G20 gives U.S. until end of year on IMF reform

When finance ministers and central bankers from the G20 major economies met last week in Washington, they rapped the United States on the knuckles for its failure to ratify reforms of the International Monetary Fund. The reforms, which leaders from around the globe agreed in 2010 but which require U.S. Congressional ratification to be implemented, would increase the voice of emerging market economies on the IMF’s board and strengthen its general account (what the IMF calls “quotas”). In the G20 final communique, the global financial chiefs expressed how “deeply disappointed” they were, and fired off a stern warning, giving the U.S. until the end of the year before they request the IMF to proceed on reform (without the United States, to insert the subtext). Given that the U.S. was instrumental in founding the IMF and has always been its largest shareholder and exercised a veto over major institutional changes, the warning is serious stuff. Whether or not the IMF can actually do anything without the buy-in of its largest shareholder remains in question, but certainly the rest of the world is growing impatient with the extended delay.

In a recent analysis, I point out that the delay is undue. The IMF has traditionally enjoyed support from Democrats and Republicans, and the current proposal for reforms builds upon a process that began under the George W. Bush administration. The IMF helps to maintain global financial stability and prevent and mitigate economic crises, something both parties can get behind. The reforms strengthen the IMF’s core capabilities and improve its governance, equipping the IMF to better prevent and manage economic crises of the twenty-first century and creating a platform for constructive relations with emerging market economies such as India, Brazil and China.

And despite some claims to the contrary, the reforms do not increase U.S. financial commitments, because the new U.S. contribution to the IMF general fund would be offset by an equal reduction in its commitment to another IMF fund (the New Arrangements to Borrow). The Congressional Budget Office, Congress’ official budget scorekeeper, estimates the technical cost of implementing the quota reforms at $239 million – but also estimates that shifting the funds away from the NAB would save $693 million over the same time frame. So the reforms don’t increase US financial commitments, and the US might actually recoup money on account maintenance costs. A pretty good deal.

The case for the reforms seems obvious, so why the delay? The toxic political environment in Washington is the primary culprit. The Obama administration has not made the case for reforms as clear and compelling as it could and should, and delayed proposing them, while Congress is loath to give the Administration any kind of victory. And with the rise of tea party influence in the Republican party and an increasingly isolationist American public, Congressional blockers may actually reap political rewards. In return for ratifying IMF reforms, some Republicans are demanding a delay in the Obama administration’s proposed rules to limit political activities of non-profits. (If that seems like a a non sequitur, that’s because it is. Such is political deal-making in today’s Washington.)

All of this is bad news for the U.S., and bad news for the world. The fact is that for now and the foreseeable future, the U.S. is still the world’s preeminent power. And that power must be exercised with commensurate responsibility. As the G20 warning made clear, the rest of the world will not wait indefinitely. They are already eying a plan B if the U.S. does not ratify the IMF reforms. Whether they act without the U.S. remains to be seen, but everyone loses if the U.S. does not step up to lead the modernization of an international system that emphasizes cooperation over competition. The IMF is an early but important step in a revitalized, rules-based global order that can manage the challenges of the twenty-first century.

 

Development Dilemmas

In our development dilemmas piece we consider what progressives should do now the split between foreign and development policy no longer exists:

Should aid be used as an instrument of foreign policy? If so, how? If not, why not? If policy coherence’ really means ‘foreign policy first’, how should DFID prioritise if the countries which are the breeding grounds for terror are not the same ones with the greatest incidence of poverty? Should a combustible Nigeria, at 153 in the UN Human Development Index, command more attention than stable Sierra Leone, languishing at 177? Should aid money be spent, as it is by the United States, more in the powder keg of the Middle East than the desperation zones of sub-Saharan Africa?

