Tuesday December 07, 2021

Decolonise the IMF

November 28, 2020

Most people assume that inequality between the global South and the global North (the United States, Western Europe, Japan, Canada and Australia) has been declining over the past few decades. After all, colonialism is behind us, and surely poorer countries are gradually “catching up” to richer ones. But, oddly enough, exactly the opposite has happened. The per capita income gap between the South and the North has quadrupled in size since 1960, in what can only be described as a striking pattern of divergence.

This trend is due in large part to power imbalances in the world economy. To put it simply, rich countries have disproportionate influence when it comes to setting the rules of international trade and finance – and they tend to do it in ways that serve their own economic interests, quite often at the expense of everyone else.

Nowhere is this problem more apparent than when it comes to the distribution of power in the World Bank and the International Monetary Fund (IMF), two of the key institutions that govern global economic policy. We might expect that representation in these institutions would be modelled along the lines of the United Nations General Assembly, or perhaps calculated according to population. But in reality, they are deeply undemocratic.

The problem starts at the top. The leaders of the World Bank and the IMF are not elected, but are nominated by the US and Europe. According to an unspoken agreement, the president of the World Bank has always been from the US, while the president of the IMF has always been European.

Moreover, voting power in these institutions is skewed heavily in favour of rich countries. The US has de facto veto power over all significant decisions, and together with the rest of the G7 and the European Union controls well over half of the vote in both agencies. Middle- and low-income countries, which together constitute 85 percent of the world’s population, have a minority share.

If we look at the voting allocations in per capita terms, the inequalities are revealed to be truly extreme. For every vote that the average person in the global North has, the average person in the global South has only one-eighth of a vote (and the average South Asian has only one-20th of a vote).

Not only is there minority control over global economic policymaking, there is also a clear racial imbalance at play: on average, the votes of people of colour are worth only a fraction of their counterparts. If this was the case in any particular country, we would be outraged. We would call it apartheid. Yet a form of apartheid operates right at the heart of international economic governance today, and has come to be accepted as “normal”.

In some cases, the differences between countries are particularly striking. Take Bangladesh and Nigeria, both of which were British colonies. In the IMF, a British person’s vote today is worth 41 times more than a Bangladeshi’s vote, and 23 times more than a Nigerian’s vote. And this is the 21st century; many decades after the end of colonial rule. The inequalities that characterise voting power in the World Bank and the IMF have their roots in the colonial period.

Excerpted: ‘It is time to decolonise the World Bank and the IMF’