Buria, Ariel. (2005). "The Bretton Woods Institutions: Governance Without Legitimacy?" CSGR Working Paper No. 180/05.
This article starts out with a quote from Douglas North: “Institutions are not…created to be socially efficient; rather they, or at least the formal rules, are created to serve the interests of those with the bargaining power to create new rules” (2).
The voting structure of BWIs is examined in this article and it is found to be highly correlated with the influence of countries who contribute more quota money to funds. The attempt is to then create a different metric whereby countries could be given voting rights in these institutions. This new metric would do much to skew voting power away from traditional hegemons and towards newly industrializing countries. “…present day quotas…represented the economic structure of the world in 1944 are far from representative of the current sizes of economies, of their ability to contribute resources to the Fund or of their importance in world trade and financial markets” (5).
There was a quota review group. They attempted to make changes to this regime. However, while they were given a mandate to make these changes, they did not take into account developing countries (6). The review group was an iteration of vested interests having their way in an IO.
The first metric that Buria examines is the measurement of GDP in determining voting rights. “The majority favored conversion at market exchange rates, averaged over several years, but a minority preferred to measure GDP for purposes of the quota calculations using PPP-based exchange rates. They considered that market exchange rates do not necessarily equalize prices of tradable goods across countries, even after taking into account transport costs and quality differences, and that this creates an index numbers problem in which the GDP in developing countries is understated in relation to developed countries if market exchange rates are used” (9).
In this world,
The quota system is also skewed in favor of developing countries in that it does poor job of measuring inter-European trade.
Buria then shows that, “…the measurement of GDP in terms of PP favors an increase in the quota share of all developing countries by eliminating a measurement bias against them. The introduction of volatility as a factor in the quota formula also favors developing countries, particularly exporters of primary products” (16).
She then looks at the eroded legitimacy of BWIs. The Fund ahs lost all influence over industrial countries. International financial markets have given countries access to other forms of financing. There is a, “…growing chasm between shareholders and stakeholders, between those who determine IMF policies and decisions and those to whom those decisions and polices are applied” (18). Also, the rapid expansion of NICs is highlighted with their growing coffers of financial reserves.
In conclusion, this article claims that the quota formulas need to reflect a changed global economy, where the influence of the economic powers of 1944 is decreased and the influence of the economic powers of the 21st century is increased. “…the determination of quotas is as much a political as a technical exercise” (26).
