Rebalancing via reform
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By agreeing to give under-represented emerging market countries more power in the International Monetary Fund (IMF), finance ministers from the Group of 20 have given the fragile global recovery a much-needed and surprising shot in the arm during their week-end meeting in South Korea.
While applauding the joint effort by big industrialized and developing economies to enhance the fairness and legitimacy of the IMF, we are urging the international community to build on the historic agreement to rebalance the world economy through different necessary domestic reforms.
The shift of 6 percent of IMF voting power away from the richest countries toward "dynamic emerging-market developing countries" will surely, at least for the moment, put an end to the discussion about the legitimacy of this international institution.
Sluggish reform on power sharing between developed and developing economies once significantly crippled the IMF's ability to reflect and respond to the dramatic changes in the world economic landscape.
Fortunately, the urgency for the Fund to assume a critical role in helping lift the world economy out the worst global financial crisis in more than a decade has facilitated reforms that will make it relatively easier for it to serve as an appropriate and effective international platform in the search for viable solutions for a balanced and lasting global recovery.
The bigger-than-expected shift of voting power within the IMF will also considerably boost confidence in the forthcoming G20 summit in Seoul next month.
At a time when the global recovery is increasingly threatened by tensions over trade imbalance and exchange rate issues, some sort of breakthrough is badly needed to avoid a widening of the gulf between emerging and developed nations.
The unity that G20 leaders displayed in confronting the immediate and immense consequences of the 2008 global financial crisis with unprecedented stimulus packages has worked well in preventing the worst from happening. Yet, as countries have emerged from the recession at different speeds, underscoring the unevenness of the global recovery, policymakers from developed and developing countries have found it more and more difficult to act in concert to stimulate growth.
The international community's endeavors to keep protectionism at bay and avoid currency wars are definitely a necessary condition for global growth.
Nevertheless, in the absence of fundamental and difficult financial and economic reforms, that would enable debt-laden rich countries to save and invest more in a productive way, and render economies with a big trade surplus balanced growth engines for the world, it is hard to predict that the global crisis will be over anytime soon.
So, let the reform of the IMF acknowledging the rising clout of emerging economies be an initial step towards broader and bolder reforms at both national and international levels.
And, if the IMF is to assume its new historical role, it should continue to press ahead with more internal reforms and keep promoting a game-changing overhaul of the international financial system to sustain a fair and orderly global recovery.
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