The Commonwealth and institutional reform (part two): a new Bretton Woods?

Further to Saturday’s post, I’ve been looking at Ngaire Woods’ advisory paper to the Commonwealth Secretariat regarding the reform of the IMF and World Bank.

Professor Woods outlines the main problems with the institutions, especially their much-maligned Amero-centrism and “prescriptiveness”. She also highlights the ways in which some countries are shunning the Bretton Woods twins and making their own arrangements: “where countries are able, they are turning away”. Some of these countries believe that “[the IMF] do not have the expertise to advise us”.

In my interpretation, if changes are not made soon, it may be too late. Lack of faith in the institutions is becoming determined and endemic.

Woods lays out three scenarios. The first is that the existing reform agenda continues, with the Commonwealth’s support. For Woods, this is unsatisfactory, particularly as the “World Bank is pretty much untouched by the current governance reforms.” Additionally, as I have hinted at above, “incremental reform risks consigning the IMF to terminal irrelevance before the reform process bears any fruit”.

The second scenario sees the Commonwealth lobby for greater reform, but to be discussed outside Bretton Woods, at more egalitarian and informal organisations like the G20.

The third scenario, favoured by Woods, is by far the most ambitious. She calls for nothing less than a new Bretton Woods conference. This would be a truly global meeting at which the very constitutions of the IMF and World Bank could be rewritten to reflect the ways the world has changed since they were originally drafted. (Woods mentions, more than once, the salient truth that in 1944 the US was the world’s largest creditor, yet today it is the greatest debtor.)

It is beyond the remit of Woods’ paper to go into the details of the reforms, yet the boldness with which she demands them – and the means by which she would implement them – is admirable. A new conference would probably result in a far more equitable system, would surely bolster faith in Bretton Woods and would certainly invigorate the global debate on institutional reform in ways that are essential to workable change.

IMF reform: code words and the Commonwealth

As I wrote last Friday, the likelihood of serious progress on Bretton Woods reform just might be increasing.

The Bretton Woods Project reports that the IMF’s Independent Evaluation Office (IEO) has released a critical new evaluation of the Fund’s governance. The document highlights unclear divisions between departmental remits, over-centralisation and a lack of ministerial scrutiny.

The Bretton Woods Project’s article draws attention to some of the more interesting findings. One of the most extraordinary aspects – in my view at least – is Jeff Chelsky’s account (located in a background paper to the IEO’s main evaluation) of the use of so-called “code words” in summaries of executive board decisions. The phrase “a few” means two to four members of the board. “Nearly all” means around 20. Yet the summary phrase “the view is held that” is explicitly code for the opinion of the member representing the US. What more telling terminology could there be? Is it too much to suggest that this subtle phraseology may belie the nature of US dominance at the Fund?

Needless to say, Chelsky finds these code words harmful to the transparency of IMF decision-making. However, the Bretton Woods Project remains stoic as to the impact of the IEO report: “Dominique Strauss-Kahn has indicated that he plans to announce some measures on governance reform in the coming weeks… But as with most IMF reform, not much is expected to happen quickly.”

Somewhat better news comes from London, as Simon Maxwell at the Overseas Development Institute emphasises the priority accorded to discussions of reforming global governance at June’s Commonwealth “mini-summit”.

It must be admitted that the leverage of the Commonwealth is limited. The BBC’s Mike Jarvis asked the assembled Heads of Government “what sort of clout, or what sort of influence does the Commonwealth have… if the reforms… are not forthcoming fast enough?” As far as I can tell from the transcript, he received no real reply.

Whilst the capability of the Commonwealth as an organisation to force change is small, words do count for something, especially when those words come from the mouths of prime ministers and presidents. An assertion of intent from the organisation is better than nothing. The Marlborough House Statement declares that:

“We intend to pursue the redefining of the purposes and governance of the Bretton Woods institutions, including working towards a Commonwealth consensus and wider international support for an international conference to achieve these goals… We intend, individually and collectively, to carry forward our reform agenda to relevant international fora.”