Global Governance in Geneva: Webster University - Prof. Joseph Marques

Meu amigo Joseph Marques, conhecedor profundo não apenas da governança global – alguns diriam globaliza – a partir de Genebra, mas também do mundo financeiro internacional, me envia o prospecto do curso que ele está oferecendo em Genebra, na Webster University.
Recomendo enfaticamente, pois somos colegas no estudo das relações econômicas internacionais, com participação conjunto em encontros da área.
Paulo Roberto de Almeida

Em anexo, segue o flyer do meu curso sobre Governança Global na Webster University em Genebra este verão (Junho/Julho). Faz tempo que anseio alavancar meus contatos nas organizações internacionais em Genebra e oferecer uma experiência única de ver o multilateralismo e governança global por dentro e de perto aos alunos de graduação. Será um curso intensivo (pelo menos 8 horas por dia, 4 dias por semana, durante 3 semanas) com palestras teóricas de manhã, e visitas às organizações internacionais e debates com profissionais à tarde. A noite e fins de semana ficam por conta do lago, das montanhas, dos festivais, dos parques e viagens pela Europa.

O curso oferecerá a oportunidade de conhecer vários professores, profissionais e diplomatas e apresentará muitas perspetivas diferentes. O objetivo é que o aluno volte para casa com um conhecimento muito mais amplo e profundo de vários problemas globais, dos vários regimes que regem as instituições e possíveis sugestões dos mesmos além de muitos contatos e amizades que poderão ser muito úteis no futuro. Gostaria de pensar que, após quase um mês sob minha tutela direta, os alunos ganharão maior interesse e respeito por vocações dedicadas ao ensino e pesquisa, cooperação internacional, desenvolvimento económico e direitos humanos.

Peço a gentileza de recomendar o curso e disseminar este flyer entre vossos colegas, alunos e contatos. Fico ao dispôr de todos, havendo perguntas a respeito.

Um abraço, com estima, a todos,

Joseph Marques

(joseph.marques@graduateinstitute.ch)

An Economic Cold War -- artigo PRA publicado

Meu mais recente artigo publicado:

“Now, an Economic Cold War: Old Realities, New Prospects”
(Shanghai, 13 outubro 2010, 4 p.)
Resumo modificado de trabalho apresentado na Fundación Ramón Areces, de Madrid, em simpósio organizado em colaboração com a OCDE sobre governança global.
Publicada in:
FRA, Revista de Ciencias y Humanidades de la Fundación Ramón Areces;
Monográfico: “Mas Allá de la Crisis: El Futuro del Sistema Multilatearal
(Madrid: Fundación Ramón Areces, Diciembre 2010, p. 116-120).
Relação de Originais n. 2202; publicados n. 1015.

