Global Economic Governance

The World Bank and the International Monetary Fund (IMF) are two of the main institutions that govern global economic policy. We might expect that representation in these institutions would be modelled along the lines of the United Nations General Assembly, or perhaps calculated according to population. But in fact they are deeply undemocratic. The leaders of the World Bank and the IMF are not elected, but nominated by the US and Europe. According to an unspoken agreement, the president of the World Bank has always been from the US, while the president of the IMF has always been European. Moreover, voting power in these institutions is skewed heavily in favour of rich countries. The US has de facto veto power over all significant decisions, and together with the rest of the G7 and the European Union controls well over half of the vote in both agencies. Middle- and low-income countries, which together constitute 85 percent of the world’s population, have a minority share.

These inequalities have their roots in the colonial period. The World Bank and the IMF were founded in 1944. Countries that were colonies at the time (like India) were integrated into the system on unequal terms, subordinated to their colonisers. Other colonies were not allowed to join until after independence, in some cases well into the 1970s and 80s.  These institutions were designed under colonialism and they remain in key respects colonial in character.

Voting power in the World Bank is allocated according to each country’s financial shares. In the IMF, it is primarily according to gross domestic product (GDP), with some consideration also given to a country’s “market openness”. As a result, the countries that became rich during the colonial period now enjoy disproportionate power when it comes to determining the rules of the global economy. Inequality begets inequality.

In per capita terms, the inequalities are truly extreme. For every vote that the average person in the global North has, the average person in the global South has only one-eighth of a vote (and the average South Asian has only one-20th of a vote). There is a clear racial imbalance at play here: on average, the votes of people of colour are worth only a fraction of their counterparts. In some cases, the differences between countries are particularly striking. Take Bangladesh and Nigeria, both of which were British colonies. In the IMF, a British person’s vote today is worth 41 times more than a Bangladeshi’s vote, and 23 times more than a Nigerian’s vote. 

Something similar is true in the World Trade Organization (WTO), which was founded in the mid-1990s. The WTO is formally governed by a one-country, one-vote system. But bargaining power is ultimately determined by market size. If we measure market size with GDP, we see that the G7 and EU have a monopoly, and together with the rest of the Global North enjoy more than 60% of the power.