Still in the Woods: Gridlock in the IMF and the World Bank Puts Multilateralism at Risk
| Author | Jakob Vestergaard,Robert H. Wade |
| DOI | http://doi.org/10.1111/1758-5899.12178 |
| Published date | 01 February 2015 |
| Date | 01 February 2015 |
Still in the Woods: Gridlock in the IMF and
the World Bank Puts Multilateralism at Risk
Jakob Vestergaard
Danish Institute for International Studies
Robert H. Wade
London School of Economics and Political Science
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 atten-
tion 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.
•They should agree to a new quota formula that establishes a more consistent link between a country’s share of
world GDP and its share of votes. The new formula would reduce the current voting power of some European
countries and increase the voting power of some emerging market economies.
•The formula should raise the share of basic votes (given to all member countries equally) to at least 10 per cent, as
a way to protect the position of the low income countries.
•The formula should aim to strengthen regional groupings of countries, by allocating a significant fraction of total
votes as ‘regional basic votes’(to be distributed within regions on the basis of shares of regional GDP).
•Western states must assume responsibility for taking these steps. Their present reluctance reinforces the already
alarming drift to gridlock in global governance, and incentivizes small groups of states to establish ‘coalitions of
the willing’and competing power blocs.
The world is currently experiencing a tumultuous rebal-
ancing of international relations. Over the past three dec-
ades major countries and regions of the ‘global South’
have emerged as dynamic poles, linked through trade
and investment and less dependent than before on ties
to Western markets and states. Their economic emer-
gence has driven their governments to seek matching
political emergence, along two broad tracks. One is to
institutionalize inter-state cooperation which by-passes
the western-centric order; for example, the ‘ASEAN plus
China, Japan and South Korea’project to create a com-
mon market, the Chiang Mai Initiative to create a cur-
rency swap arrangement between the same set of
countries, the China–Japan accord to trade in their own
currencies rather than through the US dollar, Mercosur
and Banco del Sur in South America, and most recently
the development bank and the currency swap arrange-
ment established by the BRICS (Brazil, Russia, India,
Global Policy (2015) 6:1 doi: 10.1111/1758-5899.12178 ©2014 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 6 . Issue 1 . February 2015 1
Research Article
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