“The basic deal on offer”
After a speech at the Brookings Institution today, Treasury Secretary Tim Geithner put the ongoing effort to reform the International Monetary Fund in an interesting light. Unsurprisingly, his speech emphasized the need for "surplus countries" — read China — to stop pressing against the appreciation of their currencies. But in response to questions, he went ...
After a speech at the Brookings Institution today, Treasury Secretary Tim Geithner put the ongoing effort to reform the International Monetary Fund in an interesting light. Unsurprisingly, his speech emphasized the need for "surplus countries" -- read China -- to stop pressing against the appreciation of their currencies. But in response to questions, he went further and seemed to explicitly link IMF reform with some kind of deal on currency, or at least a new willingness to "internationalize" exchange rate issues via a newly empowered IMF:
After a speech at the Brookings Institution today, Treasury Secretary Tim Geithner put the ongoing effort to reform the International Monetary Fund in an interesting light. Unsurprisingly, his speech emphasized the need for "surplus countries" — read China — to stop pressing against the appreciation of their currencies. But in response to questions, he went further and seemed to explicitly link IMF reform with some kind of deal on currency, or at least a new willingness to "internationalize" exchange rate issues via a newly empowered IMF:
The members of the IMF are sovereign nations — they did not give over to the IMF control over their basic economic policy choices, but we’re on the verge of giving substantially greater weight to the large rapidly growing emerging market economies in the fund, and we think this is a moment where it’s worthwhile making sure those reforms to governance — which we deeply believe in and support — are complemented by more effective ways for the IMF to play a greater role in helping change behavior on the exchange rate front and encourage surplus countries to shift to more domestic demand-led growth. That’s the basic deal on offer.
To this point, IMF reform has largely been a tussle between the United States and Europe, as Washington has pressed Europe to give up several of its seats on the IMF executive board. Geithner’s comments suggest a possible different dynamic: IMF reform being offered to China and other emerging economies in exchange for their willingness to countenance greater international influence over exchange rate policy.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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