Global Power Dynamics-II

By | 15 Apr, 2013 3:57 PM |

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IMF has been consistently used by the developed nations to further their own political agenda and to impose their economic beliefs on the rest of the world, so much so that the Keynesian economics, as we know it has almost been relegated to the background. The curriculum in most countries grudgingly devotes only a few pages to his work. (Ironically it was his prescriptions they turned to, to take the world out of recession. Mainly, increasing Government expenditure to revive demand).

The voting power in the IMF is determined by quotas which is supposed to be an indicator of the economic status of the country. The quota formula consists of four variables- GDP, international trade, economic variability and international reserves of countries. The quota system has mostly remained unchanged since 1945 and does not adequately represent the interests of developing nations.

The quota system was reviewed in 2010 and has to be ratified by the IMF members by 2014. Even after the proposed changes the share of quota of developing countries continue to be meagre.

An article in Economic and Political weekly analyses the recent changes in quota through 3 parameters- absolute GDP, growth rate, net contribution to demand.
It concludes that- India ranks 4th in absolute GDP in purchasing power parity terms. It was the second largest contributor to global growth after the crisis. Also, it ranked second in its contribution to net global demand(China’s was negative). But when it comes to the share of quota of IMF it ranks a distant eighth.

Also the head of IMF has always been an European. The most recent IMF head, Christine Lagarde (a french national) was appointed when euro-zone was deep in crisis. Apparently, no other candidate was suitable for the job.

This is the link to the previous article written on this topic:
http://www.economydecoded.com/2013/01/global-power-dynamics.html#more

Views presented in the article are those of the author and not of ED.

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