Still in the Woods: Gridlock in the IMF and the World Bank Puts Multilateralism at Risk

Abstract

The Western hegemony of the past 200 years is ending as power shifts towards the East and as Western states lose the authority to uphold a rules-based multilateral order. In the wake of the Great Crash of 2008 the G20 leaders took steps to bolster the multilateral order, including reform of the governance of the International Monetary Fund (IMF) and the World Bank so as to reflect the increasing economic weight of developing countries. The executive boards of both organizations affirmed that the primary criterion for allocating voting shares should be shares of world GDP. We show that the reforms at the IMF and the World Bank have substantially failed to meet their ostensible objectives. First, in both organizations the developed countries gained voting share relative to GDP share between 2009 and 2014. Second, countries continue to vary widely in their share of votes relative to share of world GDP; in both organizations some countries have six times or more the votes relative to GDP of others. Politicians and analysts should give attention to achieving more equitable governance in these important multilateral organizations. At the end of this article we show how this could be done. Policy Implications• To strengthen the multilateral order the Bretton Woods organizations should make a more determined effort than hitherto to adapt their governance structures to changes in the relative economic importance of countries.

Exporting stimulus and “shared prosperity”: Reinventing foreign aid for a retroliberal era

“…The second factor shaping and driving the shift in the aid regime among the “traditional” donors are the real and perceived challenges and opportunities presented by the “rise of the South.” Southern economies are now acting as major sources of foreign direct investment (FDI), competitors for market share, and are increasingly important trade partners. Within the realm of development co‐operation, Southern development partners are making growing contributions to various forms of development financing; have resisted or engaged on their own terms the western‐dominated “international” aid governance architecture; and have rather successfully promoted alternative ideational norms and programme modalities—including blurred and blended aid, trade and investment packages, and the focus on growth strategies, notably in terms of infrastructure development (Abdenur & Fonseca, ; Vestergaard & Wade, ; Mawdsley, ). In some regards, at least, the OECD‐DAC donors are moving closer to some of the norms and modalities of the Southern partners than the other way around.…”

Legitimacy Deficits of International Organizations: design, drift, and decoupling at the UN Security Council

“…For example, the IMF provides for quinquennial revisions of its weighted voting structure. But obstruction tactics enabled by qualified majority voting rules tend to hinder this updating in practice (Vestergaard and Wade 2015). The International Labour Organization has been relatively more successful in expanding the size of its Governing Body, but has still fallen short of implementing constitutional reform.…”

Leaving the Nest: The Rise of Regional Financial Arrangements and the Future of Global Governance

“…Top‐down approaches also find that IMF reforms for broader governance and policy reform have had marginal impact. Vestergaard and Wade find that IMF reforms do little to improve the equitability of decision‐making power between the global South and global North — although ‘developed countries gained voting share relative to GDP share between 2009 and 2014 … some countries have six times or more the votes relative to GDP of others’ (Vestergaard and Wade, : 1). The incremental impact of those changes underscores the limited scope of IMF reform, potentially highlighting why RFAs have emerged at an ever‐accelerating rate since the great financial crisis.…”