The Euro crisis has overwhelmed all other debates about the reform and development of global governance institutions dealing with the World Economy. It is therefore necessary to remind ourselves why we need a reform of the IMF Quota formula. In one word it is all about the "Credibility" of the IMF in a rapidly changing World Economy. Unless the power balance in the IMF changes to reflect the changes in the economic power in the World economy, the IMF will inevitably loose credibility as an "International" institution! Maybe my eye sight and hearing are not as strong as in my youth, but in the past year I have heard nothing (in the IMF or G20 setting) that would indicate that there is any recognition by the European Powers of the need for formula reform (and vote shares) to maintain credibility.
The following table on the contribution of major economies to World growth during the past three decades encapsulates succicinctly the point about globalchange and credibity. In the decade of the 1980s the US and Euro Area + UK contributed over 1/5th each with Japan contributing about 1/10th. In the decade of the 2000s the contribution of each of these had declined sharply with the USA contributing less than the 10% contribution of India, and all three together contributing about half that of China. The contribution of the Euro area+ UK has declined progressively from 20.6 percent in the 1980s to 17.3% in the 1990s to 6.4% in the 2000s. This reflects a fundamental transformation of the World Economy and an emerging shift in economic power. Unless this shift in economic power is reflected in the IMF an institution for monitoring/managing the global economy, it is not difficult to imagine it going the wayof other UN institutions that have completely lost Global credibility and are increasingly being bypassed!.
| Table | Contribution to World Growth | |||
| 1981 to | 1991 to | 2001 to | 1981 to | |
| 1991 | 2001 | 2011 | 2011 | |
| United States | 21.2% | 26.3% | 9.6% | 17.0% |
| Euro Area+ UK | 20.6% | 17.3% | 6.4% | 12.6% |
| Japan | 11.4% | 2.4% | 1.0% | 3.7% |
| China*# | 8.7% | 17.9% | 29.6% | 21.6% |
| India*# | 4.4% | 6.5% | 10.1% | 7.8% |
| Rest | 33.8% | 29.7% | 43.4% |
37.3% |
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