Emerging world order? from multipolarity to multilateralism in the g20, the world bank, and the imf

Politics and Society

Volumn 39, Issue 3, 2011, Pages 347-378

  Wade, Robert H ^a  

^a LONDON SCHOOL OF ECONOMICS   (United Kingdom)

Author keywords

G20; global governance; IMF; multilateralism; multipolarity; World Bank

Indexed keywords

EID: 80052300315     PISSN: 00323292     EISSN: 15527514     Source Type: Journal    
DOI: 10.1177/0032329211415503     Document Type: Article

References (62)

1. Robert Zoellick, "The End of the Third World?"(address to Woodrow Wilson Center for International Scholars, Washington, D.C.,April 14, 2010; emphasis added).
2. For example, Michael Wiles, "China's Censors Misfire in Abuse-of-Power Case," New York Times, November 17, 2010.
3. Stewart Patrick, The G20 and the United States: Opportunities for More Effective Multilateralism (New York: Century Foundation, 2010), http://tcf.org/publications/2010/10/theg20-and-the-united-states-opportu nities-for-more-effective-multilateralism.
4. The three organizations are discussed simply because they are contexts for interaction between established and emerging states, and because I have prior knowledge of them.
5. This is according to Volcker at a private lunch with the author at Princeton University, 1990 (when we were both teaching at the Woodrow Wilson School).
6. Joe Stiglitz, personal communication.
7. Personal communication, Ciao Koch-Weser.
8. Philip Stephens, "The West Must Offer Turkey a Proper Seat at the Table," Financial Times, June 18, 2010. One indicator of the extent of Western normative dominance is the voting coincidence score, which measures the amount of support a state receives from other states in the General Assembly. In the late 1990s, the EU and the United States received around 70 percent support for their positions on human rights. By 2009-10, the score had fallen to only 40 percent to 42 percent. China and Russia increased their scores from around 40 percent and 60 percent in the late 1990s, respectively, to around 70 percent today. Richard Gowan and F. Brantner, The EU and Human Rights at the UN (London: European Council on Foreign Relations, 2010).
9. See Mark Beeson and Stephen Bell, The G20 and International Economic Governance: Hegemony, Collectivism, or Both?" lobal Governance 15 (2009): 67-86.
10. President Obama previewed his government's new national security strategy in a speech at West Point military academy in May 2010. "Emerging powers in every region of the world," he said, "are increasingly asserting themselves," and the key to U.S. security is that the United States must deepen its cooperation with these "emerging centers of influence." Ann-Marie Slaughter, State Department policy chief, said, "We are not going to be able to solve any of these problems alone [from nuclear arms control to financial reform]-we have to work with other nations." Daniel Dombey and Gideon Rachman, "Mapped Out: As Washington Attempts to Engage More Closely with Emerging Powers, It Finds Their Ambitions Often Conflict with Its Own," Financial Times, June 3, 2010, p. 7.
11. Martin Wolf, "Basel: The Mouse That Did Not Roar," Financial Times, September 19, 2010, p. 13, emphasis added. See also World Bank, "Basel Core Principles and Bank Soundness," World Bank Research Digest 4, no. 4 (2010); M. Hojland nd J. Vestergaard, "The New Standard in Banking Regulation: From Basel 2 to Basel 3," in Governing through Standards: Origins, Drivers and Limits, ed. S. Ponte, P. Gibbon, and J. Vestergaard (Basingstoke: Palgrave, forthcoming); and R. Lall, "Reforming Global Banking Standards: Back to the Future?" in Governing through Standards: Origins, Drivers and Limits, ed. S. Ponte, P. Gibbon, and J. Vestergaard (Basingstoke: Palgrave, forthcoming).
12. Thomas Hale and David Held, eds., Handbook of Transnational Governance: New Institutions and Innovations (Cambridge, UK: Polity Press, forthcoming), chap. 1; emphasis added.
13. The G20 and Beyond, Report 2011:04 (Copenhagen, Denmark: Danish Institute of International Studies, 2011).
14. Quoted in Paul Blustein, The Chastening (New York: Public Affairs, 2001), 349.
15. Robert Wade, Financial Regime Change? New Left Review 53 (September/October 2008): 5-21.
16. Ciao Koch-Weser, personal communication.
