The IMF and the World Bank are lending institutions; they cannot be run by their borrowers. But they can listen more to poor countriesby P L / October 20, 2002 / Leave a comment
The protesters who make a habit of disrupting big international financial gatherings have wrought at least one desirable change. The sprawling annual meetings of the IMF and the World Bank have been slimmed down this September. But this gesture of modesty has not silenced the critics. The global financial establishment is under unprecedented attack-not just for the alleged harm it causes, but for its perceived lack of legitimacy.
Joseph Stiglitz, the former World Bank chief economist, delighted the anti-globalisers recently with his claim that: “The most fundamental change that is required to make globalisation work in the way that it should is a change in governance.”
The problem, he says in his book Globalisation and its Discontents, is that international financial institutions are not democratic enough. “The IMF… affects the lives… of billions throughout the developing world; yet they have little say in its actions.” Rich-country bankers call the shots. Moreover, these financial mandarins operate in secret. This limits public scrutiny-all the more important when officials are not directly elected-undermines democratic accountability and breeds suspicion.
Undeniably, the IMF and the Bank are undemocratic and often secretive-as, indeed, are many of their critics, such as Greenpeace. So are other lending institutions, such as Barclays Bank. So what should be done? Stiglitz calls for three big reforms: a change in voting rights at the IMF and the Bank to give poor countries a bigger say; changes to ensure that it is not just the voices of finance ministries and bankers that are heard there; and greater openness to improve their legitimacy and democratic accountability.
Breaking the stranglehold that rich countries-in particular, the US-have over the IMF and the Bank seems reasonable. People in developing countries not only outnumber those in rich ones five to one, they are also the main beneficiaries (or victims) of IMF and Bank decisions. One option is to weight voting rights at the IMF and the Bank according to population. Another is to copy the WTO, where each country has one vote and a veto.
Unfortunately, in the unlikely event that rich countries agreed to it, a change in voting rights that gave poor countries control of the purse strings would not work. Banks cannot be run by their borrowers. While the WTO sets rules that apply equally to all, the IMF and the Bank basically lend rich countries’ money to poor ones. They do make mistakes,…