IMF Governance: Do We Want You To Care?

One subject you’re probably not even slightly interested in is the governance structure of the International Monetary Fund. But they’re having a big meeting coming up and they invited a bunch of bloggers to come in for a briefing about it*, and some important discussions about IMF governance will be happening so I might as well explain it.

The way things currently work is that the IMF is structured around an idea of “shares”—money that member countries have put up. The more shares you have, then roughly speaking the more influence you have within the institution. And as a general matter, the shares are supposed to be weighted according to economic significance. So since some large developing nations are now a lot richer than they were 10-14 years ago, there’s basically a need to give them more say. Which everyone more-or-less agrees on, but to get specific about it would require giving less influence to someone else and that’s where things get dicey. But the general shape of things is that small European countries are likely to lose out in any kind of reasonable settlement. Which is fine by me except that I happen to be a big fan of small European countries, so this kind of makes me sad**.

The issue that actually might make a huge difference in the lives of hundreds of millions of people around the world, however, is not the allocation of shares but the total amount of funds raised through the quota system. As the financial crisis hit in 2008, it became clear that the resources available to the IMF were not sufficient to meet the kind of emergencies that arise in the modern world of securitized finance. So at G-20 meeting, the leaders of the world’s biggest economies made a kind of ad hoc deal to boost IMF resources via loans from governments to the Fund. But a question remains as to what should be done on a permanent basis.

My view is that more IMF funding via higher quotas is an excellent idea. But one of my questions to the briefers was whether they thought it was actually a good thing that everyone finds this issue dull and nobody is paying attention. After all, the public wrongly thinks bailouts are horrible and the proposal here really is to have the world’s taxpayers put together a big bailout fund. Which is exactly what we ought to do, in my opinion. But I bet the voters would disagree. Disappointingly, though, I couldn’t get anyone to say on the record that I was either right or wrong about that.

* It was on the record even, just nobody said anything particularly quotable and this isn’t a quotes kind of blog.
** Turns out you can construct an ad hoc argument about Purchasing Power Parities to justify overrepresentation of small European countries but since I just wrote a post cautioning people against ad hoc arguments about prices, I’ll refrain from doing so.