Until very recently, Boughton observed, the IMF would not have felt comfortable discussing its governance in a public forum. “It is a welcome and positive sign that we are now able to have an open discussion,” he said. He then raised two fundamental issues that had to be addressed in any discussion of reforming the IMF.
First, how can such an institution be governed in a way that is politically legitimate without sacrificing its efficiency and effectiveness in doing what it was set up to do? Second, how can poor countries and developing countries, as well as the borrowing countries that are most affected by IMF decisions, be assured of adequate representation without sacrificing the interests of the creditor countries that provide the IMF with the financial resources it needs to operate?
According to Vikash Yadav, the financial crises of the 1990s called into question the IMF’s ability to carry out its mandate. He pointed to several recent IMF initiatives designed to strengthen the international financial system but noted that their efficiency depended on members’ compliance. Further democratizing the IMF, he argued, would make the organization’s initiatives more effective because decisions produced through the democratic process have greater legitimacy and credibility. Yadav said that the distribution of power within the organization had to “adapt to reflect the growing weight of developing and emerging market countries.” And this makes reform of the quota system essential. Members’ contributions should be based on their stake in the global economy and their ability to pay; access to IMF resources should be based on gross financing need; and basic votes should have more weight in determining voting power, he concluded.
Ian Clark, however, suggested that modest reform was the answer to governing the IMF. He reminded listeners that the IMF is a membership-based institution and that “we must avoid attributing to it the characteristics of a government.” Thus, Clark said, while principles of democracy and inclusiveness are fundamental to governance in a modern nation-state, they are not central to governance in a membership-based institution. The IMF, he said, currently meets the essential legal and constitutional requirements of good governance. Some reforms designed to force more openness and transparency could actually weaken the IMF and undermine its governance.
There are two classes of problems, he noted—those that are best addressed by universal participation and those that should be resolved by a limited number of countries. Small groups will thus always have an incentive, Clark said, to create forums outside multilateral institutions to deal with issues where they can achieve most of the benefits that could be secured by a wider consensus, which would be much harder to obtain. Finally, he said that IMF procedures should respect the fact that, to be effective, some of the consensus-building process must be conducted in confidential forums.
Martha Finnemore echoed Clark’s conservative approach, centering her comments on some very modest organizational reforms—in culture, training, and recruitment patterns—that might increase the influence of developing countries in the IMF. For example, she said, Executive Board workloads are asymmetric. Single-member constituencies have one state to represent, no IMF programs to monitor, and an extensive flow of expertise on the home front. African Executive Directors, in contrast, each represent more than 20 countries, the majority of them with IMF programs. She suggested allocating area department staff differently and splitting each African Executive Board constituency in two.
Another way to increase the influence of developing countries, Finnemore said, was for the IMF to continue its ongoing mission of fostering expertise in these countries to prepare them to actually take ownership of their economic strategies. Such training would also fight brain drain by giving people a reason to stay where they are instead of coming to work in Washington.