Organizational Reform and the Expansion of the South’s...

G-24 Discussion Paper Series

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Organizational Reform and the Expansion

of the South’s Voice at the Fund

Peter Evans and Martha Finnemore

No. 15, December 2001

G-24 Discussion Paper Series

Research papers for the Intergovernmental Group of Twenty-Fouron International Monetary Affairs

UNITED NATIONSNew York and Geneva, December 2001

CENTER FOR INTERNATIONAL DEVELOPMENTHARVARD UNIVERSITY

UNITED NATIONS CONFERENCE ONTRADE AND DEVELOPMENT

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iiiOrganizational Reform and the Expansion of the South’s Voice at the Fund

PREFACE

The G-24 Discussion Paper Series is a collection of research papers preparedunder the UNCTAD Project of Technical Support to the Intergovernmental Group ofTwenty-Four on International Monetary Affairs (G-24). The G-24 was established in1971 with a view to increasing the analytical capacity and the negotiating strength of thedeveloping countries in discussions and negotiations in the international financialinstitutions. The G-24 is the only formal developing-country grouping within the IMFand the World Bank. Its meetings are open to all developing countries.

The G-24 Project, which is administered by UNCTAD’s Macroeconomic andDevelopment Policies Branch, aims at enhancing the understanding of policy makers indeveloping countries of the complex issues in the international monetary and financialsystem, and at raising awareness outside developing countries of the need to introduce adevelopment dimension into the discussion of international financial and institutionalreform.

The research carried out under the project is coordinated by Professor Dani Rodrik,John F. Kennedy School of Government, Harvard University. The research papers arediscussed among experts and policy makers at the meetings of the G-24 Technical Group,and provide inputs to the meetings of the G-24 Ministers and Deputies in their preparationsfor negotiations and discussions in the framework of the IMF’s International Monetaryand Financial Committee (formerly Interim Committee) and the Joint IMF/IBRDDevelopment Committee, as well as in other forums. Previously, the research papers forthe G-24 were published by UNCTAD in the collection International Monetary andFinancial Issues for the 1990s. Between 1992 and 1999 more than 80 papers werepublished in 11 volumes of this collection, covering a wide range of monetary and financialissues of major interest to developing countries. Since the beginning of 2000 the studiesare published jointly by UNCTAD and the Center for International Development atHarvard University in the G-24 Discussion Paper Series.

The Project of Technical Support to the G-24 receives generous financial supportfrom the International Development Research Centre of Canada and the Governments ofDenmark and the Netherlands, as well as contributions from the countries participatingin the meetings of the G-24.

ORGANIZATIONAL REFORM AND THE EXPANSIONOF THE SOUTH’S VOICE AT THE FUND

Peter Evans and Martha Finnemore

University of California, Berkeley, CA, andGeorge Washington University, Washington, DC

G-24 Discussion Paper No. 15

December 2001

viiOrganizational Reform and the Expansion of the South’s Voice at the Fund

Abstract

What organizational reforms might increase the influence of developing member countries

within the International Monetary Fund? In this paper we argue that a variety of organizational

changes are both feasible and could substantially increase the ability of developing countries

to articulate policy alternatives and advance change. We focus particularly on changes in the

recruitment, training, career paths and deployment of the Fund’s staff. Our recommendations

address two general issues. First, we explore ways to diversify the “intellectual portfolio” of

the staff by drawing more effectively on hands-on knowledge of the concrete circumstances that

shape policy outcomes in the South. More mid-career hiring of staff with practical experience

inside developing country institutions could increase the degree to which the distinctive

institutional circumstances of developing members are taken into account in formulating Fund

policies and implementing them. Allocating a larger share of the Fund’s resources to research

consulting contracts for researchers and institutions based in developing countries could also

expand input of ideas that reflect the experience of member countries from the South. Second,

large asymmetries in workload currently make it difficult for those working on the needs of

developing members to formulate and advocate alternative policies. We suggest a number of

ways in which even modest reallocation and addition of staff resources might create breathing

space that would allow Executive Directors from developing countries to play a larger role in

shaping the Fund’s policies.

ixOrganizational Reform and the Expansion of the South’s Voice at the Fund

Table of contents

Page

Preface ............................................................................................................................................ iii

Abstract ........................................................................................................................................... vii

I. Introduction .............................................................................................................................. 1

II. The political context of globalization and the Fund’s evolving role .................................... 2

III. The governance problem ......................................................................................................... 6

IV. Paradigms, personnel and organizational reform ................................................................ 8

V. Some possible strategies for organizational reform ............................................................ 13

A. Increasing the voice of developing country Executive Directors ...................................... 13B. Rebalancing resources and obligations in the area departments ....................................... 14C. Valuing geographic context: the possibility of regional satellites ..................................... 15D. Valuing experience: the role of lateral entry ...................................................................... 16E. Sub-contracting the project of diversification: increased support

for developing country researchers .................................................................................... 18

VI. Conclusion ............................................................................................................................... 19

Notes ........................................................................................................................................... 20

References ........................................................................................................................................... 20

1Organizational Reform and the Expansion of the South’s Voice at the Fund

I. Introduction

With over a thousand competitively selectedprofessional economists, the staff and managementof the International Monetary Fund (IMF) constitutea globally unique accumulation of human capital. TheFund should be one of the world’s premier publicservice organizations. For developing countries,where specialized human capital is a scarce commod-ity, the potential value of such an asset is especiallygreat. Yet, in the South the Fund’s expertise is oftenseen less as an asset than as a source of intrusive,external control used to further the interests of pri-vate financial institutions and rich countries. Dealingwith IMF’s economists becomes the price to be paidfor continued access to the financial flows that theFund controls, rather than a means of access to amajor intangible public good.

For the IMF to be perceived as an institutionowned and controlled by Northern governments,operating as “the creditor community’s enforcer”(Lissakers, 1991: 201), is obviously a problem forthe Fund itself as well as for member countries from

the South. Everyone recognizes that when membercountries “take ownership” of IMF programmes,chances of success increase. Even the quality of theinformation the organization uses for surveillance anddesign of programmes depends on the level of mem-ber country participation.

There are two ways in which the South’s “own-ership” of the Fund might be increased. First andsimplest would be to expand the degree of the South’sformal control over the Fund’s decision-making ap-paratus by re-aligning votes to reflect the reality thatdeveloping countries are both the Fund’s primaryclients and a major source of its operational income.This route is conceptually simple but politically dif-ficult, perhaps impossible, without fundamentalchanges in the underlying reality of the dispropor-tionate political and economic power of the North.A second, more subtle, and more politically feasi-ble, way would be to increase the voice of the Southin the Fund – to increase the extent to which per-spectives derived from the experience and interestsof the member countries of the South are incorporatedinto research, policy formulation, and decision-making within the Fund.

ORGANIZATIONAL REFORM AND THE EXPANSIONOF THE SOUTH’S VOICE AT THE FUND

Peter Evans and Martha Finnemore*

* We should like to thank all the Executive Directors and members of the IMF staff, without whose generosity in offering theirtime and insights this paper could not have been written. We also are grateful to the Berkeley Institute of International Studies forsponsoring the Workshop at which a preliminary version of this paper was discussed, and to the following participants in theworkshop for their helpful comments: Barry Eichengreen, Vijay Kelkar, Aziz Ali Mohammed, Maury Obstfeld, Beth Simmons andSteve Weber. Suggestions from Tom Callaghy, Jo Marie Griesgraber, Devesh Kapur and Robert Wade were also invaluable. Allerrors of judgement or fact are, of course, the responsibility of the authors.