Old Realities
The geopolitical Cold War is definitely closed, it seems. Besides “normal” political tensions and trade frictions between major powers, there are no more totally opposed conceptions about how to organize the world economically or politically. No one is saying something like “we’ll bury you”, as done in the past by a Soviet leader.
We are having now an economic Cold War, or sort of. Indeed, there is nothing capable of starting a full-scale confrontation among major powers. What we do have now are trade frictions and currency misalignments, over a post-crisis adjustment process. There is a dispute over how national economic policies should take into account their impacts over other countries’ economic situation. But, as Mark Twain could have argued, rumors about a global currency war are greatly exaggerated. We have not yet outlived the current financial crisis; this is just one among many others that affect dynamic markets since the beginnings of capitalism.
It is not entirely true that this crisis was created by the deregulation of the financial markets, although low regulation can indeed have facilitated the expansion of existing bubbles in some markets. The main culprit for the bubble, though, is the low level of interest rates established by central banks during too long a period. In the same manner, albeit in very different ways, that the old Lords of Finance of the Twenties created the crisis of the 1930s, by their action or inaction, the present crisis is the result of misguided policies by the new Lords of Finance.
It is also not true that this crisis is severe enough to justify a new Bretton Woods-like redrafting of the world economic order. Talks about a new financial architecture, or even about a redistribution of world economic and political power, are totally in contradiction with the more prosaic realities of our days. We are not at all in a post-major crisis arrangement, a sort of diplomatic complete reordering of the world after a cataclysmic seism, touching all and every major actor of the international scene. We are very far from that. Let’s look the precedents.
We are not in Wesphalia-1648. We are not in Vienna-1815. We are not in Paris or Versailles-1919. And we are not in Bretton-Woods-1944, or San Francisco-1945. We are not in any major re-founding of the international political and economic order. We simply are, nowadays, in the middle of our 1930s, trying to manage a big crisis by national responses, each one fitted to the specific circumstances of each country, and delinked from a major disaster affecting everyone and all countries.
To be more precise, we are somewhere between 1931 and 1933, still in the middle of a recession, but not in a depression. The level of unemployment is not as high as in 1933, and is probably in line with patterns of our days. World trade and financial flows are not as disrupted as in the 1930s, although economic liberalization regressed: we reverted to a light version of trade protectionism, without quotas.
This new economic Cold War arises from structural changes in the world economy, already on the move since the Eighties, when China started to flex its muscles again. At the same time, developing countries ceased to rely on national, inward-looking, projects for national development and opened themselves to foreign investment. Since then, the world economy has been transformed irrevocably.
But not everything, of course, has changed. The major decision-making institutions are still the same, with the same distribution of voting rights. IMF and World Bank are in the middle of their travails to find a new distribution of quotas. The collective voting power of China, India and Brazil is 20% less than that of Belgium, Netherlands and Italy, despite the fact that the joint GDP of the former countries is four times greater the size of their European counterparts; they have a population 29 times greater. Those are the reasons for this new economic Cold War.
How to manage those new realities in the economic realm, having as political leverages the same old structures of the decision-making process? That’s a tricky question, with no clear answer to the dilemma. To manage the world economy is a pretension that even the old G7 never reached to attain in its glorious days. Developed countries controlled then a big proportion of the world’s GDP, trade and financial flows. But they were never capable of coordinating their macroeconomic policies among themselves; never mind establishing rules and goals for the rest of the world.
Nowadays, with a painful free-fall in advanced economies, it is difficult to see what could be done to restore growth rates from their stagnating levels. Besides the cyclical problems affecting major economies, with the possible exception of China, India and a few other countries, we still have global challenges ahead, like poverty in less developed countries, decisions to be made regarding environmental matters, human rights violations in non-democratic countries, and many other relevant issues.
One single strategy would be the establishing of just one big goal for the world community: that has to be the promotion of global development, not exactly through assistance (the traditional Official Development Assistance), but primarily through real trade liberalization, especially in the farm sector, the only real possibility for the less-developed countries to become integrated into the world economy. The United States and European Union have a main responsibility in this domain.
It is highly unlikely that consensual proposals concerning global development could be arising from such a large body as the financial G20, too heterogeneous to be able to reach common positions. Perhaps, the best hope would be to have an evolution from the current G8 to a new G13. That means joining the leaders of the G8 together with five other big countries, namely Brazil, China, India, South Africa, and, either Indonesia or Mexico. Experience shows that small, informal bodies are more likely to deliver something meaningful than large institutionalized groups that get involved in bureaucratic foot-dragging and political entanglements.

