IMF Seeks Role in Shifting Global Economy
DEBBIE ELLIOTT, host:
The way the world economy works changed a bit this weekend and some in the U.S. are not happy. It happened at the spring meeting of the International Monetary Fund. The IMF governors agreed that the U.S., Europe and Japan have too much power. They will give more influence to China, South Korea and other rapidly growing economies. NPR's Adam Davidson has been following the meetings this weekend and joins us in the studio now. Hello, Adam.
ADAM DAVIDSON reporting:
ELLIOTT: Tell us what happened.
DAVIDSON: Well, basically, these rapidly growing countries, like China and South Korea and others, have said enough is enough. They say that the way that the IMF and therefore much of the world economy is governed is locked into the balance of power that existed in the '70s and they say it does not reflect he fact that so many countries since then have become wealthy.
So they said, look, you need to include us in the decision making process. We need to have a lot more power than we do now, and the rest of the world, where basically the wealthy world agreed and said, okay, we're gonna give you power.
ELLIOTT: So how will the power be shared and what will the U.S. lose?
Mr. DAVIDSON: That's the big question. They've agreed in principle that power does need to be shared more equitably among the world's economic powers but they haven't agreed exactly how, and what we can be sure of is over the next coming months there will be a lot of very contentious behind the scenes battles where people will be hashing out the voting structure of the IMF.
Basically the U.S. likes its position as dominant player in the global economy and they do not want to give up power. There are strong domestic pressures on this presidential administration but on any presidential administration to have influence over China, to have influence over other countries that affect our economy, and the people in the U.S. government who oversee economic matters, they do not want to give up the power they have.
ELLIOTT: Can you just remind us what it is that the International Monetary Fund and the World Bank do?
DAVIDSON: Sure. They were founded just after World War II by the big European and American powers to help stabilize the world and bring the world out of poverty. The World Bank specifically gives money, mostly in the form of loans, to poor countries to bring people out of poverty. That's at least in theory. The IMF is more there as sort of an economic policeman. They do loan money but with the purpose of stabilizing the global economy so that there aren't massive discrepancies between countries.
ELLIOTT: Now, why would the U.S. or the U.S. representatives in the IMF and other rich countries, why would they agree to give up power?
DAVIDSON: Basically they have recognized that the IMF is in a fight for its life. It's not going to go out existence tomorrow or a month from now, but over the coming years if the IMF doesn't respond to these profound concerns of the poor and developing world, there is going to be no reason for the IMF and that means there is not going to be an IMF.
ELLIOTT: Now, even if the U.S. gives up power in the context of this organization, doesn't it remain a dominant force in the world's economy?
DAVIDSON: Oh, there's no question that for most likely the coming decades, the U.S. will be the dominant force. The head of the IMF said that what has changed here is that no longer will seven men be able to sit in the hotel room somewhere and decide how the world economy works. They're going to have to pay attention to lots of other voices, even if the loudest voice will continue to be the U.S.
ELLIOTT: NPR's Adam Davidson thank you.
DAVIDSON: Thank you.