2 G-24 Discussion Paper Series, No. 15

Expanding voice is less dramatic than chang-ing votes, but no less important.1 Effective voice, forour purposes, has two components. It involves hav-ing the opportunity to formulate clear, informedviews, as well as to advance them. Having more votesis an empty victory without a well-developed set ofpolicy proposals that can in turn be effectively har-nessed to the machinery of policy implementation.The power of votes is undeniable, and in the case ofclearly clashing interests votes will trump voice.Nonetheless, the course of policy and programmesat the IMF depends as often on the sway of presump-tions and ideas which make proposals persuasive asit does on the unambiguous imposition of interest.Voice is important and, while in no way denying theimportance of votes, we shall focus here on voice.

Two features of the Fund’s structure seem par-ticularly important to the South’s ability to voice itsviews. One hallmark of the Fund’s policy-making isthe value placed on consensus, both among staff ofthe bureaucracy and within the Executive Board. Theextent to which policy is validated by consensus,particularly consensus among Executive Directors(EDs), increases the importance of effective voicesince significant opposition undermines consensusclaims. Other voice opportunities arise through thestaff. We know that in any large bureaucratic organi-zation the incentives, orientations and goals of thestaff account for a substantial part of the variance inorganizational direction and performance. This isespecially true when staff activities depend on highlyspecialized expertise and when the organization’sgoals and outputs are complex and difficult to meas-ure. Acknowledging the lessons of organizationaltheory leads firmly to the conclusion that the way inwhich the Fund’s staff is recruited, trained, organ-ized and rewarded must be a central determinant ofhow the Fund defines and executes its mandate.Therefore, the foundations of effective voice mustbe built on the recruitment, experiences and careertrajectories of the staff.

In sum, the question posed by this paper is“What kinds of organizational reforms might increasethe voice of developing member countries within theFund?” We shall answer this question at the end ofthe paper by proposing several specific organizationalreforms. Before suggesting such reforms, however,we shall make two initial arguments. First, the chang-ing nature of the Fund’s role in the current globalpolitical context makes increased responsiveness tothe interests and perspectives of developing coun-tries almost a logical necessity. Second, importantorganizational reforms are feasible despite the

realpolitik of Fund governance and the technicalconstraints within which Fund policies and pro-grammes must operate.

II. The political context of globalizationand the Fund’s evolving role

As the magnitude, velocity and volatility of glo-bal financial flows grow and the capacity of nationalpublic authorities to manage these flows declines,the role of the IMF has become more crucial. Eventhough private financial institutions and other privateagents which collectively constitute “the markets”dominate the international financial system, the Fundis an essential catalyst for the collective action nec-essary to keep the system running.

As the global political economy has evolvedover the course of the last 50 years, the Fund’s rolehas also evolved. The initial tasks of increasing open-ness to the movement of global trade and capital havelargely been accomplished. Current challenges aredifferent and more difficult. On the one hand, the taskof devising reliable institutional insurance against thethreat of volatility and crisis has become ever morechallenging as the volume and velocity of flowsincrease. Even more intractable is that fact that open-ness has proven insufficient to effect the kinds ofNorth-South transfers of real resources on whichmarket-driven solutions to poverty in the South de-pend. The difficulty of responding effectively to thesenew challenges makes the Fund’s legitimacy morefragile.

The Fund’s problems flow in the first instancefrom the failure of market-driven globalization todeliver sustained growth, diminished inequality andenhanced well-being to the majority of the world’scitizens that live in the South. Growth has been un-even. Inequality has increased. Even where increasesin monetary incomes have been achieved, they aretoo often accompanied by the loss of well-being dueto the erosion of collective social and cultural goods.Discontent with the results of globalization is rife,but the private actors who bear primary responsibil-ity for shaping the process of globalization are hardto hold accountable. “The markets” are not account-able to either citizens or congressional commissions.Consequently, resentment generated by globalizationis focused on the public institutions charged with try-ing to diminish its negative effects – and the Fund isa prime target.


Ironically, while angry citizens storming theFund’s meetings are the more visible threat, criticswith a very different point of view are more likely toundermine the Fund’s ability to carry on. For thoseconvinced that the solution to the problems of glo-balization is simply a more thorough hegemony ofmarket forces, the Fund appears superfluous, if notan impediment. The Meltzer Commission, with itsfixation on the Fund as a source of moral hazard is agood example. From the point of view of the Fund,the question is how it might generate a political con-stituency sufficient to prevent itself from beingcrippled by the twin cries of “De-fund the Fund!”and “Let the markets work!”. Providing more effec-tive service to developing country members must bea central element in building a broader constituency.

At the same time that the current global con-text makes the Fund more politically vulnerable, italso increases the importance of ideas and expertisein the Fund’s role. The Fund’s ability to act as a cata-lyst for collective action and its ability to bothdisseminate and legitimate ideas and informationabout the global economy as well as individual na-tional economies becomes more important as themagnitude of its financial leverage relative to pri-vate markets declines.2

A central feature of the Fund’s ideas about howto help members respond to global change has beena deepening of the Fund’s involvement in local insti-tutions in the member countries of the South. In the1980s and 1990s, convinced that resolving balance-of-payments problems and achieving macroeconomicstability was impossible unless borrowers could bepersuaded to restructure their domestic economies,and forced by the increasing magnitude of world tradeand capital flows to undertake greater risks by lend-ing increasing proportions of country quotas, theFund began to focus its attention on constructing setsof “conditionalities” which member countries wererequired to accept in order be deemed credit-worthy.Conditionalities were also seen as a service to pri-vate sector creditors, since their acceptance gavegovernments a way “to signal the predictability oftheir policies to private creditors” (Kapur, 2000: 5).In the 1990s, governance-related conditionalitiesbecame the vogue, and conditionalities came to fo-cus increasingly on institutional issues rather thanvariables measurable in terms of traditional economicparameters.

The expansion of conditionalities is, in manyways, a logic result of the uneven success of Fundprogrammes (Killick, 1995). The assumption under-

lying policies prior to the 1980s that macroeconomicperformance can be separated from the seamless webof institutional relations that determine economicperformance was only a convenient fiction to beginwith. As it became more obvious how hard it was tochange a specific, restricted set of parameters withoutmodifying the surrounding parts of the seamless web,the temptation to broaden the scope of condition-alities was irresistible. It is a hard trajectory toreverse. While the Fund’s new Managing Directorwould like to shift the momentum in the direction of“streamlining conditionalities” (IMF, 2000a: 322),too many aspects of the domestic economy and itsgovernance are critical to the Fund’s core goal ofmacroeconomic stability to allow the Fund to recap-ture the simpler world of its early lending practices.3

Along with the move toward an expanded setof conditionalities, the Fund has intensified its focuson issues of poverty and inequality through the Heav-ily Indebted Poor Countries (HIPC) and PovertyReduction and Growth Facility (PRGF) Initiatives.Like conditionalities, this has forced deeper involve-ment in the institutional life of borrowing countries.The Chair of the Fund opened its annual meetings in2000 by highlighting these twin issues: “The greateconomic tragedy of our time is poverty. ... Growinginequality poses the greatest risk for the future ofthe global economy”. The new Managing Directorunderlined the point by declaring that “The mem-bership wants the IMF to stay strongly engaged withits poorest member countries”. The position of themanagement of the Fund on the importance of con-tinued Fund engagement with poverty issues iscompletely consistent with the position of the Groupof Seven as expressed at its Summit held in Japan inJuly 2000 (where it was agreed that IMF responsi-bility for macroeconomic stability was a “key tool forthe achievement of poverty reduction and growth”)and in the Group of Seven Finance Ministers reportto the Summit (which states that the IMF has a criti-cal role to play in supporting macroeconomic stabilityin the poorest countries, through the Poverty Reduc-tion and Growth Facility).4

Both conditionalities and responsibility for pov-erty reduction increase the importance of “on theground” knowledge of and experience with the in-stitutions of the member countries in which the Fundhas programmes. Indeed, even conventional macro-economic analyses concerned with financial stabilityrequire such institutional knowledge. Concern withthe capacity to make “credible commitments” ascentral to building sound relationships with the in-ternational financial community illustrates the point.