New Prospects
What is to be done? The biggest problem in this approach of a G20-minus is acquiring the legitimacy that is involved in the act of speaking for the whole world community from the starting point of only 13 countries. To solve this quandary implies that the political leaders of these 13 countries would have to find a terrain of reciprocal confidence between them that has to be compatible with the representation at large they would be pretending to have from the whole community of nations.
Finding common grounds is a hard task to achieve. It will quite difficult to attain a perfect coordination of agendas between the big advanced and emerging countries and, together, among them and the international institutions. The world is simply not as globalized as required to attain this kind of interaction. Disparities of interests, differences of levels of development, imbalances between countries, many factors collude to render almost impossible this exercise of coordination.
A modest approach could be a more frequent interaction – once a year – between the leaders of the new G13. Sherpas of a special quality, meeting twice a year, could then be mobilized to discuss trade matters, environmental affairs, human rights protection, UN peace-keeping missions and the like, with specific mandates from their political leaders. But, don’t look at the UN for the organization of their agenda. It is difficult to implement anything through the UN, a too large and chaotic a body. Better to rely of the coordination of agendas of the three more important agencies for globalization: IMF, World Bank and WTO.
The main task of the “new sherpas” is to look for international economic coordination around relevant issues for the global community. A possible suggestion would be to try to establish a “global new deal”, exchanging extensive protection to investments and to proprietary riches (patents and the like), as well as other good microeconomic conditions for productive activity, from the side of developing countries (the recipients of FDI), against extensive licensing and effective investments and trade liberalization by rich countries and investors alike. This kind of deal, by extending property rights for the rich, could entail the strengthening of trade, financial and investment flows to the poor, giving a pretty little boost to globalization.
Traditional assistance for development, because it is ineffective, should be replaced, essentially, by a focus on educational improvements, that is, an extensive program for human resources qualification. Assistance as such should be limited to the implementation of a consistent program for eradicating most of infectious diseases in African countries and in some other developing countries. The main reason for the persistence of poverty in those countries is not the lack of resources, but the absence of governance and their non-integration into the world economy through trade links.
Assuming that the questions of democratic governance and human rights protection can be a conundrum for countries like China, or perhaps even Russia, the main target for the agenda of the new G13 could be the adoption of high standards for public governance in the technical meaning of this expression. It is a little too early to make democratic governance and respect for the human rights the decisive criteria for bilateral and-or multilateral cooperation. But these should be the ultimate goals of any kind of new global governance.

* Paulo Roberto de Almeida
Brazilian Diplomat, International Political Economy; Professor at University Center of Brasilia (Uniceub); (www.pralmeida.org)

[Shanghai, October 12, 2010]

Governanca global e reformas institucionais (2): uma sintese de minhas respostas

Transcrevo agora, no imediato seguimento do post anterior (ver abaixo) sobre o mesmo tema, um resumo de uma página tratando dos mesmos temas colocados num documento de planejamento de um encontro sobre o assunto, que recebi para comentário pessoal.
O que elaborei, muito rapidamente, a respeito dos temas levantados está no post anterior. A síntese possível segue agora neste.

[Next post: one page outline of this paper]

Global Governance and Institutional Reform: a personal view
Paulo Roberto de Almeida

One page outline

1) Lessons of the crisis and structural changes of the world economy
One small lesson: the origin of the crisis is in the bad monetary policies of the main countries, not in the “deregulation of the financial markets”. A second small lesson: coordination of macroeconomic policies is an impossible dream, as each government is clearly focused in its own national objectives and narrow interests.
A big lesson: the crisis was not serious enough to stimulate a complete reform of governance rules at world level; previous redrafts of international order were the consequence of cataclysmic changes in power relationships. We had none of this now. We have just a recession to administer, with a new emerging power-house: China.
World economy is already transformed, and advanced countries are slowly giving terrain to the dynamic emerging economies, with China at the forehead. Pity that decision-making mechanisms were not reformed accordingly this new reality.

2) Concepts, strategies and institutional features for managing the world economy
Managing the world economy is an elusive goal; the G7 never went beyond ad hoc arrangements for dealing with currency volatility. The only single strategy for today’s world would be to integrate less-developed countries into the world economy, through real trade liberalization, not official development assistance (that’s passé).

3) Existing institutional challenges for intelligent regulation and better governance
G-7/G-8 has no more legitimacy, for being too restrict; G-20 is too large to reach real consensus; solution is an upgrade to a G-13, with new dynamic economies.

4) Interaction between international bodies and between private and public interests
Regular meetings of this new G-13 should give clear guideline to sherpas, who would discuss trade matters, environmental affairs, human rights protection, UN peace-keeping missions, etc., with specific mandates to deliver feasible solutions.