17. Argentina, Saudi Arabia, and South Africa would be excluded from a list of the top twenty countries whether by GDP (nominal), GDP (purchasing power parity [PPP]), GDP (60 percent market exchange rates, 40 percent PPP), or population.
18. What Is the G20?" (G20, 2010), http://www.g20.org/about_what is_g20.aspx.
19. Counting only the EU states included in the nineteen country members, the G20 covers 77 percent of world GDP and 62 percent of world population.
20. On the legitimacy of the G20, see José Antonio Ocampo (p. 315), "A Development-Friendly Reform of the International Financial Architecture," Politics & Society (September 2011)
21. "Norway Takes Aim at G20: 'One of the greatest setbacks since World War II,' interview with Jonas Gahr Støre, Der Spigel, June 22, 2010.
22. These statements are based on interviews with International Monetary Fund (IMF) and World Bank officials, summer 2010.
23. Note that the nineteen country members (plus Spain as "permanent guest") send three persons to the top tables of the summits: the head of state, the finance minister, and the senior civil servant (sherpa). The countries representing regions send only one. Vestergaard, "The G20 and Beyond."
24. The Koreans, chair for 2010, consulted more widely than their predecessors.
25. Sewell Chan, "G-20 Gives Developing Economies Greater Role," International Herald Tribune, October 25, 2010.
26. As one example, see David Gruen, Terry O'Brien, and Jeremy Lawson, eds., Globalisation, Living Standards and Inequality (Sydney: Reserve Bank of Australia and Australian Treasury, 2002). My observations on the G20 are based partly on participant observation at the Sydney meeting from which this book emerged and on personal reports over the years from other participants, including informants at the World Bank and IMF in the summer of 2010. My paper at the Sydney meeting was the only one to take a critical view of the strong proglobalization argument being championed by representatives of the developed countries and the World Bank. It elicited jeers from Australian representatives, such as "You are just kicking up statistical dust" and "Your approach leads to the paralysis of policy making." Developing and transitional country (DTC) representatives sat mum, but several later said sotto voce that they were glad I had made the argument. When asked why they had not spoken at the session, they replied, in effect, that to disagree with the developed country consensus would be courting trouble.
27. Alan Beattie, "A Big, Unwieldy and Diverse Body Moves Upstage," Financial Times, G20 Summit special report, June 25, 2010.
28. Not all observers agree. Marc Plattner says, "By deciding to make the G-20 the key body for addressing the global financial crisis, the governments of the G-8 countries effectively consigned the smaller body to obsolescence, Today the G-20 is clearly where the action is and where the real influence lies." Plattner, "From the G-8 to the G-20," Journal of Democracy 22, no. 1 (2011).
29. Ngaire Woods, "Global Governance after the Financial Crisis: A New Multilateralism or the Last Gasp of the Great Powers?" Global Policy 1, no. 1 (2010): 51-63.
30. Nancy Alexander, "The US: Still CEO of the Free World?" G20Update 6 (March 2011).
31. "The G20 Show How Not to Run the World," Financial Times, November 12, 2010; Chris Giles and Christian Oliver, "Pledge Stirs Uneasy Sense of Déjà Vu," Financial Times, November 13-14, 2010, p. 2; Christian Oliver, Chris Giles, and Alan Beattie, "Seoul Dismisses Talk of Failure," Financial Times, November 13-14, 2010, p. 2.
32. Robert Wade, "Greening the Bank: The Struggle over the Environment, 1970-95," in Devesh Kapur et al., The World Bank: Its First Half Century, vol. 2 (Washington, DC: Brookings Institution, 1997), 611-734.
33. In the World Bank, the 187 governors delegate their governance role to the Development Committee, composed of finance or development ministers representing the countries and constituencies of countries that occupy the twenty-four seats on the board; and the latter delegate the day-to-day governance to the Board of Executive Directors, composed of civil service representatives of the same countries and constituencies, resident in Washington.
34. There were some mixed-constituency Part I states (in a constituency with developing countries) that did support the general capital increase (GCI). Austria was one.