Only robust institutions can make credible commit-ments. The commitments of one central bank that isformally independent but organizationally weak maybe less credible in practice than those of anothercentral bank that is not formally independent but or-ganizationally robust. Superficial examination of thetwo cases is not likely to suffice to evaluate the dif-ference between the two.

For programmes and policies that focus on pov-erty reduction the case for drawing upon localknowledge is equally strong. Making sure that macro-economic policies are consistent with povertyreduction is a task that depends substantially on anintimate knowledge of the functioning of local insti-tutions. Enabling the Fund’s staff to play the samekind of innovative role in the implementation ofconditionalities and poverty reduction that they haveplayed in the diagnosis of macroeconomic flows re-quires diversification of the Fund’s human andepistemological capital.

Attempts to change the Fund’s role and the con-tents of its policies and programmes must recognizethe Fund’s diverse relationships with different setsof member countries. The constituency of the con-temporary Fund with its 182 members, the vastmajority of which are poor nations of the South, isvastly different from the constituency of its 29 origi-nal members, mostly industrialized countries fromthe North. The task of protecting the Bretton Woodssystem of exchange rates among the industrializedcountries of the North has disappeared, and lendingprogrammes in the North ended a quarter of a cen-tury ago.

North and South now confront the Fund fromsubstantially different perspectives. From the pointof view of the “structural creditors” of the North, theterms of the Fund’s loan programme are rules thatwill be imposed on others (Kapur, 2000). While theNorth would obviously benefit from the diminishedglobal tension that would result from improved eco-nomic performance in the South, the interests thatimpress themselves most immediately on Northernpolicy makers are those of the private financial in-stitutions and transnational corporations that call theindustrial nations home. These private actors havethree kinds of interests. First, they want to make surethat they are not excluded from any potentially prof-itable opportunities in the South. Second, they areanxious to minimize the risks that might arisefrom clumsy economic management in fragile South-ern economies. Finally, they would like to haveeconomic institutions in the South mirror those with

which they are familiar in the North to the greatestextent feasible.

The South is, of course, interested in attractingcapital from the North and can hardly afford to ignorethe interests of Northern investors, but the Fund’sactivities appear in a different light. Just as debtorsand creditors will never see bankruptcy laws in thesame light, developing and industrial countries can-not be expected to see the Fund’s role in the samelight. The South’s vision of the Fund’s ideal rolewould emphasize provision of technical advice andinformation in a way that allows local policy makerssubstantial autonomy in deciding how it should beused to reshape local practices and institutions. Like-wise, the Fund’s “service” role would be focused onservice to member countries rather than private lend-ers: providing finance when the private sector is nolonger willing to lend, buffering poor nations fromspeculative attacks on the value of their currency anddestructive “asset grabs” by creditors during liquid-ity crises.

Specific Fund policies are also likely to evokedifferent responses among Southern borrowers thanthey do from Northern structural creditors. For ex-ample, in the early 1990s policy makers in the Southwere not necessarily averse to opening their capitalmarkets, but were more likely to see the Fund’s ef-forts to impose “corner solutions” (i.e. either totallypegged or fully flexible currencies) as intrusive andlimiting their policy flexibility. Issues of macroeco-nomic coordination among the industrial economiesoffer another kind of illustration. The countries ofthe South strongly suspect that the absence of macro-economic coordination among the major industrialeconomies is an important element in the origin offinancial crises in the system as a whole and should,therefore, be a matter of considerable interest to theFund. From the point of view of the North, greaterattention to this issue, even if it remained at the levelof theoretical pronouncements, would constitute anunwanted intrusion into their policy process.

As political constituencies, North and South,especially the South, are, of course, hardly homoge-neous. No matter how narrowly the boundariesof the North are drawn – i.e. Group of Ten, of Sevenor of Three – there are still substantial differences inideology and interests with respect to specific policiesof the Fund within the North. These differences areimportant to any analysis of possibilities for innova-tion in the Fund’s policies, but, from the point of view ofthe Fund’s response to the challenges of globalization,differences within the South are even more important.


In thinking about the South and the Fund itmakes sense to divide the South into “emerging mar-ket countries,” HIPC countries and “the rest”. Mostprominent in the calculations of the Fund (as well asthose of private financial actors) are the emergingmarket countries. The basic qualification for beingconsidered an “emerging market” is having sufficientaccess to international capital markets so that pri-vate capital flows constitute a credible potentialsolution to local development problems. Dependingon where the line is drawn, about a dozen develop-ing countries and a smaller number of Europeantransitional countries would qualify. At the other endof the spectrum are the 35 HIPC countries (IMF,2000b: 50), whose poverty and institutional problemsleave them without the prospect of access to privatecapital, beyond a scattering of traditional extractiveinvestments which are unlikely to trigger trans-formative growth. This leaves the largest single groupof the Fund’s member countries, perhaps 60–80 inall, which may be treated either as potential emerg-ing market countries or potential HIPC countries,depending on the optimism of the observer. Beforethinking further about the relationship of the Southas a broad constituency to the Fund, it is worth brieflyconsidering the situation of each of these three groupsin turn.

Emerging market countries of the South includethe major middle-income countries of Latin America,like Argentina, Brazil, Chile, Mexico and Venezuela,along with the East Asian “tigers” and the majorcountries of South-East Asia (Malaysia, Philippines,Republic of Korea, Singapore and Thailand) andperhaps South Africa. While poverty and inequalityare still central issues in these countries, inflows ofprivate capital are seen as central to growth and pov-erty reduction. At the same time, since this small setof emerging markets absorbs the vast bulk of North-ern investment going to the South, these countriesare vulnerable to the volatile behaviour of interna-tional investors, and therefore highly concerned withFund policies aimed at maintaining investor confi-dence (e.g. the Fund’s new Contingent Credit Line)and policies aimed at limiting the damage from thealmost inevitable exchange and liquidity crises (e.g.lending into arrears, standstills, collective actionclauses, etc.). The emerging market countries areparamount both in defining the Fund’s strategy to-ward the South and as a source of tension over Fundpolicies. At the same time, since emerging marketcountries are the main source of opportunity and riskfor Northern capital in the South, these countries alsodefine North-South issues from the point of view of“the markets”.

