Composition of the IMF Executive Board, Voting Powers - Essay Example

? International Political Economy Table of Contents Introduction 3 Composition of the IMF Executive Board, Voting powers 3 Design and operations of IMF 4 Conclusion 6 Reference 8 Introduction The project seeks to bring forth the three worldviews of liberalism, economic nationalism and structuralism as they have evolved over the years. This is done to explain which of these three views is most applicable in the functioning, design and operations of IMF, the Internal Monetary Fund. The study of the organizations;’ composition of Executive Board, working of voting powers, selection of Managing Director is explained in the context of the above theories. It also mentions some of the conditions that countries need to fulfill in order to receive any assistance from the organization. Composition of the IMF Executive Board, Voting powers The member states have the liberty to participate in the IMF directly. The executive board comprises of 24 members out of which five executive directors can be elected by the member states having the maximum quota. The remaining nineteen executive directors are elected by the remaining number of members. The powers that each country enjoys are predominantly dependant on the proportional scale of their population and the economic position they hold in the entire world. The general owners of the organization are represented by the board of executive directors who are responsible for taking the major decisions and responsibilities of the organization. However, all of the names of the member countries are represented in the economic scale. This is more resembling with the theory of structuralism which was discovered and presented by Marx. In the view of structuralism theory presented by Marx, it disputes the instrumentalist theory which considers the state as being the direct servant of the ruling class or the capitalists. Structuralism theory states consider the capitalist of production as the state being under the control of the capitalist class having superior powers. As per the members of the executive board, it is seen that members having superior positions in the IMF are actually the members who belong to the developed nations of the world which abides by the structuralism theory stated by Marx. The highest decision making authority of IMF rests with the Board of Governors. All powers of the IMF are vested in the Board of Governors. The Board of Governors comprises of a single governor as well as an alternate governor for each of the member countries. Members’ states are responsible for appointing the governor and generally the finance minister or the governer of the Central Bank is nominated for the position. The Board of Governors may delegate to the Executive Board all except certain reserved powers. The Board of Governors generally conducts a meeting in every year (IMF, “IMF Members' Quotas and Voting Power, and IMF Board of Governors”). The regular or day to day running of business of the organization is done by the Executive Board. Composed of 24 Directors, either elected or appointed by the member nations or also by collective groups of countries, it is also elected by the Managing Director, or the Chairman of the board. Several meetings are conducted by the Board in a single week. The works are generally conducted by the papers which are prepared or provided by the management and staffs in IMF (IMF, “IMF Executive Directors and Voting Power”). Design and operations of IMF In the 1980s a tremendous financial crisis had gripped the Latin American economy when high and bloated public debts and improper and loose monetary policies had led to very inflation rates in the economy. However, some of the conditions set by the IMF demonstrate the fact that it imposes certain restrictions or preconditions before providing aid to nations. For example, in this situation, the International Monetary Fund gad imposed financial austerity or balanced budgets as well as tighter monetary policies. The IMF demanded from the nation that it should impose the same monetary policies for ensuring any assistance from them. The very same demands were placed in front of Thailand in the year 1997 (Stiglitz & Joseph, p.2-5). Austerity was considered as the process which would restore peace and stability in the economy of Thailand. During the spread of the crisis in the East Asian nations the same policy was applied by the IMF. However, there have been severe criticisms regarding the application of the system. The Thailand the government was incurring extremely large surpluses which were actually famishing the country of the investments which were needed in infrastructures and education essential for economic growth of the nation. On the other hand monetary policies in the East Asian nations were already tight and inflation rates were low as well as coming down. This application of economic nationalism has been criticized by critics where Government dominates over all possibilities even though it is done in favor of political interest (Stiglitz & Joseph, p.2-5). IMF’s treatment towards Mexico has also been criticized severely and once again its economic nationalist policies had failed. But this was an absurd analogy. Mexico had not even recovered from the effects of the recession and IMF forced it to strengthen its financial system which was extremely weak and it remained considerably weak for years after the crisis. The main reason why it recovered was because of the upsurge of America which flourished immensely (Stiglitz & Joseph, p.2-5). On the contrary, Japan which was the main trading partner with Indonesia remained in desperate and inactive situations for years. Additionally Indonesia was a much more socially and politically explosive as compared to Mexico having a deeper background of ethnic strife. And this strife would have produced immense capital flights had not IMF encouraged currency flow restrictions in the country. However the above argument mattered little. The IMF kept pressuring the government to reduce spending. Thus subsidies in some the main sectors like fuel and food were called back through the contractionary fiscal policies just at the time when the nation desperately needed it (Stiglitz & Joseph, p.2-5). The role of IMF played a similar problem in the case of Russia which was faced with a similar problem as that in East Asia. The role of IMF, in this case in asking the government to impose restrictive policies also reflects economic nationalist measures on their part, which had failed once again. Economists had other views and emphasized on the importance of an institutionalized infrastructure of a market economy from legal structures which enforces contracts to the regulatory structures for working of the financial system. They have emphasized on the need for increasing competition instead of privatizing the industries which were owned by the State. They have called for a more gradual mode of transformation into the market economy although it was agreed that strong steps would be required for controlling high inflation rates (Stiglitz & Joseph, p.2-5). Conclusion Composition of the IMF board reflects structuralism views. Consisting of 24 numbers of board members, five of the members are elected by the states having the maximum quota. In fact the powers enjoyed by the countries are also proportionate to the position they hold in world economic rankings. The IMF's operations and designs can be seen to have predominant resemblance with the economic nationalism worldviews. It is seen that in most of its attempts to impose economic nationalism in countries gong through crisis have failed. This has been primarily because it has encouraged governments to impose strict monetary and fiscal policies, at times even asking them to reduce spending when nations were desperately of the same. Reference IMF. IMF Members' Quotas and Voting Power, and IMF Board of Governors. 2011. About the IMF. December 14, 2011. < http://www.imf.org/external/np/sec/memdir/members.aspx>. IMF. IMF Executive Directors and Voting Power. 2011. About the IMF. December 14, 2011. < http://www.imf.org/external/np/sec/memdir/eds.aspx>. Stiglitz & Joseph. The Insider. New Republic; 04/17/2000-04/24/2000, Vol. 222 Issue 16/17, p56-60, 4p, 1. (2010). Read More