What do the United States, Japan, China, Germany, France, United Kingdom, and Italy have in common?
Citizens in these countries go every day without realizing the immense power their country holds on the international economic stage. Just as a college undergraduate would receive a student loan from Sallie Mae, countries around the world must go to the International Monetary Fund (IMF) if they need capital to rescue their development or stave off a recession. According to their website, the IMF works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Just as a loan officer at Sallie Mae would set the rates for the student, these seven countries of the IMF’s 189 members have a disproportionate impact on the conditions set for developing countries located in the global south.
The IMF’s seven countries with the most voting power share many commonalities, but perhaps the most significant is their latitude: each of their capitals lies above the Tropic of Cancer. Together, the US, UK, Japan, China, Germany, France, and Italy control almost a majority of voting power (45.16%). The United States, with 16.51% of the voting share, can unilaterally veto a variety of major policy decisions. Meanwhile, countries like Uganda, Vietnam, and Myanmar, all experiencing rapid expansion, have less than half a percentage point of voting power combined. Developing economies and the global south are chronically underrepresented in the very institution that is intended to help them maintain healthy economic growth.
Voting shares are determined in large part by a country’s quota, or position in the world economy, leading the above countries to hold a share of power disproportionate to their populations. These shares are adjusted based on the economic development of a country in relation to the entire body and also reallocated during General Reviews of Quotas, which happen at least every five years.
This representation is not at all proportionate to population- although these seven countries hold 45% of the voting power, they only have 30% of the world’s population. This mismatch has downsides for economic policy. For example, a review of 41 countries which had agreements with the IMF during the global recession of 2009 found that 31 had pro-cyclical policies, which would be expected to exacerbate the downturn. Many of these decisions were based on inaccurate growth forecasts developed by the top seven countries, which proves that this misaligned economic policy is the result of a disconnect between those making decisions and those affected.
In 2016, the IMF attempted to combat this problem with voting reforms by shifting voting power to four emerging economies: Brazil, India, China, and Russia. However, the shifts were insignificant in changing the true balance of power, seen in the way the rest of the developing economies lost 3 percentage points of the voting power. This attempt and subsequent failure demonstrate that the policymakers of the IMF recognize the problem, even if their solution wasn’t effective.
As the United States looks back on an election where representation was a keystone issue and completes a census that will determine the allocation of representation for a decade, there are valuable parallels to be drawn to the international institutions that struggle with similar issues. Through these challenges, governments around the world can learn from failures and successes to ensure proportional and commensurate representation for all.