Those who would like the Fund to focus on globalfinancial concerns argue that inclusion in interna-tional capital markets is the best answer to underde-velopment and that all countries of the South, eventhe poorest, are emerging markets waiting to hap-pen. The empirical basis of this projection is shaky.Despite the vast increase in net private capital flowsto the South during the 1990s (prior to the Asian cri-sis), flows to PRGF countries were tiny and unreli-able. In 1998, Chile (an emerging market countrywith only 15 million people) absorbed more net pri-vate capital flows than all of the PRGF countriescombined. To be sure, total flows to PRGF countriesincreased, but individual PRGF countries bouncedback and forth between positive and negative netflows, with little expectation that such flows wouldsolve their poverty problems in the foreseeable fu-ture.

The 35 HIPC countries and the 45 PRGF-eligible members which are not included in the HIPCInitiative are intimately involved with the Fund, butin a different way quite different from the emergingmarket countries. With the exception of China andIndia, whose huge size more than compensate fortheir low incomes, dealings with private lenders arean aspiration rather than a problem for PRGF coun-tries. Securing debt relief and further concessionalfinancing for basic health, education, and infrastruc-ture projects is the goal, and separating projects aimedat “macroeconomic stability” from those whose goalis “poverty reduction” is more a theoretical exercisethan a practical distinction. The rest of the South ismore like the PRGF countries in terms of the likeli-hood of private capital flows solving its problemsthan it is like the emerging market countries. Whilea few countries in this category (e.g. Columbia andIndonesia) have attracted capital flows on a scalesimilar to that enjoyed by emerging market coun-tries, a change in political fortunes could easily thrustthem back into the regular ranks.

Not surprisingly, analysing the Fund’s chang-ing relationship to different constituencies producesconclusions that parallel those reached by analysingchanges in the Fund’s role. Both sets of changes ar-gue for an increased voice for the South and adiversification of the Fund’s intellectual portfolio inways that would draw more effectively on the devel-opment experience of the South. Without moresubstantive input from the South, Fund programmeswill be handicapped by a weak sense of ownershipand suboptimal design and implementation. This stillleaves the question of whether organizational reformsthat would accomplish this are possible, given the


Table 1

DISTRIBUTION OF VOTING RIGHTS IN THEIMF BY GROUPS OF COUNTRIES

Groups of countries Percentage of votes

United States 17.29

G-5(Germany, France,Japan, UK, US) 39.57

G-7(G-5 + Italy, Canada) 45.84

G-10(G-7, Netherlands,Belgium, Sweden) 51.53

The Northa 61.45

Emerging market countriesb 9.00

HIPC countriesc 2.29

Non-HIPC PRGF countriesd 3.67

China and India 4.14

The rest of the Southe 11.22

The South 30.32f

Transitional and other countriesg 8.23

a “The North” includes 24 industrialized countries: theGroup of Ten plus all remaining OECD members(Australia, Austria, Denmark, Finland, Greece,Iceland, Ireland, Luxembourg, New Zealand, Norway,Portugal, Spain, Switzerland and Turkey), except forMexico and the Republic of Korea (which are includedunder “emerging market countries”) and transitionalcountries (Czech Republic, Hungary, Poland andSlovak Republic).

b Includes Argentina, Brazil, Chile, Malaysia, Mexico,Philippines, Republic of Korea, Singapore, SouthAfrica, Thailand and Venezuela. Transitional emergingmarket countries – e.g. Czech Republic, Hungary,Poland, Slovak Republic – are included in the“transitional and other” category.

c IMF (2000b, table 5.1: 50).d IMF (2000b, table 5.3: 58). Excluding China and

India, but including, among others, Nigeria andPakistan.

e Includes, among others, Colombia, Indonesia, Iran,Iraq, Morocco, Saudi Arabia, Costa Rica and Uruguay.

f An alternative measure of the South’s voting power isto aggregate the votes of the Group of ElevenExecutive Directors, i.e. all those whose constituenciesare primarily countries from the South. This producesa total of 31.9 per cent of the votes, but requires thecooperation of Spain and Australia, which are alsorepresented by Group of Eleven EDs.

g Includes the Russian Federation, Czech Republic,Hungary, Poland, etc., as well as Israel.

political realities of governance at the Fund and theheavy weight placed on legitimating the Fund’s poli-cies in terms of macroeconomic theory. We shall lookfirst at governance issues, then at the role of theoryand methods, and finally at the intersection of thetwo. We argue that, even in combination, theseissues do not preclude important organizational re-forms.

III. The governance problem

Formally, the Fund is an unequal property-baseddemocracy, in which votes are determined by his-torical contributions to capital rather than a moreegalitarian one-nation, one-vote Westphalian model.In practice, the Fund is both more and less demo-cratic than it appears, depending on which featuresof the decision-making process are emphasized. Asin any organization (or polity), informal channels ofinfluence are as important as formal decision-mak-ing structures. Some of these channels increase thedegree of democracy in the Fund, others decrease it.

Since the most important decisions made by theFund require a super majority of 85 per cent and thehistoric quota of the United States gives it 17.29 percent of the votes, full democracy is impossible fromthe start. Even in the case of less important deci-sions where normal majorities are sufficient, the10 industrialized countries that comprise the Groupof Ten have 52 per cent of the votes and can there-fore outvote the other 172 member countries. Incontrast, all of the 80 PRGF qualified countries com-bined have only about the 10 per cent of the votes. Inthe unlikely event that they could act as a unifiedblock, they would still be unable to stop even thebasic changes in the Fund’s Articles of Agreementthat require an 85 per cent super majority. In short,voting power is structured so that the Fund is inca-pable of taking any action that the industrializedcountries feel contradicts their national interest orthe interests of private actors based in their jurisdic-tions.

Relative to normal standards of democracy, theSouth is fully justified in complaining about the“democratic deficit” in the Fund’s governance. None-theless, the South is not completely powerless. If themajor countries of the South share a common posi-tion, they can block proposals that require an 85 percent majority. If the Group of 11 EDs, whose con-stituencies are largely from the South, work in unison,


they can block proposals requiring a 70 per centmajority – especially if they can find allies amongthe smaller industrialized countries. Developing thekind of clearly shared vision of common goals thatwould make such unified action possible is an im-portant project. If it could be done, the power of theSouth, even measured formally in terms of votes,would become significant.

The process of decision-making within the Fundalso generates possibilities for input from the Souththat are not evident in the formal distribution of vot-ing power. Unlike the Board of Governors, whichsits at the apex of the decision-making structure butmeets only once a year, the Executive Board is a realworking governance body. The 24 EDs who makeup the Board meet together regularly (149 times in1999), making decisions about both individual coun-try programmes and overall policy. While there areoccasionally votes on the Executive Board, mostdecisions are made by consensus. Having a formalsummary of debate in the Executive Board meetingsmakes it hard to claim consensus if too many EDsare opposed. Given that there are 11 EDs represent-ing countries of the South, this means that membersfrom the South have considerable voice in the Fund’smost important decision-making body. Voice doesnot make up for the democratic deficit in terms ofvotes, but it does give the South an opportunity toinfluence policy and programmes. Ideas for enablingdeveloping country EDs to use this opportunity moreeffectively must be central to any programme of re-form.