35. Some Part I countries (United Kingdom, Germany) also opposed a GCI from a commitment to defend bilateral aid programs. As for Zoellick's reluctance, some informants noted that he is a Bush government appointee (he and James Baker were the key figures who swung the Florida recount in favor of Bush), and is unlikely to be offered a second presidential term by the Obama government, unless failure to reappoint him might jeopardize the U.S. monopoly of the position. According to these informants, he has signaled that he may see his future to lie outside of multilateral development, in circles where support for public-sector financial organizations that compete with the private sector may not be welcome.
36. Quoted in Bretton Woods Project, "Expert Panel Calls for Sweeping Bank Governance Reform," Update 68 (November 20, 2009).
37. The work on the reform package built on ongoing work by a special board subcommittee. After the inglorious end of the Wolfowitz presidency in 2007, the board established an ad hoc committee to conduct an investigation of the Wolfowitz affair, which revealed flaws in management of the board and the bank going far beyond the affair. So the board established a standing committee to propose changes in the nuts and bolts of board operations, board-staff relations, and board-president relations. But until the global financial crisis and the need for a CGI, nobody was paying much attention to its work.
38. This discussion refers to voting shares in the International Bank for Reconstruction and Development (IBRD), the near-commercial lending arm of the bank, as distinct from the International Development Association (IDA), the soft-loan arm.
39. To make the voice shift within months was quick by the standards of Japan's rise from fifth biggest shareholder to second biggest. It took a dedicated division in Japan's Ministry of Finance several years of strategizing, in the first half of the 1980s, even though only an adjustment of shares within the G7. Until the current fallout between the United States and Europe, the whole of the G7 has tended to unite against dilution of its aggregate share. Robert Wade, "Japan, the World Bank, and the Art of Paradigm Maintenance: The East Asian Miracle in Political Perspective," New Left Review 217 (1996): 3-36.
40. On purchasing power parity and market exchange rates, and controversies around their use, see Robert Wade, Globalization, Growth, Poverty, Inequality, Resentment and Imperialism," in Global Political Economy, 3rd ed., ed. John Ravenhill (Oxford, UK: Oxford University Press, 2011).
41. Personal communication from an individual who requested anonymity.
42. See World Bank, "World Bank Group Voice Reform," paper for Development Committee meeting, April 25, 2009.
43. In the IDA soft-loan lending arm, the high-income countries, postreform, have 61.18 percent; in the International Finance Corporation (IFC), 66.24 percent. The low-income countries have 4.46 percent in the IBRD, 11.31 percent in the IDA, and 3.09 percent in the IFC. Bretton Woods Project, "Bank Voting Remains Unbalanced," Update 70 (April 16, 2010); and "IFI Governance Reform Freezing Over?" Update 71 (June 17, 2010), http://www.brettonwoodsproject.org/gov71.
44. This statement holds when the earlier increase in "basic votes" is included.
45. Such "ad hocery" is hardly new. In a conference of state representatives in the run-up to the Bretton Woods conference in 1944, the young Raymond Mikesell was given the task of working out a formula for allocating IMF quotas on the basis of several variables whose general importance had been agreed at the conference. As he started work with his slide rule, he was informed confidentially that the U.S. president and secretary of state had agreed on the appropriate share to go to each of the "big four" wartime allies, and he was left to devise a "technical" formula to produce that predetermined result. Raymond Mikesell, The Bretton Woods Debates: A Memoir, Essays in International Finance Series, no. 192 (Princeton, NJ: Princeton University, 1994).
46. For an overview of the voice reforms, see Jakob Vestergaard, "Voice Reform at the World Bank," paper for Danish Ministry of Foreign Affairs, draft, February 2010.
