IMF financial resources: The U.S. failure to embrace the governance reforms we ourselves championed represents a missed opportunity. On its own, this failure might do little to reduce U.S. influence around the world or even at an institution, which is, after all, housed only a few blocks up the street from the White House and the Treasury. But dropping the ball on governance reforms, when combined with U.S. unwillingness to participate in the bolstering of the fund's financial resources earlier this year, leads to the rise of an unhealthy narrative that the United States is simply not committed to the IMF itself.
In January 2012, Lagarde publicly warned of the enormity of the risks to the global economy and pleaded that the fund's then-current resources were inadequate to address them. She then embarked on a high-profile fundraising effort across the globe, seeking to reinforce the IMF's financial resources to ensure that, should the worst case develop, the fund would be adequately prepared to stand between teetering nations and global economic Armageddon.
But, perhaps deferring to a skeptical Congress that was seen as more likely to withdraw existing commitments rather than pony up additional ones, the United States argued that while Europe's problems were big, they were not too big for wealthy Europe to handle by itself, and the administration made it clear that it would not be participating in any new fundraising effort. While this analysis was undoubtedly correct on its face, it missed the broader strategic argument that a continuing role for the IMF would enable the United States to indirectly, but meaningfully, retain influence over the direction and outcomes of Europe's crisis response. Given the strategic, political, trade, and financial interlinkages between Europe and the United States, and the strong, built-in financial protections over IMF member finances, this might well have been a trade worth making.
So when Largarde announced in April that 30 countries had committed to more than $450 billion in new resources for the IMF, America was glaringly absent. Perhaps as important, the United States ensured that this new infusion of cash didn't buy those countries any increased "shares and chairs" at the fund.
While some might argue that this was a deft move by the United States -- "leading from behind," if you will -- that is not likely to be the case. While the United States will undoubtedly retain its de jure veto over official decisions, it is likely that increasing de facto influence will be exerted by contributor countries who naturally expect to have their voices heard, in spite of stalled governance reform and a dominant shareholder that contributed not a penny to the latest round of financing.
As in any large complicated institution, influence can be felt and exerted through a variety of means, and not simply in the board room. With an outdated governance and operating structure, U.S. failures mean that U.S. influence may be significantly diminished and that more IMF policy influence and decision making will take place outside of the established governance structure. That's not good for the United States.
IMF role: As far its global influence is concerned, the IMF has taken a roller-coaster ride over the last few years from "searching for relevance" to "indispensable actor." But the fund's future role is still evolving, and while it is likely to remain integral to the world's economic system, the specifics of how it goes about this role are in flux. Decreased U.S. influence may not only be seen in individual policy and program decisions, but also in its ability to influence the fund's overall direction as it seeks to define and refine a new role on the world stage.
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