Published Monday,
April 26, 2004
Dodd: World finances
need democracy, too
The mistake would be to allow
Europe to choose the next man or woman to head the International Monetary Fund
(IMF). If all goes according to tradition, the next IMF managing director will
be the ninth consecutive European to hold that post since the global financial
institution was established 60 years ago.
Europe's monopoly stems from an
informal arrangement, rather than any written rule. Without the United States'
approval, a new leader cannot take over, so America has an opportunity to
demonstrate our democratic principles by including developing countries in
global economic decision-making.
The IMF is a highly visible
international institution thanks to the critical role it plays in providing
oversight of the global economy and coordinating economic rescue policies in
response to economic crises.
In the past decade, the IMF has
assembled bailout plans for Mexico, five East Asian countries, Russia, Brazil,
Turkey and, most recently, Argentina. Developing-country governments know that
if they suffer a financial sector collapse, it will be the IMF they must
confront. Who governs the IMF is therefore a matter of great importance. Its
power should be matched by the perception of legitimacy.
Wheeling and dealing over the
next IMF chief is being done behind closed doors -- and only a small percentage
of the world's population is represented in the room. European governments are
engaged in round after round of backroom horse-trading to make their selection.
The top candidate appears to be Rodrigo Rato, the former finance minister of
Spain, although there also appears to be substantial support for a Frenchman
and to a lesser extent for a nominee of the Italian government.
Meanwhile, 11 IMF regional
directors -- representing 126 developing countries, or over two-thirds of all
members -- are demanding a fair and transparent selection process. They want
all members to be involved in the selection of the managing director. They also
want an end to the discrimination against developing countries.
Excluding non-Europeans from the
search for the IMF's top official is discriminatory.
In addition to maintaining
control of the top position, Europe also has a disproportionate share of votes
and seats on the IMF's executive board. Today, Europe holds nine.
These control almost 30 percent
of the total voting power.
Nations defined as having
developing or transition economies account for 85 percent of the world's
population, and have a gross domestic product more than double that of the
European Union -- yet they have only 38 percent of total votes. Looked at
individually, Denmark has more voting power than Korea, and Belgium has 52
percent more voting power than Brazil and 74 percent more than Mexico, despite
their larger populations, economic output and volume of international trade.
It's time to restore the balance
of power in this important economic institution in order to reflect how the
world has changed since it was created 60 years ago.
Defenders of the status quo cite
the Europeans' unique institutional knowledge and expertise that qualify them
for the managing director post. But there are many highly qualified candidates
from developing countries as well. If they are dismissed, it would be a cruel
irony that the people most affected by the IMF and its policies have no voice
in the selection of its chief executive.
The IMF Executive Board --
including the United States -- has already made a commitment to this goal in
2001 with a report stating "a plurality of candidates representing the
diversity of members across regions would be in the best interests of the Fund;
the goal is to attract the best candidates regardless of nationality."
The United States should insist
that this promise be kept by insisting that a diverse slate of candidates be
considered for. The head of such an important economic policy-making
institution should be chosen according to merit, not nationality.
Randall Dodd is director of
the Financial Policy Forum, a Washington, D.C., think tank, and a Foreign
Policy In Focus scholar. He wrote this for the Institute for Policy Studies.
The Institute for Policy Studies (IPS) is the only multi-issue progressive
think tank in Washington, D.C. Through books, articles, films, conferences, and
activist education, IPS offers resources for progressive social change locally,
nationally, and globally. www.ips-dc.org.