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Time to improve global governance
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THE membership of the Group of 20 (G20) leading economies shows how different the world is now compared with merely decades ago.
However, the global economic and financial governance architecture is yet to catch up.
Some progress has been made, particularly in the International Monetary Fund (IMF), but changes have been too slow. For global financial governance to be more balanced and reflective of the real world, further hurdles have to be cleared.
High hopes are pinned on the G20 summit to make this happen earlier. In contrast to the Group of Seven, a rich-world club that used to dictate global economic policy-making, about half of the G20 members are emerging economies.
The IMF, the World Bank and the General Agreement on Tariffs and Trade — the precursor of the World Trade Organization — were established after World War II as pillars of the global economic and financial architecture.
Despite the evolving world economic landscape, the developed economies still retain their disproportionate voting share in the IMF, with the United States wielding a veto.
And the tradition remains for the World Bank to be headed by a US citizen and the IMF by a European.
The IMF finally implemented a substantial quota and governance reform plan last year, but that came only after five years of delay.
Legitimate concerns
In view of the rapidly evolving economic landscape, even IMF Managing Director Christine Lagarde agrees that there is a need for further rounds of IMF quota and governance reviews.
The emerging economies have their legitimate concerns. They have been underrepresented in global financial governance, while their developed peers have a disproportionately big say, often leading to decisions disadvantageous to the emerging economies.
For instance, the United States has reaped great benefits from the reserve currency status of the US dollar, but many of the emerging economies have had to suffer the negative spillovers of US dollar interest rate changes.
In a world troubled with slow economic growth and easy money in the developed economies, beggar-thy-neighbor policies cannot be sustained and should be ditched.
The emerging economies should be allowed to have more say in global financial and economic governance, and the selection process for top management at the IMF and the World Bank should be opened up.
As the premier forum for international economic governance, the G20 has an unshirkable role to play in further improving global economic and financial governance. It is high time that G20 leaders join hands and act now.
The author is a writer with Xinhua.
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