I was going to call this an imperial delusion, but the United Kingdom has been remarkably successful at defending its powers. Our government has retained a permanent seat on the UN Security Council. Its membership of the G8 is unchallenged. Most importantly, it has preserved its unwarranted share of the vote on the boards of the International Monetary Fund and the World Bank. And it has no intention of giving this up.
In advance of the IMF’s spring meeting (which has just concluded in Washington) France and the United Kingdom rejected any political reform(1). It is true that the fund’s proposals are feeble. It is true that even after far more ambitious reforms the IMF would remain the wrong body, constitutionally destined to fail. But this is not why our government is holding out. It is resisting change because it wants to preserve its imperial rank.
The United Kingdom, with 1% of the world’s population, has 5% of the IMF’s votes(2). Sub-Saharan Africa, with 12% of the population, has 4.6%(3). The UK’s share equals that of China and India put together. It is 5 times as big as Argentina’s, 19 times Bangladesh’s, 35 times Kenya’s, 124 times bigger than Malawi’s(4). The G7 nations – the UK, US, Japan, Germany, France, Canada and Italy – together possess 45% of the vote. The other 177 members are left to squabble over the remains.
Even these numbers tell only half the story. The five countries with the biggest quotas – the US, UK,
Japan, Germany and France – are each allowed to appoint their own executive director to the IMF’s board(5). The rest must submit their candidates for election. Because poor nations don’t know what’s good for them, they are assigned to the tutelage of richer ones. The votes of the English-speaking Caribbean countries are given to Canada. Mongolia is represented by Australia, Kazakhstan by Belgium(6). The reason the UK and France are resisting even the most timid reforms is that these would tip them below the threshold for automatic election: like the other countries they would be represented on the board as part of a bloc.
Power is distributed like this because the IMF is a plutocracy. A country’s vote represents its “quota”, which is a function of its gross domestic product. In theory the quota reflects countries’ financial contributions to the fund. This is no longer the case, as the IMF receives much of its income from loan repayments from poorer nations. But the old formula has resisted 60 years of complaints.
The result is that the governments which are never made subject to the IMF’s strictures control it, while those whose countries have been reduced to an IMF franchise have no say in the way it runs. The fund’s allocation of votes is a perfect inversion of democracy.
A new report by ActionAid gives us a glimpse of how this unfair distribution of power affects the poor(7). After years of protests by poor countries and their supporters in the rich world, the IMF and the World Bank at last permitted them to provide healthcare and education without charge. The rich nations also promised, in 2000, to ensure that by 2015 every child on earth would have primary education(8). It looked like a great victory for the global justice movement. But the IMF is ensuring that the promise won’t be met. It has, in effect, forbidden the poorest nations to hire sufficient teachers.
No one disputes that public sector wage rises can contribute to inflation. No one denies that governments have to exercise some degree of restraint. But the paternalists who run the IMF – who are fixated on creating safe havens for foreign capital – cannot help micromanaging the economies of the poor nations, without reference to the needs of the people who live there. The limits they have imposed on the public sector pay bill ensure that schooling can’t be improved.
ActionAid studied three very poor countries with major education problems: Malawi, Mozambique and Sierra Leone. After they abolished user fees (and when the civil war ended in Sierra Leone), vast numbers of pupils enrolled. But a combination of the rich nations’ failure to provide the foreign aid they had promised and the restrictions imposed by the IMF has prevented these countries from meeting the new demand. As a result, the pupil to teacher ratio in Sierra Leone is 57:1; in Malawi 72:1 and in Mozambique 74:1. That’s the average: in rural areas it can be much higher. Many of the teachers are untrained; many give up because they cannot survive on their wages. In Malawi, for example, the goods required for the most basic level of subsistence cost $107 a month. A trained teacher receives $55(9).
So crowds of pupils strain to hear a scarcely-literate teacher somewhere in the middle distance seeking to instruct them without books, chalk, paper or pens. We should not be surprised to discover that 40% of children fail to complete primary school in Sierra Leone and Mozambique, and 70% in Malawi. Most of the drop-outs are girls.
As a result, these countries are stuck in a vicious circle of misery. Until education improves, GDP remains low. Until GDP rises, there’s little money for education. As one of the agencies charged with rescuing countries from poverty, the IMF should be seeking to break this circle. But the conditions it attaches to its loans keep these countries in their place. In Malawi the IMF sets the ceiling for public sector wages directly; in Sierra Leone and Mozambique the broader macroeconomic rules it imposes have the same effect. ActionAid argues that its fiscal targets are outdated and unnecessary: all these countries have now achieved sufficient stability to start raising teachers’ pay.
But in no case did the IMF consult either the public or the state’s own ministry of education before laying down the law. The amount of money a teacher in rural Malawi is paid is decided by the men in Horse Guards Road and Pennsylvania Avenue. Except for the district commissioners in pith helmets, little has changed since the country was called Nyasaland.
Last year Tony Blair acknowledged that the IMF “must become more representative of emerging economic powers and give greater voice to developing countries.”(10) But he just can’t let go. The proposed reforms do nothing to democratise the IMF; by linking the quota to purchasing power parity rather than raw GDP, they simply turn it into a more sophisticated plutocracy. But they would have the effect of very slightly empowering some middle-income countries while taking a few votes away from some of the rich ones. Even that is too much for the Emperor of Africa. If the British government wants to help the poor, it must first give up its power to tell them how to live. Until that happens, everything the prime minister says about “partnership” and “solidarity”(11) with the world’s oppressed is humbug.
1. Larry Elliott, 13th April 2007. UK opposes plan for developing nations to have more say at IMF. The Guardian.
2. International Monetary Fund, 2007. IMF Members’ Quotas and Voting Power, and IMF Board of Governors
3.David Woodward, New Economics Foundation, February 2007. IMF Voting Reform: Need, Opportunity and Options. Paper for the G24 Technical Meeting, 12 March 2007. http://www.g24.org/wood0307.pdf
4. International Monetary Fund, ibid.
5. David Woodward, ibid.
6. International Monetary Fund, ibid.
7. Akanksha A. Marphatia et al, April 2007. Confronting the Contradictions: The IMF, wage bill caps and
the case for teachers. ActionAid. http://www.actionaid.org/assets/pdf/1%20%20CONFRONTING%20THE%20CONTRADICTIONS%20E-VERSION.pdf
8. The UN Millennium Development Goals, 2000. http://www.un.org/millenniumgoals/
9. ActionAid, ibid.
10. Tony Blair, 26th May 2006. Foreign Policy Speech 3. http://www.number-10.gov.uk/output/Page9549.asp
11. Tony Blair, 8th July 2005. Statement on the final day of the G8 Summit.