Counter-balancing possibilities for voice insidethe Fund are patterns of informal influence fromoutside the Fund that result in concentrations ofpower even more unequal than the formal votingstructure. To begin with, there is the informal under-standing that the Managing Director will be from aEuropean member of the Group of Five, but this is atleast a transparent form of informal control. As inthe borrowing countries with which the Fund deals,less transparent forms of influence are more corro-sive of accountability and “good governance” in theFund. Most prominent among them is what might becalled the “Treasury effect”.

In recent years, the United States Treasury hasbecome notorious for transmitting its preferencesdirectly to Fund management and staff, rather thansimply having the US ED air them in Executive Boardmeetings. Combined with heavy lobbying efforts vis-à-vis individual member governments, this gives US

opinions sway even beyond the United States’ dis-proportionate share of voting rights. This influencebecomes particularly irksome to other member gov-ernments when it is used to turn the Fund into aninstrument of US foreign policy in ways that contra-dict the Fund’s own highly-prized claims to makingdecisions on the basis of objective economic analy-sis. Continued financial support for the RussianFederation despite gross violations, not just of con-ditionality but of basic Fund reporting rules, is theexample most often cited.

Precisely because it is informal, the Treasuryeffect is hard to eliminate in the absence of changesin the real balance of global power that diminish UShegemony. It might, of course, be argued that suchchanges are in fact likely and that US hegemony –and therefore the importance of its informal influ-ence – has already passed its apogee. Europe’spreoccupation with internal institution-building andJapan’s stagnation, combined with a temporary eco-nomic boom in the United States, have resulted in akind of “hyper-hegemony” that is likely to dissipate.This is, of course, pure speculation. The only imme-diate solace for the South is that United StatesTreasury influence tends to be focused on a relativelysmall set of countries and issues, leaving the bulk ofthe Fund’s decisions to be shaped by more transpar-ent institutional processes.

The bottom line with regard to governance isthat the formal rules are unlikely to change substan-tially. The recently industrialized countries of EastAsia may eventually succeed in getting the largerquotas that they deserve on the basis of the increasedsize and importance of their economies, but it is likelyto be at the expense of the Europeans rather than theUnited States, leaving US veto power intact. Evenwith some reallocation of quotas, the South will con-tinue to have a minority of the total votes. What thenmight be done within the parameters of these formalgovernance structures? The answer is, surprisingly,“quite a bit”. A good deal, perhaps most, of what theFund does is rooted less in explicit directives fromits “principals” than in a taken-for-granted paradigmof how macroeconomic stability and developmentand poverty reduction are best achieved. The struc-ture of the Executive Board gives EDs from the Southconsiderable opportunity to debate the features ofthis paradigm. To make the paradigm better incor-porate their needs and experience, however, they needa strong flow of new ideas and information. In theend, the question of governance cannot be separatedfrom the question of ideas.


IV. Paradigms, personnel andorganizational reform

Contemporary organization theory provides anumber of useful insights into the possibilities ofreform at the Fund. The Fund is a knowledge-basedorganization. It has material resources to distribute,but it is the coupling of these resources with detailedknowledge and “expert” analysis that both legitimatesthe way it distributes funds and amplifies its advice.Within knowledge-based organizations, those hold-ing knowledge tend to have significant autonomy.Day-to-day activities of the Fund’s “operators” (thestaff) are not easily observed by management (to saynothing of the state “principals”), and the connec-tion between day-to-day practice and the outcomessought can be observed only with a considerable lag,if at all (Barzelay, 2001: 134–144). Consequently, thebeliefs and attitudes of the staff are of crucial impor-tance in determining what the Fund actually does.As in the case of the World Bank (Miller-Adams,1999), “organizational culture” is as fundamental tooutcomes as power politics.

The expertise resident at the Fund is almostentirely economic. In fact, the Fund may be uniqueamong major international organizations in its pro-fessional homogeneity. The World Bank, WTO andother economic organizations all draw on a muchbroader range of professional specialities to do theirwork. Not only are the Fund’s staff members virtu-ally all economists, but they are almost all macro-economists, and most have been trained at Americanor Anglo-American universities (Clark, 1996; table 4below).

Economics as a profession differs from law ormedicine in that it is an academic discipline ratherthan an organization of practice. There is no equiva-lent of the Bar or Medical Boards that certifies oneto “practice” economics on the people (or govern-ments) of the world. Consequently, the large body oforganization theory literature on competition for statemonopolies over certain kinds of activities by pro-fessions tells us little about Fund economists. WhatFund economists do share with law and medicinethat has related effects, however, is command of abody of abstract and complex knowledge which theyapply to particular cases (Abbott, 1988; Brint, 1994;Larson, 1977; McDonald, 1995).

Expertise has a number of well-documentedeffects on those who wield it and the organizationsthey inhabit. First, expert knowledge inevitably con-

tains cultural and normative components. Expert orprofessional training does not simply transfer “ob-jective” technical knowledge. Rather, it is a consciousattempt to shape world views and values of practi-tioners. Doctors are explicitly trained to value humanlife above other goals; soldiers are trained to sacri-fice human life for certain strategic objectives. Theanalogue for economists might be that economistsare trained to value efficiency above other goals,while other professions are trained to emphasize eco-logical protection, social well-being or universalliteracy. The values and norms of a profession influ-ence the social problems they recognize as needingsolutions, the kinds of data they believe are relevantto understanding those problems, and the array ofsolutions they perceive to be available and appropri-ate (Haas, 1989; DiMaggio and Powell, 1983;McDonald, 1995).5

Second, any system of abstract and complexknowledge has blind spots. Indeed, it creates them.Theory, by its nature, abstracts from reality and pur-posefully ignores some things in order to make otherstractable. Information that is not required or producedby an economic model is an “externality” and be-comes invisible in economic analysis. Similarly,issues about which the intellectual technologies ofeconomics are silent are ignored. They are not “eco-nomic problems”, and so must be somebody else’sproblem. Intellectually, these may be sound positions,but for experts in large public bureaucracies they canbe difficult positions to maintain. Political decisionmakers who run these bureaucracies rarely are con-tent with “it’s somebody else’s problem”, nor shouldthey be. Consequently, the mandates given to experts,including economists, are often larger than the rangeof knowledge they possess. In the case of the Fund,expanded mandates have involved economists inpolicy-making on a broad range of social, environ-mental and even military issues about whicheconomic expertise says little and which, understand-ably, can make staff uncomfortable. Lack of fitbetween their expertise and tasks shapes both theattitude of staff toward these tasks and the way theyperform them.

A third, and related, characteristic of theoreti-cal expertise is its tendency to overvalue abstractedrationality at the expense of what Brint calls “con-textual rationality” and the “contextual pragmatics”of policy-making. In many situations, “local knowl-edge” – knowledge about specific contexts orsituations – may be more valuable than abstract con-cepts in solving policy problems (Brint, 1994;Lindbloom, 1990, Lindbloom and Braybrooke, 1963;


Lindbloom and Cohen, 1979). Restoring monetarystability in a country like Mali is likely to dependmore on detailed understanding of how the informaleconomy works or how social structures create labourmarket rigidities than the universal truths providedby macroeconomic textbooks. Failure to incorporatelocal knowledge has been shown to hamper devel-opment efforts at the World Bank (Escobar, 1995;Ferguson, 1990; Gran, 1986). There is also everyreason to assume that it influences Fund outcomes.