Peacemaking’s silly season

I have an especially dour article over at World Politics Review about the state of crisis diplomacy today, which kicks off like this:

Since the conflict in South Sudan escalated in December, well-meaning governments and United Nations officials have repeatedly argued that only a political solution can end the fighting. “There is no military solution,” U.S. Ambassador to the U.N. Samantha Power told CNN on Christmas Eve. But the South Sudanese government does not seem entirely convinced. Over the past week it has ratcheted up its offensives against rebel-held areas, recapturing the economically important town of Bentiu. Bor, another major center in rebel hands, has also been under attack. The government is still in peace talks with rebel envoys, but it is evidently intent on negotiating from the strongest possible military position.

South Sudanese President Salva Kiir has been bolstered by air support and ground troops from Uganda, as well as political signals of support from his old enemies in Sudan. If Kiir needs further encouragement, he needs only to think of other governments that have been told to find a “political solution” to internal conflicts. From Sri Lanka to Darfur and Syria, leaders who have ignored this advice have managed to fight on in the face of international revulsion. Western powers and the U.N. appear willing—or obliged—to put aside bargaining with these leaders, tragically affirming the continued political value of brute force.

You can read the rest of my argument here.  But perhaps I am just being a curmudgeon, because it seems that peacemakers everywhere are having a whale of a time.  The Russian and U.S. delegations meeting to discuss Syria have been up to high jinks:

For some watchers of international diplomacy, the somber road to Syrian peace was overrun Monday by potatoes and furry pink hats.

A swapping of delegation gifts between U.S. Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov served as a distraction from predictions of elusive success in Syria.  The usually stern-faced Lavrov came to the meeting armed with at least two ushankas, a traditional Russian fur hat with earflaps that tie to the top of the hat. Both hats went to women on Kerry’s press staff — including a bubblegum-pink one for State Department spokeswoman Jen Psaki.

The more bizarre bout of diplomacy came over a pair of Idaho potatoes.  After pictures of Kerry handing Lavrov the tubers during talks Monday morning surfaced on the Web, reporters pressed both leaders for an explanation hours later.  Kerry quickly sought to disavow any deep diplomatic meaning from the spuds, explaining that he was in Idaho over the holidays when he and Lavrov spoke by phone. The Russian, it seemed, associated Idaho with potatoes.  ”He told me he’s not going to make vodka. He’s going to eat them,” Kerry said of Lavrov, who was next to him at an otherwise grim news conference on militant threats to humanitarian aid for Syria.

How could anyone feel grim after such hilarities?  Still, some people just can’t take a joke, like the South Sudanese negotiators who are miffed about holding talks… in a nightclub.

A shift in the venue for talks aimed at brokering a ceasefire in South Sudan has left some delegates bemused.  The government and rebel teams have moved to the dance floor of a top nightclub in an Addis Ababa hotel.

The Gaslight club was selected after the room in the Sheraton hotel the teams had been using was booked by a Japanese delegation.  Sources close to the talks said some delegates were unhappy with the poor lighting and excess noise.

Maybe, just maybe, these things could be handled without spuds and disco balls?

A high ambition coalition of the willing on climate change

As the Center for Global Development’s Owen Barder and Alice Lepissier noted in their post from the COP19 climate summit in Warsaw last month, there was “lots of cloud and not much silver lining” in evidence there, what with Japan’s announcement of reduced emissions targets and the further diluting of the already dubious ‘pledge and review’ approach.

For me, though, the most depressing thing of all was the deafening silence among governments attending the COP about the issue of global carbon budgets. It’s a deep irony that, just as the IPCC publishes by far its most unequivocal analysis to date about the need to define (and then stay within) a safe global carbon budget, governments are less willing than ever to talk about the issue.

Part of the problem is that governments and other UNFCCC process hacks assume that a carbon budget is just too difficult to talk about. Not just because countries would have to agree on a way to share it out, but also, even more fundamentally, because of a sense that agreeing a carbon budget would depend on a ‘big bang’ moment at which all countries agreed on an allocation mechanism – and good luck with that.

