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The IMF Governors will be considering formally next week a pack of governance reforms -- most notably a proposed change in quota shares and thus voting power among members. The change is meant to give developing countries, especially China, India and other fast-growing emerging market economies, and developing economies as a group, more votes and a bigger stake in the IMF's future.
I have had several questions from reporters about the merits of the proposed changes, some in response to my signing with seven other think tank colleagues (at Brookings, the Peterson Institute, and New Rules) a letter expressing concern that the proposed reforms fall far short of what's needed to ensure legitimacy and effectiveness at the IMF in a rapidly changing global economy.
The discussion about quota changes (and the formula for quota changes) is exceptionally arcane. The bottom line, as Ralph Bryant of Brookings makes clear in a forthcoming paper, is that the changes in the formula itself don't achieve any increase in developing country influence or engagement; it is the ad hoc adjustments to the formula (and a tripling of "basic votes") that produce some increases for developing countries. That means the much fought over formula (over two years of negotiations) provides no basis whatsoever for somewhat more automatic and less politically contentious adjustments in the future to reflect the growing weight of the developing world.
Is there any hope for a breakthrough on IMF governance? Dominique Strauss-Kahn, head of the IMF, tried to put the idea of double majorities on the table of reform just prior to his arrival less than one year ago. That idea deserves more attention. Why? Double majority voting provides the big creditor countries (U.S., Europe etc.) effective negative or veto power on key issues, while providing developing economies some positive power to move the Fund forward. Positive power derives from the kind of coalition building, deal-making and trading on key issues that is required to get a majority of countries (or Board members) as well as votes, and might help generate the consensus building that would restore to the IMF its role as a global venue on global financial issues.
The Europeans are more attuned to double majority voting, which they employ to keep big and small members of the EU satisfied if not always happy. But Americans can understand double majority voting in the context of the bicameral legislative arrangement, in which the composition of the Senate (where small states as well as large ones have two members) protects small (in population, and usually more rural) states.
It's no panacea; there are multiple complexities in its deployment: Double majorities on what issues, and what size majorities?
But for Strauss-Kahn to put it back on the table might generate a new round of healthy debate….on who is and who ought to be running the IMF.