This reality presents an opportunity for the emerging market countries of the world. Power is, however, never given up easilythe developed countries are hardly likely to lead the charge for changeand change will come about only if the emerging market countries seize this opportunity. That will require skill, cooperation among those countries, and a vision of what they want to achieve.
An important step has already been taken in the emergence of the G-20 as the primary forum of national leaders within which the major initiatives and decisions have been taken to deal with the current crisis. This is a positive step as it gives voice to the emerging market countries in what could become the foremost global agenda setting body. This is a significant step in going beyond the G7/8 which long dominated the direction of global economic and financial policy.
While a step in the right direction, there are serious questions about the composition of the G-20. Most important, and like the G7/8, it suffers from the fact that it is not universal and its membership is arbitrary. This weakens both the legitimacy with which it can act and its accountability. The essential challenge is to build a better structure for global economic governance in which all countries have voice appropriate to their place in the global economy, i.e., to assure its universality. At the same time, the number of active participants needs to be limited to a group small enough to discuss and debate issues efficiently.
There is only one means to assure universality in such a body while limiting its size. That can be done through a constituency system, wherein the countries sitting in the smaller group speak not just for themselves but are charged with representing the views of a group of countries. Such a system already exists in many international organizations in which members of the executive boards of those organizations are elected to represent country groupings. For example, chairs in the Executive Board of the International Monetary Fund (IMF) are held either by a single country (those with the five largest quotas), or by a group of countries that has self-selected its members and elected one executive director to represent them.
Under this structure, all countries have a channel, through their executive director, to have their views known and their voice heard. This is the system through which a group of countries like the G-20 could achieve universality and increase its legitimacy.
The IMF system provides more than just a model. As the IMF is the central institution created by treaty with responsibility for global economic and financial stability, consideration should be given to using a body in the IMF to serve as the forum for the coordination of global economic and financial policy. To date, none of the bodies that have tried to adopt the mantle of that responsibility have succeeded. The G7/8, the G-20 and the International Monetary and Financial Committee (IMFC) all failed to prevent the current crisis.
There is now a proposal on the table that should be seen as a means to provide the kind of forum that is needed in which the senior-most economic and financial policy makers can come together to discuss and debate and take action on the critical issues confronting the global economic and financial system.
That proposal would convert the IMFC into a decision-making Council, a body that was anticipated in the IMFs Articles of Agreement but that has not yet been activated. The structure and composition of the council would mirror that of the Executive Board which would assure its universality by giving voice and power to all countries since every member country in the IMF would be represented through its Councilor. Now is the time to put this proposal to serious discussion and debate.
The author is former Special Adviser and Director of the Policy Development and Review Department, International Monetary Fund