5) International governance: can it be implemented?
It is difficult to implement anything through the UN, too large and chaotic a body; better to rely of the coordination of agendas of the three more important agencies for globalization: IMF, World Bank and WTO. This has to be achieved by means of a more harmonious G-13, but the Europeans have to accept reform in their representation at the first two organizations, ceding voting rights to emerging economies and establish their rotating representation.
A “global new deal” would exchange reinforced protection for proprietary technology by developing countries against access to markets and large investments by advanced economies. Assistance to development should be concentrated on education, human capital and improvement of governance, on technical grounds, as democracy and human rights are difficult to implement even for some of the new emerging powers of the world economy.

[Shanghai, 27.09.2010]

Governanca global e reformas institucionais (1): minhas respostas a perguntas

Recentemente fui contatado por um ex-funcionário de uma organização internacional, a quem conheci justamente em função de meu trabalho profissional junto a essa organização nos temas da agenda internacional que à época -- digamos, uns dez anos atrás -- ocupavam-me institucionalmente em nome do Brasil.
Não vem ao caso, agora, detalhar quem, qual, onde, como, pois o referido ex-funcionário, um amigo pessoal, contatou-me em sua nova qualidade de consultor privado em "temas globais" e gostaria de ter sugestões de nomes brasileiros para participar de um evento que trataria exatamente dos temas que figuram no título deste post. Indiquei vários nomes e não perguntei se foram ou não contatados diretamente.
Em todo caso, ele mandou-me o documento de planejamento desse evento, feito em colaboração entre essa organização internacional (sempre acho que eles gastam dinheiro com "palavras soltas") e uma fundação privada (como sempre é de tradição nos países latinos, sustentada com recursos públicos, em grande medida), e solicitou meu posicionamento sobre os temas enfocados.
Como estava em forma de perguntas, foi-me fácil reagir (ainda que muito rapidamente, e sem maiores elaborações) às questões colocadas.
Esta é a origem do texto que segue abaixo, primeiro em sua versão completa (ainda que provisória), depois, num segundo post, em sua versão curta, como "outline" de uma página.
Como esse texto não será aproveitado, a não ser para compor um novo texto, mais curto, de 3 páginas apenas, sobre os mesmos temas, permito-me reproduzi-lo aqui, tão somente como um "registro" de reações minhas a questões colocadas por outros.
Se eu estivesse escrevendo ab initio um texto meu, faria de outra forma, claro, pois o que vai abaixo são apenas reações a questões colocadas externamente.
O que está em itálico são as perguntas colocadas no documento de planejamento do evento em questão, sem a parte de elaboração a respeito delas, pois isto tornaria muito extenso um texto (meu), que já tem seis páginas.
Paulo Roberto de Almeida (7.10.2010)

Global Governance and Institutional Reform: a personal view
Paulo Roberto de Almeida
[(dados de expediente, suprimidos)]