Local knowledge is particularly important at theFund because so much of its work has what JamesQ. Wilson (1989) would call a “craft” character. Craftwork tends to be project-based work in which eachproduct is unique, procedures are non-routine, andthe work process depends to a considerable degreeon experimentation and intuition (Perrow, 1967).Architecture, construction, publishing and medicineall have strong craft components in their work. So,too, does the work of the Fund. Managing the globalmonetary system is not a routinized activity in whichstandardized responses drawn from abstract princi-ples can be simply dropped onto problems. Eachnational economy is unique and IMF programmesmust be tailored to the particularities of time andplace in each case. Designing successful programmesrequires detailed knowledge of the specific nationaleconomy seeking assistance and the institutional,political, and social context in which the programmeis to be implemented. Fund staff recognize this, andtheir use of missions to collect information aboutindividual members is designed to supply some ofthis particular context information. Serving 182 mem-bers requires a great deal of local knowledge,however, and the pace of Fund work inevitably re-quires some standardization of responses simply toget programmes in place in a timely way. Balancingthe need for speed against the need for local knowl-edge about the complexities of each case is anongoing feature of the Fund’s work.

Striking the right balance between general ana-lytical models and institutionally sensitive localknowledge is most pressing for countries in the South.These are the countries most likely to require IMFprogrammes and they are also the countries where“local knowledge” is most important because theirlocal institutional contexts differ most sharply frombaseline macroeconomic assumptions. The necessityof a greater weight on country-specific institutionalexperience is increased by the Managing Director’sadmonitions that “poverty reduction strategies mustbe country-driven, developed and monitored withBoard participation, and tailored to country circum-

stances” so that they will “enjoy broad public own-ership” (IMF, 2000b: 55). A “local knowledgedeficit” is thus more likely vis-à-vis the South andmore likely to compromise Fund programmes there.

All of these characteristics of expertise in or-ganizational decision-making are apparent in theFund and provide possible opportunities for change.Shared belief in a paradigm is one of the Fund’s mainstrengths as an organization. An integrated set oftheoretical and methodological propositions allowsFund staff, managers and EDs to ground policy rec-ommendations in a general framework that is shared,not only within the Fund, but also by the economicsprofession more broadly. The Fund’s shared macro-economic paradigm gives staff and management acommon language and shared approach to specificproblems, despite the fact that they are drawn from127 different countries. Yet, by definition, a detailed,comprehensive prescriptive paradigm also restrictsthe range of innovation likely to emerge out of theFund’s deliberations. It is very hard for the Fund, asan institution, to “think outside the box”. Any pro-posal for diversifying the Fund’s intellectual portfolioin a way that will increase the voice of the South mustbalance the advantages of coherent decision-makingand capacity for collective action conferred by stronglyshared beliefs against the limitations on innovationwhich also flow from tightly shared paradigms.

The strongest argument against diversifying theintellectual portfolio is a simple one: the current para-digm provides the most accurate available theory andtechniques for analysing the real economic world. Itis based on a hundred years of cumulative theoreti-cal progress in the discipline of economics and offersthe best possible predictions of the effects of par-ticular policies, and therefore the best insurance ofachieving whatever goals member countries decidethat they would like to achieve. Improvements arealways possible, but they should be seen as refinementsof the existing paradigm rather than as alternativesto it.

This argument has obvious merit, but it is over-stated. To begin with, the extent to which existingeconomic theory produces unique solutions to policyquestions should not be exaggerated. Two examplesfrom the Fund’s recent history illustrate the point.Firm convictions that full opening of capital accountswas necessary to “reform” the domestic financialmarkets of developing countries and allow them tosecure the benefits of international capital marketswere presented in the mid-1990s as derived from thewisdom of economic theory. Following the Asian


crisis, it seems obvious that carefully phased open-ing of capital accounts, contingent on improvementsin domestic prudential regulatory capacity, is moreconsistent with existing macroeconomic theory. Thedifference in interpretation was clearly dictated bythe lessons of experience more than by any interven-ing revision internal to the paradigm. Privatizationin the Russian Federation and the other transitionaleconomies is another case in point. When the Fundinitiated its policies, the case for privatization seemedto flow easily from even a rudimentary comparisonof the prospective relative efficiency of state-ownedand private enterprises. In retrospect, it seems obvi-ous that exchanging a set of semi-accountable publicmonopolies for unaccountable but politically con-nected private monopolies is likely to result in welfareand efficiency losses rather than gains. Once again,experience resulted in a new understanding of thetheory-policy connection.

In so far as the Fund’s policies and programmesventure beyond macroeconomic stability into the areaof governance, poverty reduction and reforming do-mestic economic institutions, the Fund must face theintellectually murkier terrain that the World Bank haslong been forced to deal with. Determinate relationsbetween theory and policy are more difficult to sus-tain. Well-meaning and apparently rational policiescan have perverse effects (see, for example, Ferguson,1990). In these policy areas, the importance of localknowledge in understanding actual institutional dy-namics, and therefore making accurate predictionsregarding the economic consequences of institutionalchanges, becomes paramount.

Even without venturing into the murky terri-tory of institutional change and development, theextent to which theory can be used to argue that “thereis no alternative” when it comes to specific policiesis clearly exaggerated. A recent comment by MichaelMussa, Director of the Fund’s Research Departmentillustrates the point. Asked about the recent weak-ness of the euro, he replied that about half of theeuro’s depreciation “was the result of the ‘manic-depressive nature of the market’” (IMF, 2000a: 336).If the behaviour of the deepest and most sophisti-cated financial markets in the history of the globecan only be explained in terms of pop psychology,how likely is the behaviour of local entrepreneursand public officials in Botswana, Bolivia or Nepalto be predictable on the basis of textbook macroeco-nomic propositions?

The point here is not to argue for abandoningthe paradigm; it is to argue that a more diverse intel-

lectual portfolio, which includes a larger componentof local knowledge about Southern institutional prac-tices, might actually allow more effective applicationof the existing paradigm. Any proposals for imple-menting such intellectual diversification requiresthinking, in turn, about the recruitment, training, ca-reer paths and organization of the Fund’s staff.

In is hard to think of any other organization (ex-cept, of course, the World Bank) in which over athousand professional economists work in close, co-ordinated contact on a shared set of public issues. Inaddition, the Fund is able to pay salaries and offerperquisites that – deprecatory comments by theformer Chief Economist of the World Bank aside –allow the recruitment of a highly qualified set of pro-fessionals.6 The value of the human capital assembledat the Fund is also enhanced by the unusual integrationof research and applied work that IMF encourages.In academic settings, policy applications are morean individually pursued sideline than a collectiveendeavour. In government agencies and private cor-porations immediate pressures to deal with specificapplied tasks leave little time for research and re-flection.

Finally, the potential contribution of the Fund’seconomists is enhanced by the fact that the Fund isin an unusually comfortable position in terms ofbudgetary constraints, relative to most other publicorganizations, national or international. In contrastto the national governments whose expenditures IMFmonitors, Fund staff size, administrative budgets, andstaff salaries have continued to expand (Clark, 1996).The number of economists at the Fund more thandoubled in between 1980 and 1999 (IMF, 2000b: 98)and the Managing Director’s salary increased bymore than 50 per cent between 1987 and 2000 (Clark,1996: 80; IMF, 2000b: 97). While individual mem-bers of staff may work under considerable pressure,there is appreciable “organizational slack” in theFund as a whole (Kapur, 2000: 25). The output re-quired for organizational survival does not exhaustthe human, fiscal and organizational resources thatFund has at it disposal. Staff and management haveleeway to make choices and experiment.

