While approving assistance to Ukraine last week, Senate Democrats tried and failed to include an agreement to changes in the International Monetary Fund. Adding unrelated “riders” to legislation is not always the best practice, but in this instance it reflects the United States’ embarrassing inability to agree to these crucial reforms.
The IMF promotes international cooperation on economic issues and bails out countries in financial crisis, such as Greece. It has long been dominated by Europe and the United States, drawing complaints about unfair representation from growing countries like China and Brazil.
To preserve its legitimacy as a global institution, in 2010 the IMF’s Executive Board recommended a set of reforms to fix this problem, essentially by giving these countries more votes and requiring that the Executive Board be fully elected (at present, the U.S. and four other countries get an automatic seat).
It would also double the amount of money the IMF has on hand to bail out countries. Virtually every member of the IMF has approved these reforms, but they cannot take effect until the United States agrees.
House Republicans have resisted ratifying these reforms for years because they fear that they would reduce American influence, encourage risk-taking by countries counting on an IMF bailout and waste taxpayer money. These claims are specious. First, the United States would retain its “veto power” to block any decision it didn’t like, ensuring that it would always be represented on the Executive Board. Second, IMF bailouts come with infamously tough requirements that no country would enjoy.
Keeping the IMF small in a growing global economy will not discourage risk-taking, but it will encourage countries to build other financial defenses, subsequently reducing influence from the IMF and America
Finally, the $63 billion asked from the United States is a small price to preserve our ability to shape global economic decisions. Continuing to reject these reforms will damage IMF and American credibility, but for a fraction of one year’s defense budget, the United States can secure its influence in this vital institution for years to come.
The complexity of the issue has so far shielded Republicans from political pressure, but the answer is simple: call your representative and urge them to ratify IMF reform.
James Sunquist is a senior in the College of Arts and Sciences. He can be reached at jsund@bu.edu .
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