I don't mean to dump on UK Prime Minister Gordon Brown any more than is necessary. His troubles at home appear enough to ensure that a second term in office--which he would actually have to win at the ballot box--is a very iffy proposition. Being Blair's chancellor of the exchequer for the longest time, it is hard for him to escape the blame for the America Jr. mess he faces: a collapsing housing bubble, unprecedented household indebtedness, and the rest of it. However, Brown has not exactly held silent during this time of economic crisis, and a recent swing through the Middle East finds him suggesting that Gulf states ante up at the IMF. With any number of countries now in line to receive funding and global conditions not improving markedly by any stretch of the imagination, it is conceivable that the quarter of a trillion or so the IMF has will run out in the near future.You may think, "That's a $%^&*£ fine idea. Let the petrodollars be put to productive use by helping less fortunate developing countries out." Perhaps so, but I believe that the Gulf states will be reluctant to participate in such a scheme given that, like many other LDCs, these countries have minimal say in global economic governance despite their growing economic clout. Let us spell out the issues:
(1) Europeans have disproportionate influence at the IMF - tradition dictates that the managing director is chosen by the Europeans. Moreover, Europeans have been quite reluctant to let developing countries have more voting shares at the IMF. At the IMF, the number of quota allocations a country has is roughly proportional to its voting power there. Despite efforts to make the IMF less "Western-centric" in governance, European countries have not been keen on relinquishing some of their voting rights to make way for fast-growing LDCs. On March 28 of this year, changes in quota allocations were proposed that were largely cosmetic, however. Unless representation and governance at the IMF become more cosmopolitan, it is right to wonder why Gulf states would be so excited to fund it.
(2) Gulf countries' sovereign wealth funds (SWFs) continue to be regarded with suspicion - I've already talked about past efforts to impose Western standards on LDCs with large pools of investible monies. The IMF has been at the forefront of these efforts with the so-called Santiago Principles. Somewhat infamously, French President Nicolas Sarkozy proposed the creation of European equivalents of these SWFs to ensure that European "national champions" do not fall into the hands of others. Although it would be good not to confuse Sarkozy's protectionist rhetoric with that of Brown and others, vestiges of protectionism remain that maintain a patronizing attitude. On the topic of SWFs, Brown suggested that they "play by our rules and operate in a commercial manner." Which, of course, is a big problem in a world where he who has the gold (usually) makes the rules.
(3) At the same time, Westerners keep talking about lessening oil dependency and cutting carbon emissions - telling Gulf states that you intend to undercut their breadwinner doesn't seem conducive to eliciting support.
It is thus doubtful the Gulf states will suddenly have an outpouring of generosity towards the IMF. The upcoming (US-sponsored, naturally) November 15 meeting in Washington to discuss changes in global economic governance should prove to be decisive in seeing if Western powers are truly interested in inviting others to the table. Or, it may perpetuate the status quo which is more reflective of the situation over half a decade ago than of current times.
UPDATE: The Guardian reports Brown is confident that Gulf states are amenable to the idea of funding the IMF, although there are no firm commitments (or dollar figures) to speak of as of yet. We should see in a fortnight or so when the G20 summit is held whether these commitments are substantial. Brown says that heightened oil prices in recent years have boosted Gulf states' revenues by $1 trillion in making his case:
Gordon Brown yesterday said he felt confident that he has successfully enlisted the help of Gulf states for international plans for an emergency bail-out fund, with both Qatar and Saudi Arabia indicating they will offer funds when leaders of the 20 most developed countries meet in Washington in a fortnight.
As the prime minister arrived in Qatar on the second leg of his whistlestop Gulf tour last night, the Qataris hinted they would contribute money to an International Monetary Fund bail-out fund - being billed as a "new Bretton Woods" after the initiative of 1944 - the details of which will be thrashed out in Washington on November 15. The prime minister, Sheikh Hamad bin Jassim al-Thani, said: "We are sharing the same world. Qatar is not excluded, so we have to work together."
Speaking after his three-hour private conversation with the King of Saudi Arabia on Saturday, Brown told the BBC's Sunday AM programme: "The Saudis will, I think, contribute so we can have a bigger fund worldwide." Yesterday Kuwait said it had still not made up its mind.
Brown's diplomacy appears to have been in the face of some disquiet among Arab leaders that they are being looked to to provide funds to shore up ailing countries. A senior government source involved in the talks said the Arab states did not want to be cast as the West's "cash cow" [that you are, bub]...
Though the trip has many ambitions, Brown has concentrated on securing Gulf support for the emergency IMF bail-out fund before the Washington summit. He believes the oil-rich countries in the Gulf have profited from the higher oil prices of recent years - something he put at $1tn - which he believes puts them in a position to contribute. He would like to see the $250bn in the IMF's pot increased by "hundreds of billions"...