Given the Fund’s extraordinary position as arepository of economic expertise, the potential forinnovative contributions to economic knowledge andpolicy formulation is undeniable. Indeed, beginningwith Jacques Polak’s famous models, Fund staff cantake credit for a variety of innovative ideas. The scopeof innovation is, however, restricted by the tendencyto what might be called “intellectual monocropping”.


Lack of intellectual diversity is grounded first of allin the tightly shared paradigm discussed above, butit is reinforced by recruitment and career patternswithin the organization.

While it is true that 127 of the Fund’s 182 mem-ber countries are represented on the staff, it is alsotrue that the United States, the English-speaking in-dustrial nations and the industrialized economiesmore generally are heavily over-represented on thestaff, even taking into account the argument that staffproportions should reflect country quotas. Further-more the tendency toward monocropping is morepronounced in those parts of the organization thatmight be expected to make the most contribution toinnovation and policy change – management and thecore policy departments like Research (RES) andPolicy Development and Review (PDR). Economistsfrom the South represent less than one third of theeconomists in the top professional rank (A-15) and asimilar proportion in the managers ranks (B-1 throughB-5) (Lahti, 2000: 29). Among department heads(B-5) the proportion of managers from the South isaround 20 per cent, a proportion that is lower than itwas 10 years ago. In contrast, 47 per cent of departmentheads come from English-speaking industrializedcountries (Lahti, 2000: 31). Nor is there any generaltrend toward recruiting more economists with devel-oping country origins. As table 2 shows, the almost50 per cent expansion of the total number of econo-mists employed by the Fund over the course of thelast decade (1990–1999) has not been taken as anopportunity to increase the proportion of Fund econo-mists with developing country origins. Instead, it hasfallen slightly. Likewise, as table 3 shows, the pro-portion of economists with developing country

origins being currently recruited is lower than it was10 years ago, especially in the elite “Economists Pro-gramme” (EP).

While there would seem to be good argumentsfor increasing the “passport diversity” (i.e. diversitymeasured by national origin) of IMF staff, focusingon passport diversity per se would miss the point.Despite the disproportionately small share of devel-oping country staff (and non-Western developedcountry staff),7 among the staff, the degree of pass-

Table 2

TRENDS IN NATIONAL ORIGINS OF FUNDECONOMISTS, 1990–1999

Percentage of developing country origin by year(Number of developing country origin in parentheses)

1990 1999

A-9 – A-15(professionals) 42 (220) 39 (321)

B-1 – B-5(managers) 30 (56) 33 (83)

Total 39 (276) 38 (404)

Source: 1999 Diversity Report (1999, table 8: 47), Washington,DC, IMF.

Table 3

TRENDS IN RECRUITMENT OF FUND ECONOMISTS, 1990–1999

Percentage of developing country origin by year(Numbers of developing country origin in parentheses)

1990 1999 Total 1990–99

Economist programme 52 (13) 35 (13) 42 (149)

Other economists 40 (12) 46 (28) 36 (193)

Total 45 (25) 42 (41) 38 (342)

Source: 1999 Diversity Report (1999, table 12: 51), Washington, DC, IMF.


port diversity is still very impressive if one takes intoaccount the differential size of available pools of menand women with Ph.Ds in macroeconomics. Theproblem is that passport diversity unquestionablyoverstates the diversity of the Fund’s intellectualportfolio.

Focusing on diverse national origins masks ho-mogeneity of training and outlook. Clark (1996: 182)claims that “a full 90 per cent of recent hires withdoctoral degrees have received them from universi-ties in the United States and Canada”. Current data(see table 4) suggest that recruitment of Ph.Ds withEuropean training is greater than Clark suggests, butthere are still no recruits to the EP programme trainedoutside the industrial countries. A Fund staffer ex-plained that the tendency for talented, would-beeconomists from the South to come to the UnitedStates for graduate training, rather than staying in

their home countries, has reached a level that makesit relatively easy to achieve passport diversity, evenif hiring is focused primarily on top US graduateschools. When common American training is com-bined with the Fund’s own two-year internalsocialization programme, young developing countryeconomists in the EP are likely to become firmlyimmersed in the common paradigm, regardless oftheir country of birth. Again, there are powerfuladvantages to this system which cannot be ignored,but if diversifying the Fund’s intellectual portfoliois a goal, then strategies must be found to comple-ment the standard trajectory.8

The realities of “brain drain” are such that re-cruiting in the top universities of the North may, ofcourse, be the easiest way of bringing the “best andthe brightest” from the South into the Fund. It stillleaves the problem, however, that a career trajectorywhich starts at an early age in an academic environ-ment in the North and is then followed by life inWashington, punctuated by brief “missions” to theSouth, provides little room for acquiring “hand-on”experience with the operational intricacies of institu-tions in the South. The chemist/philosopher MichaelPolanyi (1958: 53) has argued compellingly that thenatural sciences are “an art which cannot be speci-fied in detail [and therefore] cannot be transmittedby prescription”. Certainly this is much more true ofthe art of economic policy-making in developingcountries. Substantial on-the-ground experienceshould be a crucial element in the organization’s in-tellectual portfolio. As one developing country EDput it, the Fund needs more people who have been“working at the coal face”.

Expanding the number of Fund economists withpractical hands-on experience in developing coun-try institutions is one way of increasing the extent towhich local knowledge of the institutions and country-specific problems of developing country members playsa greater role in policy formation and implementa-tion strategies at the Fund. Greater use of institutionsand researchers based in the South to perform sub-contracting and consulting projects for the Fundwould be another. Any such efforts at intellectualdiversification must be grounded in organizationalchanges. Organizational reforms and expanded voicego together. The range of possible reforms is large,and only a few of the many possibilities can be con-sidered here. Hopefully, they will be sufficientlyprovocative to stimulate a range of alternative sug-gestions.

Table 4

COUNTRY OF FINAL DEGREE FOR1999 ECONOMIST PROGRAMME

Total EPsRegion Country graduated

Europe Denmark 1France 2Italy 1Germany 6Switzerland 1United Kingdom 7

Total for Europe 18

North America Canada 1United States 18

Total for N. America 19

Asia --- 0

Africa --- 0

Latin America --- 0

Other --- 0

Total 37

Source: IMF.


V. Some possible strategies fororganizational reform

The argument so far has suggested that the Fundand its member countries would be well served byan effort to complement expertise based on the pre-vailing general paradigm, with ideas derived fromlocal knowledge of the actual workings of economicand political institutions in the South and from ex-perience in those institutions. But, expertise and ideasare not disembodied. Expertise, especially when itis implemented as policy and programmes, is em-bodied in and transmitted by individuals. Anyprogramme of intellectual innovation must involvethe recruitment, allocation and career trajectories ofthe staff, which is to say the structure of the Fund asa bureaucratic organization.

Most observers would agree that the Fund is aquite efficient organization, in its own terms. Majororganizational shake-ups of the kind the World Bankhas experienced would probably be ill-advised. Norshould organizational reforms threaten the currentmeritocratic character of Fund recruitment and pro-motion policies. Nonetheless, the fact that IMF enjoysa steady rate of growth in terms of professional staffcreates room to manoeuvre. Assuming that the or-ganization continues to be able to add an average of30 new professional staff positions per year, as it hasdone over the course of the past 20 years, marginalchanges in the allocation of staff can be accommo-dated in a relatively short time without jeopardizingexisting work programmes or threatening currentlevels of efficiency. Such changes could have asignificant impact in stimulating new ideas and ap-proaches.