1) What are the lessons to be drawn from the crisis and the structural changes in the world economy?
There are small and big lessons to be drawn from the present crisis. I will start with the small ones.
I’m not among those who proclaim that the current financial crisis was created by the deregulation of the financial markets, although low regulation can indeed have facilitated the expansion of already existing bubbles in some markets. The main culprit for the bubble, though, is the low level of interest rates established by central banks during too long a period. In fact, in the same manner, but in very different ways, that the old Lords of Finance created the crisis of the 1930s, by their action and inaction, the present crisis is the result of misguided policies by the new Lords of Finance, to use the title of Liaquat Ahamed book. If one apply the “Taylor rule” to the interest rates settled by the Fed from 2002 to 2005, the diagnostics could not be more incriminating of the insouciance of the Fed with the mounting bubble.
So, the first small lesson to be drawn from the crisis, in terms of its impact in the world economy, is that in a so integrated a world, especially in the financial sector, central banks are not allowed any more to deviate from the economic fundamentals set by the markets, in which interest rates play a crucial role. Interest rates too far apart from normal market rates are prone to stimulate bubbles and disequilibria. But that was already very well known.
A second lesson, to be drawn from institutional arrangements after the crisis – in the financial G-20, for instance –, is that coordination of macroeconomic policies among major actors, even among blocs, such as European Union, is an almost pipe dream, almost a pious desire. At least, the European Commission will start to have a right to look over the fiscal plans and budgetary proposals of its member countries, which is an indispensable move on the way to have a real common currency. But all that is the “business as usual” of the aftermath of “normal” crises.
And, what are the big lessons to be drawn from this crisis?
We are not at all in a post-major crisis arrangement, a sort of diplomatic complete reordering of the world after a cataclysmic seism, touching all and every major actor of the international scene. We are very far from that.
We are not in Wesphalia-1648. We are not in Vienna-1815. We are not in Paris or Versailles-1919. And we are not in Bretton-Woods-1944, or San Francisco-1945. We are not in any major re-founding of the international economic order.
We simply are, nowadays, in the middle of our 1930s, trying to manage a big crisis by national responses, each one fitted to the specific circumstances of each country, and delinked from a major disaster affecting everyone and all countries.
To be more precise, we are somewhere between 1931 and 1933, still in the middle of a recession, but not yet in a depression. Sure, a bad thing is the level of unemployment in the world’s major economy, not as high as in 1933, but still unacceptably higher for our welfare state social patterns of our days. World trade and financial flows are not as disrupted as in the 1930s, but economic liberalization has regressed in the world, as revealed in 2010 report on Economic Freedom in the World, of the Cato Institute. This is the old protectionism, déjà vu all over again.
There are no structural changes in the world economy derived from the current crisis. The structural changes were already on the move since the 1980s, at least, when socialism started to fail and went completely down the drain. At the same time, developing countries ceased to implement national, inward-looking, projects for national development and started to open to foreign direct investments. Since then, the world economy has been transformed irrevocably, suffice is to point to the case of China becoming the second major economic power in the world.
But not everything, of course, has changed. The major decision-making institutions that are supposed to lead countries in their mutual relationships are still the same, with their same division of voting rights. IMF and World Bank are in the middle of their travails to find a new distribution of quotas. The collective voting power of China, India and Brazil is 20% less than that of Belgium, Netherlands and Italy, despite the fact that their GDP is four times greater the size of the European counterparts, and they have a population 29 times greater.

2) What are the concepts, strategies and institutional features for managing the world economy?
To manage the world economy is a pretension that even the G-7 never reached to attain in its glorious days. It is a fact that developed countries, and among them the big seven economies, controlled a respectable proportion of the world’s GDP, trade and financial flows, together with technological innovation and mass-market cultural products. But they were never capable of coordinating their macroeconomic policies among themselves; never mind establishing rules and goals for the rest of the world.
But, they settled the framework for acceptable arrangements regarding the most important matters whenever there was a need to act, such as in the big monetary turmoil of the 1970s and the 1980s. Short of agreeing on new standards for the world monetary system, they managed at least to have ad hoc arrangements to avoid too many ups and downs in the currency and exchange markets.
Nowadays, with a painful free-fall in advanced economies, it is difficult to see what could be done to restore growth rates from their stagnating levels. Besides the cyclical problems affecting major economies, with the exception of China, we still have global challenges ahead, like poverty in less developed countries, decisions to be made regarding environmental matters, human rights violations in non-democratic countries, and many other relevant issues like those.
One single strategy would be the establishing of just one big goal for the world community: that has to be the promotion of global development, not exactly through assistance (the traditional Official Development Assistance), but primarily through real trade liberalization, especially in the farm sector, the only real possibility for the less-developed countries to become integrated into the world economy. The United States and European Union have a main responsibility in this domain.

3) Main existing institutional challenges for intelligent regulation and better governance.
It is difficult to see any credible solution for the impasse in the Doha Round coming out from current G-7/G-8. But it is also unlikely that consensual proposals could be arising from such a large body as the financial G20, too heterogeneous to reach common positions. Perhaps, the best hope would be an evolution from the current G-8 to a new G-13. That means joining the leaders of the G-8 together with the 5 “outreach” countries, namely Brazil, China, India, Mexico and South Africa.
Experience shows that informal bodies are more likely to deliver something meaningful than large institutionalized groups that get involved in bureaucratic foot-dragging and political entanglements. The biggest problem in this approach is acquiring the legitimacy that involves the act of speaking for the whole world community from the starting point of only 13 countries. To solve this quandary implies that the political leaders of these 13 countries would have to find a terrain of reciprocal confidence between them that has to be compatible with the representation at large they would be pretending to have from the whole community of nations.