47. The five largest gains in quota shares go to China (2.4 percentage points), Brazil (0.53), Korea (0.39), Turkey (0.37), and Mexico (0.35). The five largest decreases in quota shares go to Saudi Arabia (-0.83), Belgium (-0.59), Germany (-0.52), Canada (-0.36), and Venezuela (-0.33). The rank order of shareholders in the IMF is now (1) United States, (2) Japan, (3) China, (4) Germany, (5) France, (6) United Kingdom, (7) Italy, (8) India, (9) Russia, (10) Brazil. Previously the rank order was (1) United States, (2) Japan, (3) Germany, (4) France, (5) United Kingdom, (6) China, (7) Italy, (8) Saudi Arabia, (9) Canada, (10) Russia. With the exit from the top ten of Saudi Arabia and Canada and the entry of India and Brazil,the DTCs now have four states in the top ten, as compared with two previously (on the assumption that Saudi Arabia should not be classed as a DTC). Note that the Fund refers to "EMDCs" (emerging markets and developing countries) rather than the Bank's "DTCs."
48. "Alleged" overrepresentation because the formula used to calculate it is highly contested, and overrepresentation vanishes with small variations.
49. Bretton Woods Project, "IFI Governance Reform"; Bretton Woods Project, "Implementing IMF Governance Reform: Baby Steps in Slow Motion," Update 73 (November 29, 2010), http://www.brettonwoodsproject.org/gov73. See also Woods, "Global Governance."
50. Robert Wade, "The Global Slump: Deeper Causes and Harder Lessons," Challenge, September/ October, 2009; Robert Wade, "From Global Imbalances to Global Reorganizations," Cambridge Journal of Economics 33, no. 4 (2009): 539-62; Robert Wade, "The Economy Has NotSolved Its Problems," Challenge, March/April 2011.
51. Quoted in Bretton Woods Project, "Bank Voting Remains Unbalanced."
52. Quoted in David Bosco, "The IMF: Europe Fights Back," November 4, 2010, http://www.bosco.foreignpolicy.com; emphasis added.
53. On fragmented and comprehensive regimes, see Robert Keohane and David Victor, "The Regime Complex for Climate Change," Perspectives on Politics, March 2011. On the belief-action relationship at different "levels" of learning, see Melford piro, "Buddhism and Economic Action in Burma," American Anthropologist 68, no. 5 (1966): 1163-73.
54. Wade, "From Global Imbalances."
55. These criteria are proposed by E. Rueda-Sabater, V. Ramachandran, and R. Kraft, "A Fresh Look at Global Governance: Exploring Objective Criteria for Representation" (Working Paper 160, Center for Global Development, February 2009).
56. This is best treated as a hypothesis. The United States and other Part I countries that opposed a GCI for the Bank nevertheless approved large GCIs for regional development banks (e.g., a 200 percent increase for the Asian and African development banks).
57. The World Bank's new information policy makes a presumption that documents should be available in the public domain after ten years. But the Board of Executive Directors insists that its documents be treated under much tighter restriction. The board decides on requests to see transcripts of board meetings more than ten years old on a case-by-case basis. If any one state objects, no grounds for refusal need be given, and other states are unlikely to argue in favor of release. There is an appeal procedure-but the rules say that no board decision can ever be changed as a result of an appeal. The Chinese government has blocked requests to see transcripts relating to China, without challenge. An information policy so circumscribed by political convenience hardly deserves the name.
58. The issue is complicated by rumors that Zoellick is playing a double game: keeping up pressure on Bank member countries for a second term at the World Bank under the banner of "the last American president" while also lobbying the Republican Party to be appointed U.S. treasury secretary if a Republican wins the White House in 2012.
59. Luis Carlos Bresser Periera, Globalization and Competition: Why Some Emerging Countries Succeed While Others Fall Behind (Cambridge, UK: Cambridge University Press, 2010).
60. Robert Wade, "Wheels within Wheels: Rethinking the Asian Crisis and the Asian Model," Annual Review of Political Science 3 (2000): 85-115.
61. Robert Wade, "After the Crisis: Industrial Policy and the Developmental State in Low-Income Countries," Global Policy 1, no. 2 (May 2010): 150-61.
62. A governance separation of IBRD and IDA would undoubtedly have costs, including diseconomies of scale, coordination costs, and adverse incentives, as newly disempowered Part I countries find bilateral aid more to their advantage. My thanks for uenther Schoenleitner of the Austrian finance ministry for useful comments.