the monopoly of Europe and the United States over the top jobs. Neither post is due to come up again until 2017. But rich members of the IMF and World Bank had better get used to a permanent campaign to surrender some of their power.