The annual IMF/World Bank meetings in Morocco have been the most confrontational yet by US/NATO diplomacy towards China and its BRICS+ allies. The issue is not rivalry, but rather the world’s support for US unipolar dominance or a multipolar philosophy of mutual support to increase living standards and prosperity.
The US has increased its drive to increase quotas of IMF and World Bank member countries, reflecting voting power with 85% of the votes required to enact a policy. Since the inception of these organizations in 1944-45, the US has insisted on having veto power in any organization it joins, so that no foreign countries will ever be in a position to dictate its policy.
Since 1945, the original distribution of quotas has not kept up with the changes in international financial power. Rising economies have asked for a larger quota and voice in settling IMF and World Bank policy. However, US strategists insist that any increase in overall quotas must not reduce its own quota to less than 15% enabling it to maintain its unique veto power.
Japan holds the second largest quota of US power, at 6.47 per cent, due to its industrial success in the 1970s and ’80s. China follows with 6.40%, followed by Germany and Britain, who rely on US gentleness to tighten US-centered dependency on their economies.
The emergence of BRICS+ countries and their collective alternative to de-dollarization in the IMF has made the issue of de-dollarization more pressing this year. Countries seeking a multipolar world order instead of relying on US suppliers and creditors are seeking a different philosophy of international finance, creditor/debtor relationships, and national self-sufficiency to protect themselves from trade sanctions and US-sponsored economic warfare.
US Treasury Secretary Janet Yellen and her neoliberal gang at Marrakesh have thrown down the gauntlet when it comes to giving China a stronger voice in the IMF. Former US Treasury official Edwin Truman explains that any deal must satisfy the US Treasury, ensuring that the combined size of selected increases does not threaten the US voting share or Washington will block the compromise.
The problem is that under the current formula, the quotas of the strongest 25 IMF members should be at least 50% lighter than their current ones, led by China. This would not only reduce the US voting share to close to 15% but also give China increasing influence. China should refuse a selective increase in its quota, and the US should support the compromise to remove this obstacle.
The IMF meeting is facing a stalemate, with China and other countries refusing to support US Cold War strategists in hijacking resources for international diplomacy. The IMF’s recent loans to Ukraine have raised its borrowing to seven times its quota, violating its stated limits to member-country borrowing, lending to a country at war, and violating the “No more Argentinas” rule.
The US strategists at the IMF and World Bank are expected to continue weaponizing their loans to promote US-centered neoliberalism. If the US refuses, China could potentially withdraw its IMF and World Bank subscriptions altogether and walk away. However, China should not subsidize international organizations whose policies are adverse to those of China and its fellow BRICS+ allies. The World Bank, headed by a US diplomat, aims to finance a US/NATO-backed alternative to China’s Belt and Road initiative.
If Chinese and fellow BRICS+ de-dollarization is a broad system-wide effort to replace the US unipolar predatory asymmetry with a more positive-sum philosophy of mutual gain, it would be better to accept the US challenge that has just been thrown down the gauntlet to China. This would avoid a “stalemate” and make clear the philosophical distinctions that have led the world economy to today’s crossroads.