Interestingly, the paper is titled “An IMF for the 21st Century”, a title that raises the issue as to why such a dissertation has come more than a decade after the start of the twenty-first century bearing in mind that the sustained calls for reform of the Bretton Woods institutions which, even developed countries concede, was not fashioned to respond to the contemporary challenges of poor, underdeveloped countries, most of which were still colonial possessions when the agreement was signed in 1944 to seek to respond to the rebuilding needs of war-ravaged Europe.
What has pushed the IMF to unveil its new “vision” is the current global economic and financial crisis, which Strauss-Khan says has put at risk much of what the Fund has worked for including less poverty and more prosperity. Critics of the Fund, however, particularly underdeveloped and developing countries that were forced to accede to conditional borrowing particularly during the 1970s and 1980s would question whether more prosperity and less poverty were indeed part of the IMF’s mission during that period and whether in fact the prescriptions dispensed by the IMF did receiving countries more harm than good. We remember only too well the stringencies imposed on public spending that compromised the funding of social services, reduced spending on critical imports and forcing borrower countries to reduce employment levels. We recall too that IMF austerity measures precipitated instability, riots and killings in poor countries. Indeed, some economic theorists still believe that the Fund remains both largest ‘living symbol’ of the gap between rich and poor countries and the most poignant indicator of an unacceptable control over the economies of the poor countries of the south by the rich countries of the north, particularly the United States, the single largest contributor to the IMF.
By the later years of the twentieth century the IMF had begun to be more receptive to calls for reform of the institution and since then we have seen a revamping of its lending framework that have ushered in new financing instruments while a significant boost to the Fund’s concessionary resources will allow for the tripling of its lending to low-income countries over the next two years. Additionally, the IMF has also moved to ease the onerous debt burden on low-income countries by waiving all interest due on lending to those countries until 2012.
Even as the IMF has moved to reform its modus operandi, however, new challenges have emerged that will demand even more of the organization and the most significant pronouncement made by Strauss-Khan during his presentation was the acknowledgement that climate change is “perhaps, the most critical issue facing the planet in the 21st century” and that he sees the Fund supporting measures “to deal with the serious macroeconomic and financing consequences of climate change.” It is by no means an inconsequential pronouncement by the IMF’s Director General that the Fund has acknowledged that climate change falls within its ‘core mandate’ and that it is seeking to update its crisis response capacity since what this means is that more funds will be required to respond to the challenges already facing some vulnerable countries including low-lying island states in the Caribbean and elsewhere. Here in Guyana, while President Bharrat Jagdeo’s Low Carbon Development Strategy (LCDS) appears to be the flavour of the day, as far as the country’s environmental policy is concerned, the events of 2005/2006 provide a grim reminder that our more immediate concern ought to be with rising sea levels and its implications for our heavily populated and highly vulnerable coastal plain.
Of course, none of what the IMF promises in terms of reform is likely to count for much unless its can significantly hasten the pace of its long-promised governance reform particularly in the context of levelling the playing field in the balance of power between rich and poor member countries of the Fund. As Strauss-Khan himself admits the Fund’s 2008 “quota and voice reform” is still not implemented since only 64 member countries – representing about 70 per cent of the required 85 per cent voting power – have enacted legislation to make the reform possible.
The point about the interminable delay in bringing about governance reforms within the IMF is that the slow pace of the reforms is a powerful manifestation of an unchanging balance of power and of the reluctance of developed countries to loosen their hold on the multilateral financing institutions. Better still, the gingerly pace of IMF reforms reflects the reluctance of rich countries to countenance significant change though Strauss-Khan himself admits that the mandate has long been “validated.” Building a Fund for the 21st century has been identified by Strauss-Khan as one of three “global challenges” facing the IMF through he concedes, succinctly, that the key decision-makers inside the Fund may still be locked in the same post-war mould that fashioned Bretton Woods. This, perhaps, is still the most important challenge facing the IMF even as its Managing Director talks of change.