4) How can interaction between established international bodies be improved, and public and private interests better aligned?
That’s is a hard task to achieve. I don’t think it is possible, or feasible, to have a perfect coordination of agendas between international bodies and multilateral organizations. The world is simply not as globalized as required to attain this kind of interaction. Disparities of interests, differences of levels of development, huge imbalances between countries and regions, many factors collude to render almost impossible this exercise of coordination.
A more modest approach could be a more frequent interaction – once a year – between the leaders of the new G-13. Sherpas could then be mobilized to discuss trade matters, environmental affairs, human rights protection, UN peace-keeping missions and the like, with specific mandates from their political leaders.

5) There is such a thing as international governance; can it be implemented?
Plainly not, but there are attempts into this direction. Don’t look at the UN for that, but we should work with the three main agencies for globalization: IMF, World Bank and the WTO. Some organizational work should be implemented, with institutional changes here and there, and their agendas should be made compatible with consensual decisions reached through the new G13. To start with, Europeans, that is, the EU, should have permanent, but rotating, seats among them, opening the way for more decisional power in favor of emerging powers.
The main focus here is on international economic coordination around relevant issues for the global community. A possible suggestion would be to try to establish a “global new deal”, exchanging extensive protection to investments and proprietary riches (patents and the like) and other governance (microeconomic) conditions for productive activity, by developing countries or recipients of FDI, against extensive licensing and effective investments and trade liberalization by rich countries and investors alike; this would imply an extension and the strengthening of trade, investment and intellectual property rights treaties, giving a little boost to globalization.
Traditional assistance for development, because ineffective, should be essentially replaced by a focus on educational improvements, that is, a focused program for human resources qualification. Assistance as such should be limited to the implementation of a consistent program for eradicating most of infectious diseases in African countries and in some other developing countries. The main reason for the persistence of poverty in those countries is not the lack of resources, but the absence of governance and their non-integration into the world economy through trade links, not financial aid.
Assuming that the questions of democratic governance and human rights protection can be a conundrum four countries like China, or perhaps even Russia, the main target for the agenda of the new G13 could be the adoption of high standards for public governance in the technical meaning of this expression. It is a little too early to make democratic governance and respect for the human rights the decisive criteria for bilateral and/or multilateral cooperation. But these should be the ultimate goals of any kind of global governance.

Paulo Roberto de Almeida
Professor of International Political Economy at the Post-Graduate Program in Law of the University Center of Brasilia (Uniceub).
[Shanghai, October 26, 2010]

Brasil pode perder cadeira no FMI...

Não é essa a intenção dos Estados Unidos, mas é o que pode ocorrer se os europeus não aceitarem a diminuição de sua representação.
Respiração suspensa, até outubro...
Paulo Roberto de Almeida

An Unexpected Agenda Item at the Next IMF Annual Meetings
Domenico Lombardi, Nonresident Senior Fellow, Global Economy and Development
The Brookings Institution
Friday September 10, 2010

It’s no secret that IMF reform has been slow since the jump-start it got at the Pittsburgh G-20 Summit last year, where after some arm-twisting President Obama managed to get a promise from his fellow leaders to reallocate “at least 5 percent” of the IMF’s voting rights to under-represented member countries, which are broadly understood to be emerging-market and developing economies.

The latest development on the reform front, as reported by Reuters, is that the U.S. will veto the approval of a special resolution at the next IMF Board of Governors meeting in October. This veto could have wide-ranging implications well beyond those of any recent quota review and bring about outcomes that we haven’t seen in a generation, albeit with significant risks.

