Top Ten Reasons Why the IMF Shouldn’t Take the Lead in Reform of Global Finance

By Mark WeisbrotBy Mark WeisbrotCo-Director of the Co-Director of the

Center for Economic and Policy Research (CEPR)Center for Economic and Policy Research (CEPR)

Thursday, October 9, 2008Thursday, October 9, 2008

10. The IMF totally 10. The IMF totally missed the two biggest missed the two biggest

asset bubbles in the asset bubbles in the history of the world.history of the world.

Home PricesHome Prices

60

80

100

120

140

160

180

200

Year

Per

cen

t o

f 19

54$

(1st

Qu

arte

r)

House Prices Rent

Price-to-earnings ratioPrice-to-earnings ratio

9. The IMF is 9. The IMF is unaccountable.unaccountable.

8. Developing 8. Developing countries have no countries have no significant say in significant say in IMF decisions.IMF decisions.

Voting Structure of the IMFVoting Structure of the IMF Pre-Singapore IMF Voting Rights

All Others37.2% Japan

6.1%

Germany6.0%

France4.9%

United Kingdom4.9%

United States17.0%

Korea & Singapore1.2%

Australia & New Zealand

1.9%

Mexico1.2%

Brazil1.4%

India1.9%

Russia2.7%

China2.9%

Canada2.9%

Italy3.2%

High-Income Oil Producers*

4.5%

* High-income oil producing countries include: Saudia Arabia, Kuwait, the United Arab Emirates, Qatar, Brunei, and Bahrain

Source: Bryant, Ralph C. (2008). "Reform of IMF Quota Shares and Voting Shares: A Missed Opportunity." Washington, DC:

Brookings Institution (April 8). http://www.brookings.edu/~/media/Files/rc/papers/2008/0409_imf_bryant/0409_imf_bryant.pdf

Voting Structure of the IMFVoting Structure of the IMF Current IMF Voting Rights

All Others37.7% Japan

5.9%

Germany5.8%

France4.8%

United Kingdom4.8%

High-Income Oil Producers*

4.3%

China3.6%

Italy3.1%

Canada2.8%Russia

2.6%India1.9%

Korea & Singapore1.7%

Mexico1.4%

Australia & New Zealand1.8%

Brazil1.4%

United States16.5%

* High-income oil producing countries include: Saudia Arabia, Kuwait, the United Arab Emirates, Qatar, Brunei, and Bahrain

Source: IMF, 2008. "IMF Members' Quotas and Voting Power, and IMF Board of Governors." http://www.imf.org/external/np/sec/memdir/members.htm

7. The IMF is at the 7. The IMF is at the head of a creditor’s head of a creditor’s

cartel that has cartel that has pressured developing pressured developing

countries to adopt countries to adopt harmful policies over harmful policies over

the last three decades.the last three decades.

6. The IMF made a 6. The IMF made a mess in the last set mess in the last set

of financial and of financial and economic crises: economic crises: Argentina, East Argentina, East Asia, Russia…Asia, Russia…

Per Capita GDP in Asian Crisis Per Capita GDP in Asian Crisis Countries, (1997=100)Countries, (1997=100)

Per Capita GDP in Argentina, 1990-Per Capita GDP in Argentina, 1990-20082008

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

10,000.00

11,000.00

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

5. The IMF has 5. The IMF has shown no serious shown no serious efforts at reform efforts at reform despite repeated despite repeated

failures.failures.

4. The IMF’s economic 4. The IMF’s economic projections can be projections can be way off target and way off target and may be politically may be politically

influenced.influenced.

IMF Projected GDP Growth for IMF Projected GDP Growth for Argentina and Actual GrowthArgentina and Actual Growth

3. The IMF’s 3. The IMF’s recommended recommended

economic economic policies have, in policies have, in general, failed.general, failed.

Latin America's Latin America's Unprecedented Long-Term Unprecedented Long-Term

Growth CollapseGrowth Collapse 82.0

9.0

14.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

1960-1980 1980-2000 2000-2007

To

tal

Gro

wth

(%

)

Western Hemisphere: Total growth in per capita real GDP (Purchasing Western Hemisphere: Total growth in per capita real GDP (Purchasing Power Parity)Power Parity)

Slowdown in Economic Slowdown in Economic GrowthGrowth

2. The IMF has been a 2. The IMF has been a champion of the champion of the

de-regulated global de-regulated global financial flows that financial flows that

played a huge role in played a huge role in the current mess.the current mess.

1.The IMF is run 1.The IMF is run mostly by the mostly by the

Treasury Treasury Department.Department.

U.S. Treasury U.S. Treasury Secretary Secretary Paulson. Paulson. CompensatioCompensation at Goldman n at Goldman Sachs in Sachs in 2006: 2006: $164 $164 millionmillion..