This summary report is the output of a joint seminar held by the German Development Institute, Friedrich-Ebert-Stiftung and Bretton Woods Project in December 2013. Download the fully formatted and referenced PDF version of this summary report.
Over the last several decades, the sands of global economic governance have been shifting. Emerging markets and developing countries (EMDCs) have experienced unprecedented growth, and the structure of the global economy has undergone a process of transformation. The global financial crisis not only amplified this process, it also produced new challenges and difficulties. As the effects of the crisis linger, it is evident that the world economic dynamic has evolved. It is also clear that a commensurate shift in the paradigms of global governance has yet to take place. For this reason, questions regarding the future role of the IMF, Europe, and EMDCs are more important than ever.
On December 4th 2013, the German Development Institute, Friedrich-Ebert-Stiftung and Bretton Woods Project, in collaboration with the G-24, hosted a high-level workshop in Berlin on “The Future of Global Economic Governance and the IMF – Challenges and Opportunities for Europe, Emerging Economies and Developing Countries.” The aim of the conference was to foster an open exchange on the profound changes in the global economy and the implications thereof for global economic governance and its constituent institutions and members.
The principal issues arising from the conference were as follows:
- The global economic governance architecture must evolve to reflect the structural transformation that has taken place in the world economy. However, the means of achieving this evolution are neither simple nor apparent. In an increasingly multipolar world, this requires, at a minimum, cooperation amongst stakeholders and trust in the system of which they are a part. The debate over IMF quota reform appositely illustrates this challenge. Failure to reach a meaningful resolution will undermine the Fund’s legitimacy and influence; nevertheless, resolution remains elusive. At this critical juncture, it is clear that a push towards action is needed.
- Effective multilateralism is inherently a global public good with systemic as well as national benefits. Yet, in a world of sovereign states, political economy considerations are unavoidable, and must be recognized in order to be navigated. Domestic concerns can conflict with the collective actions required for the pursuit of global goals. Overcoming this dichotomy will be challenging but not impossible, provided the necessary political will and leadership is mobilized and the democratic accountability of national governments vis-à-vis their electorates is respected.
A complex and delicate balance must be reached between effectiveness and legitimacy within the multilateral system. Whether and to what extent each goal is preferable varies according to the mandate of a given institution, as is evident in the contrast between the G-20 and the IMF. Nevertheless, a degree of equilibrium between these governance principles must be achieved for the sake of credibility, efficacy and impact.
- The IMF is only as effective as its members believe it to be. Persistent concerns regarding legitimacy and credibility serve to undermine institutional trust and, if unaddressed, may provoke increasing fragmentation of the financial architecture in favour of regionalism and a plurality of institutions. These concerns are manifest in the evolution of financial safety nets and the potential for growing division along regional lines. Reforms of IMF governance have been undertaken in recent years, but the implementation of the most recent reforms are still being held back by delays in the ratification process in some countries.
- It is unclear whether the international financial architecture is sufficiently prepared to cope with future crises. Many states lack the fiscal capacity or policy space to weather large shocks. At the same time, existing institutions exhibit weaknesses that may undermine their ability to provide a global stabilizing effect if needed. This is evident in the decreasing political capital of the G-20 and the enduring governance challenges in the IMF. Resolving these issues must be a priority.
The Future of Global Economic Governance and the IMF seminar consisted of a keynote speech and three discussion panels. Domenico Lombardi (Center for International Governance Innovation [CIGI]) presented the keynote discussion: Where is Europe now and what is its role in Global Economic Governance?
The first panel, chaired by Sargon Nissan (Bretton Woods Project) addressed IMF quota reform in the context of shifting global economic governance. Panellists included Hector Torres (Alternate Executive Director of the IMF), Amar Bhattarcharya (Intergovernmental Group of Twenty-Four [G-24]), Thomas Krueger (IMF Finance Department) and Robert Heinbücher (Deutsche Bundesbank).
Panel 2, chaired by Peter Wolff (German Development Institute) explored the future of macroeconomic surveillance, policy coordination and conditionality and the changing role of the IMF and regional arrangements. Panellists included Andreas Bauer (IMF Strategy, Policy, Review department), Jae Young Lee (ASEAN+3 Macroeconomic research office), and Ulrich Volz, (SOAS, University of London).
The final panel explored Europe and emerging countries in global economic governance. Chaired by Amar Bhattacharya, panellists included Momodou Bamba Saho (Executive Director, IMF), Wilfried Steinheuer (Ministry of Finance, Federal Republic of Germany), Helmut Reisen (Associate Fellow, German Development Institute) and Domenico Lombardi. Proceedings were concluded by Hubert René Schillinger (Friedrich-Ebert-Stiftung).
The Bretton Woods Project, an ActionAid hosted project, receives assistance from the European Union. This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of the Bretton Woods Project and can in no way be taken to reflect the views of the European Union.