The Issue
The resolution at stake would allow the main IMF policymaking body, its executive board, to operate at its current size (24 executive directors plus a chairman). However, the IMF charter only allows for 20 directors and straying from this provision requires approval by the board of governors of a special resolution every two years, with a supermajority of 85 percent of the overall voting power. This, in practice, puts the U.S. in the unique position to effectively exercise a veto given that its voting rights are 16.74 percent of the total.

The move to veto reflects three major concerns of the U.S. administration:

1. The frustration at the slow progress in IMF governance reform, stalled mainly by underground European opposition.
2. The White House objective to make emerging-market economies responsible stakeholders in the international monetary system with both rights and due accountability.
3. The awareness that quota reallocations, though important, can exert limited impact on the IMF’s own decision-making if the issue of who sits in its boardroom is not addressed.

Fanning the flames of these long-time concerns was Europe’s stance at the June G-20 Summit in Toronto, when European leaders snubbed repeated U.S. calls for their countries to assume a fair share of the burden of sustaining the global recovery, as allowed, of course, by their respective macroeconomic conditions.

In fact, it is the Europeans that the U.S. is trying to target with the veto. For historical reasons, Europe has enjoyed the privilege of a sizable representation in the IMF’s most important hall. Depending on the rotational pattern of each chair, there are times when as many as eight European representatives sit on the executive board, 10 if we include representatives from Switzerland and Russia.

The Prospect
Any plan to consolidate European representation in the short-term is practically unworkable. Even if (and this is a big “if”) the Europeans were willing to pool their representation, this would inevitably mean drawing Germany, France and the U.K. into multi-country constituencies. The problem with that is these three countries are, by the stipulations of the IMF’s own charter, intended to occupy single chairs. Changing their status is feasible, but it would require amending the charter, which is not something that can be done overnight.

Because the U.S. move is mainly driven by their desire to shake things up, the impasse may be surmounted if at the October annual meetings the Europeans were willing to state—for the record—their pledge to pool their representation by the time of the next general elections in 2012, devise a binding roadmap and provide operational details as to how to achieve their target. Incidentally, this would have the benefit of reallocating country representation on the basis of revised quotas, as currently being negotiated, which would provide a stronger sense of legitimacy to the whole exercise.

There are a couple of solutions at hand. In the most recent consultations with global civil society, called for by the IMF’s managing director, a proposal was put forward in the final “Fourth Pillar” Report, and backed by several academics and civil society actors, to pool E.U. representation into two chairs: one representing euro area members, the other representing E.U. countries that do not belong to the European monetary union. This approach would leave enough room for a couple more chairs including other (non-E.U.) European countries, such as Switzerland, or rising economies, such as Turkey and some Eastern European nations. Alternatively and more realistically, euro area countries could cluster their representation around the three hubs of the largest euro-area economies (i.e. Germany, France and Italy) and then one or two more chairs would include other European countries.

But these options trigger other questions: if Germany and France end up in multi-country constituencies, the position of Saudi Arabia or Russia as single-country chairs becomes increasingly untenable.

The Risk
A “forced” consolidation of European representation through a U.S. veto is not without risk. The most immediate is the disruption of the ordinary governance of the institution. In a sense, this has already come to pass as general elections for executive directors, which should have been more or less finalized by now, have been put on hold. Should European governments fail to arrive at a constructive position on this issue, the IMF will be forced to extend the term of the current board due to expire on October 31. This would pose further legitimacy problems for an institution struggling to find a more representative and legitimate role in the changing world order.

Obviously, there is nothing to prevent the calling of a general election now. However, lacking any agreement among Europeans, then four board members will have to go. These will likely be those representing chairs with the lowest voting power, such as the twenty-three-member Rwandan, the six-member Argentinean, the four-member Indian and the nine-member Brazilian constituencies. As a result, important emerging-market countries and a dense group of low-income countries would lose their voice in the IMF’s policymaking room, which is exactly the opposite of what the U.S. has in mind by resorting to the veto.

The stakes are high any way you look at it. Though, European inaction could ratchet them up even further, putting in jeopardy the role of the IMF itself in the global community.