The reform of the IMF is imperative for an equitable world order

Delhi, India Oct 11, 2018, 09.54 AM(IST) Written By: Wajahat Qazi

File photo Photograph:( ANI )

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Pakistan has been moving away from the US and drifting into the Chinese orbit, being a substantive partner in China’s One Belt One Road Initiative’s, (OBOR) corollary, the China Pakistan Economic Corridor(CPEC). 

Before actually formally approaching the International Monetary Fund(IMF) for a bailout, the global governance institute has warned Pakistan against “excessive loans” from China. It is almost a surety that Pakistan will approach the Fund for its variegated economic and financial issues. But, a not too subtle warning has already been issued to the country which has over a period of time drifted to China’s orbit. (This has been couched in a technocratic gloss and verbiage).

The reasons are not too difficult to figure out: the institutions of global governance like the IMF are not merely technocratic institutions designed to maximize peoples welfare or merely to “look after” the global economy; they are institutions where the ingress of ideology( free market capitalism or  market fundamentalism) and politics is all too prevalent.

The quota system of the IMF and the voting rights thereof are loaded towards developed and industrialised (or even post-industrial) nations, especially the United States (which has had no qualms in maintaining the status quo from which it benefits). Complemented with the geopolitical heft and clout of the country,  the United States’ influence at and in the IMF gives it enormous leverage.

In terms of the ideological flavour of the IMF, it is loaded towards free-market capitalism and the gravamen of its approach towards countries in financial and economic distress is to goad these countries towards this variety of capitalism. The IMF has a “one size fit all” prescription for distressed countries toward this end (Obiter Dictum, Thomas Friedman, the famous and influential columnist of the New York Times, in his best selling book, “ The World is Flat”, essentially in the nature of an irrationally exuberant ode to free-market capitalism inspired globalisation called this “the Golden Straitjacket”).

But, countries that form the international system are neither uniform nor homogenous in terms of their development, economic growth and patterns thereof for a whole host of reasons. So, a “straitjacketed” prescription for all countries or economies is not only impractical but suggests an ideological agenda. This agenda is translated into action through “conditionalities” and “structural reforms” foisted upon economies in distress by the IMF. And, given the voting power discrepancies, there are other political agendas involved as well. The case of Indonesia after the Asian financial crisis in 1997 comes to mind here as an egregious example. More contemporarily, the IMF’s involvement and its role in Greece constitutes another example.

All this is not to demean and denigrate the IMF. This global governance institution is a much-needed one. But the political power embedded in it, its nature and the institutions’ ideological predilections(discredited in and after the 2008 global financial crisis) need urgent reform.

 Now, in terms of the instance of Pakistan , whose financing gaps have become enormous over the years, the country has been moving away from the United States and drifting into the Chinese orbit, being a substantive partner in China’s One Belt One Road Initiative’s, (OBOR) corollary, the China Pakistan Economic Corridor(CPEC). If both the OBOR and the CPEC actually fructify, then there will be a recalibration of economic and global power globally which, in turn, will have geopolitical implications and consequences. This might even constitute a challenge to the United States domination of the global economic and financial system, creating another powerful pole in the process. The IMF, in this instance, appears to be used to make a point to Pakistan. There then is politics involved here.

The example of Pakistan and other countries in the past must concentrate the minds of developing and emerging economies which are at a structural disadvantage in many respects vis a vis the developed world. Given the inherent volatility of the world financial system, especially in its more globalised avatar and given that economic fluctuations are part and parcel of the capitalist growth process, emerging and developing economies face vulnerabilities that can perhaps best be mitigated by institutions like the IMF. The institution then is both needed and desirable. But, at the risk of sounding tautological, it needs reform at both conceptual and structural levels.

The world that we inhabit contemporarily is not the same world it was in the seventies. Profound structural transformations have occurred that have both upended and rejigged past paradigms and shibboleths. The developing world, as a group, albeit a differentiated one, no more bears the depredations of post colonialism but has emerged as an entity which can hold its own, in many domains. It cannot and must not be relegated to the margins in institutions of global governance.

Developing countries need an agency and robust representations in institutions of import. One good starting point for this would be a comprehensive and robust reform of the IMF. If and when this happens, it could be a prelude to a more equitable world order. Till then, global governance will reflect and bear the imprimatur of power with developing countries, especially those in distress, suffering in the crucible of and at the altar of power politics.

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Wajahat Qazi

Wajahat Qazi is particularly interested in politics, global security and political economy. He is a wanderer and fancies himself to be a wannabe writer.