|Contributions to the I.M.F. Come with Conditions
While the B.R.I.C.S nations are contributing to the I.M.F.’s funding with the purpose of shoring up the global financial system, they’ve stipulated that they want more power in the I.M.F. China is contributing $43 billion, so as it races to become the world’s leading economic and financial nation it wants a bigger part of the decision making process, commensurate with its rising power. So the first question to be asked is, “Will it get it?” The emerging countries –China, Brazil, Mexico, India and Russia— announced contributions to the IMF’s global firewall, nearly doubling the fund’s resources to $456 billion, at the G-20 summit in Mexico this last weekend as global efforts to restore confidence in the euro were discussed. The others will contribute $10 billion each and South Africa $2 billion.
I.M.F. Structure of Power
The International Monetary Fund is subject to the will of the U.S. Some may have believed that it’s a truly Democratic institution where true consensus has to be reached on issues before the body can agree. This is not so. For any Resolution to be passed, 85% of the members must be behind it.
The U.S. has 16.75% of the votes at the I.M.F. So for an 85% agreement to be reached, the U.S. must agree. If they don’t, the Resolution will not be passed.
It’s true that if all the members of the E.U. have around 25%+ of the votes, but this is irrelevant if the U.S. opposes the Resolution. To emphasize the point –all the member’s votes of the I.M.F. amount to 83.25% of the votes and an 85% of votes must be achieved to get a Resolution through.
This reflects the Balance of Global Power going back to the last World War. To most observers that may still be the case in terms of global financial power, but in the emerging nations, we don’t have supportive, subordinate economic powers.They walk their own road. As economic power grows in China and it finds ‘satellite’ nations becoming dependent on it, so it’s growing a substantial power base, one that will have to be recognized in global financial institutions such as the I.M. F.
Don’t expect the U.S. to willingly hand over their voting dominance, but to draw off voting rights from other nations, if they wish to accommodate China in their demands. Indeed, until China and its ‘satellite’ nations are the dominant economic power, we don’t see the U.S. budging on the issue.
When, If at All, Will This Change?
Right now, the B.R.I.C.S. are setting up an alternative to the World Bank, focused ontheir interests alone. This appears to precede the full internationalization of the Yuan. China is acting away from the developed world on this. It does set a precedent we can expect China to follow in the future and on other issues.
Once it has established a economic power base rivaling that of the U.S. (not necessarily the developed world in total) it may well challenge the U.S. at the I.M.F. or set up a developing world equivalent, as it is doing with the potential rival to the World Bank.
China, as always, will be driven by its own interests, solely…