This set Owen, Alice, and I thinking about whether there’s a way for some countries to go ahead with a carbon budget-based approach, but without all governments having to be on board at the outset: a high ambition coalition of the willing, in other words. Continue reading

China’s transition from object of Western power to rival to it

In our latest #progressivedilemmas article we look at how the left should respond to China’s rise.

During Labour’s last period in government we failed to make responding to illiberal powers one of the organising concepts of British foreign policy and paid the price in Copenhagen, Geneva, and New York. If we want to avoid repeating that mistake, we need to face up to the scale and nature of China’s power. Labour’s future China policy must combine the humility to recognise the UK’s diminished leverage and the confidence to believe the west’s collective capacity to shape the environment in which Beijing makes its choices has not been lost.

What Have We Learned About Institutional Change?

institutional changeA number of noteworthy reports on institutional change, development, and foreign aid have been published recently. There is much agreement between them, suggesting that we have reached a tipping point in knowledge in this area. I will briefly summarize the results here and provide links for those who want to explore the subject further. Continue reading

Emerging economies’ dangerous game on the post-2015 development agenda

The internal dynamics of the G77 group of developing countries are shifting rapidly on both climate change and the post-2015 international development agenda, as the interests of least developed countries increasingly diverge from those of emerging economies – with pretty far-reaching implications.

Least developed countries (LDCs) are continuing to prioritise adaptation financing in the climate context, but they’re increasingly also focused on the need for higher levels of ambition on the mitigation side of the equation – not just from developed countries, but also from emerging economies, given the proportion of global emissions that they now account for. This has already contributed to a sharp decline in G77 cohesion in the UNFCCC process.

In the development context, meanwhile, different LDCs have different priorities. Most of them continue to regard ODA levels as their key priority – ideally increasing them towards 0.7, and at a minimum stemming the real terms decline seen over the last couple of years. But this is not true of all countries: for governments such as Bangladesh, Zambia, and Malawi, ODA is arguably less important than a successful conclusion to the Doha trade round, together with opportunities in investment, migration, and remittances.  Still, across both development and climate, it is clear that equity remains a key lens through which LDCs view the world.

The key emerging economies, meanwhile – China, Brazil, India, and South Africa – are among the principal demandeurs for a pledge-and-review based approach in the climate context, hence the tensions with LDCs, as well as small island states, over levels of ambition. (Admittedly, some emerging economies – and especially China – are pursuing much more ambitious strategies at national level than their scepticism of global monitoring, reporting, and verification might suggest; but the fact remains that their and others’ voluntary pledges under the Copenhagen Accord imply long term warming of 3.6 – 5.3 degrees Celsius, rather than the globally agreed target of 2 degrees.)

But while it is clear that emerging economies regard global climate policy as a matter of fundamental national interest, it is by no means obvious that the same applies with the post-2015 development agenda. Emerging economies are less reliant than ever on ODA levels, and while many of them are now becoming aid donors in their own right, they show little interest in multilateral coordination of their efforts with those of OECD donors.

This potential lack of emerging economy interest in the post-2015 agenda creates a significant political risk. With emerging economies’ interests increasingly diverging from those of LDCs in the climate context (as well as on several trade issues), they have every reason to try to direct LDCs’ political and moral suasion towards developed countries, and away from themselves.

This in turn gives them a powerful incentive to play up a ‘North versus South’ narrative in the post-2015 context, and to aim for the idea of common but differentiated responsibilities to be as central a concept in development as it already is in climate – something that is now happening rapidly in post-2015 debates in New York, where the tone of discussions is becoming increasingly polarised.

The risk of such an approach, of course, is that it could lead to the post-2015 agenda becoming seriously bogged down amid a mood of mutual recrimination. But it is not clear that this would come at a significant opportunity cost to emerging economies, given that there appears to be little that they want from the agenda. On the other hand, as noted, it might help to ease LDC pressure on them to shift positions on climate or trade. Cynical? Sure – though no more so than the US’s earnest talk about food security while continuing to keep ethanol mandates in place, or EU farm support policy. And smart, too – at least in terms of narrow self-interest.