Five possibilities for organizational reform areoffered here. All of them are designed to increasethe Fund’s connection with and utility to the devel-oping countries of the South. They involve:complementary shifts in recruitment procedures andcareer trajectories, allocation of staff across divisionsand ED offices, diminishing the currently very highdegree of geographic centralization, and broadeningthe search for outside consultants and researchers.None of them involve major restructuring, but incombination they would significantly change IMF’sorganizational relationship to developing regions.

A. Increasing the voice of developingcountry Executive Directors

We have argued that the consensual process ofdecision-making on the Executive Board is one ofthe important democratizing features of Fund gov-ernance, and that the possibility of voice on the Boardcompensates to some degree for the inegalitarian dis-tribution of votes. Yet, the possibility of exercisingvoice on behalf of new ideas requires investing timeand energy in the development and substantiation ofthese ideas. Even effective criticism of existingframeworks depends on prior investment of time andexpertise. The current distribution of responsibili-ties among EDs gives the Group of Five EDs anoverwhelming advantage over developing countryEDs in this respect.

The Group of Five EDs represent only one coun-try and never have to deal with the negotiation ormonitoring of IMF programmes in their countries.Annual Article IV reports are relatively less impor-tant to their countries and therefore require lessattention. In short, these EDs are free to focus theirattention on shaping Fund policies. In addition, theyare likely to be able to rely on extensive support fromtheir own national governments to help them elabo-rate positions in which they have an interest.

The circumstances of EDs from the South isquite different: the positions of the two African EDs,each of which represents over 20 countries, are theclearest cases of overload. These two EDs have thetask of representing almost a quarter (24 per cent) ofthe Fund’s members, the majority of which coun-tries have Fund programmes, often of several types,either under way or under negotiation at any point intime. Each of these EDs represents 10 or more HIPCcountries, almost all of which are PRGF-eligible; thuseach African ED is dealing with a variety of PRGFprogrammes, and therefore at least indirectly withthe production of PRSP’s (Poverty Reduction Strat-egy Papers). Each of these EDs has half a dozen ormore constituents which are either in arrears to theFund or have programmes which have gone off-trackand require additional attention. Both EDs also rep-resent countries receiving Emergency Post-ConflictAssistance from the Fund. All of these varied IMFprogrammes involve quarterly review, not just theannual review Group of Five countries do for Arti-


cle IV. No other constituency generates this kind ofworkload. Trying to represent immediate constitu-ency interests is more than a full time job.

Political considerations within these constitu-encies compound the problem. Chairs that representlarger numbers of member countries must be rotatedamong at least the more important of these coun-tries, so that no ED is likely to be able to stay in hisor her position long enough to fully “learn the ropes”.Furthermore, the perhaps six to eight professionalstaff attached to such ED chairs must be selected toprovide representation to countries other than theED’s own. The ED is not in a position to construct a“team” that can carry forward a project of develop-ing new policy positions that reflect the generalinterests of the represented member countries. In-deed, it is hard to find the time to examine andthoroughly analyse the Fund’s existing policy posi-tions.

The increased responsibilities of particularly theAfrican EDs over the course of the past 10 to 15 yearshas left them with what one ED called an “impossi-ble task”. According to this ED, continuing on thecurrent trajectory will mean that the voice of theAfrican EDs will “effectively be shut down”. Suchan outcome obviously undercuts any attempt to ex-pand the South’s voice, but avoiding this outcomewill require serious organizational attention. Theobvious remedy would be to divide the two Africanconstituencies in half and add two more African EDs.This need not involve changing voting quotas. If thesmaller European countries were willing to consoli-date the five chairs that they currently hold (without,of course, reducing their votes), it would not neces-sarily even involve increasing the total number ofEDs. Even if four African EDs shared the samenumber of votes among them as the current two,Africa’s voice on the Board would be expanded.

If despite the debilitating overload faced byAfrican EDs, the reallocation of chairs is still seenas too radical, expansion of staff would be aminimalist response, but still a positive one. The dis-parate situation of African and Group of Five EDscurrently receives only token recognition in the formone or two extra staff members. Making a start to-wards levelling the playing field by giving EDs fromthe South the staff back-up they need in order to ef-fectively use their voice on policy issues wouldrequire investment, either in staff directly account-able to individual EDs or perhaps in a pool of staffshared by the more hard-pressed developing countryEDs. Increasing the capacity of these ED offices

would not only expand the range of issues on whichthe ED’s own staff could provide support but alsoincrease the ability of developing country ED officesto monitor and shape the policy work going on in themajor functional departments.

Overall, the addition of a dozen professionalstaff positions (a little over 1 per cent of the Fund’scurrent number of economists) for the purpose ofincreasing the capacity of developing country EDoffices would seem like a very reasonable invest-ment.9 Some might argue that such a minimal additionis a quid pro quo for recent increases in the ratescharged to Southern borrowers for the use of Fundloans. At the same time, from the perspective of theGroup of Five, this is the least politically threaten-ing way of increasing the voice of developing countryEDs. There is no reason why it should not be politi-cally feasible within the current voting rules.

Other more creative solutions should also beconsidered. More long-term staff would help withday-to-day problems, but generating policy agendasthat reflect the experience of HIPC and PRGF coun-tries may require the infusion of “idea generators”with a higher rate of turnover. Creating a rotatingcadre of research- and policy-oriented economistsdedicated to working on these problems might pro-vide such an infusion. These would be hired forstrictly limited terms, after which they would returnto their countries of origin. They could be assignedto African or other Group of Nine/Group of ElevenEDs and devoted to generating policy proposals spe-cifically reflecting the concerns and experiences ofthose member countries. Such proposals could thenbe elaborated and developed in collaboration withthe Research and PDR Departments, with a view topresenting them to the Board.

B. Rebalancing resources and obligationsin the area departments

A similar, though less extreme, disparity be-tween the distribution of staff resources and thechallenges that staff must deal with exists in the AreaDepartments. A quick look at the distribution of areastaff (as of mid-1999) will serve to illustrate the point.The Equatorial Africa Division of the Africa Depart-ment is overseeing PRGF programmes in half thecountries under its jurisdiction (two of four). It haseight economists. The Central European Division Iand the Maritime Division of the European Depart-ment, which deal with countries which have neither


had a Fund programme in the last 25 years nor arelikely to in the next 25 years, have each seven econo-mists and a research assistant. The North AmericanDivision (Canada and the United States) has seveneconomists and two research assistants.

Member countries may wish to claim equalrights to Area Department staff regardless of the geo-graphic distribution of organization’s activities, butsuch claims are hard to justify in terms of the Fund’soverall mission and current workload. The simplelogic of allocating staff in accordance with IMF’sobligations to manage loans and programmes and thedifficulty (based on past experience) of those pro-grammes is hard to deny.

C. Valuing geographic context:the possibility of regional satellites

The natural complement to better calibration ofstaff allocation and regional responsibilities wouldbe trying to locate more of the Fund’s economists indeveloping regions. A major decentralization like thatundertaken by the World Bank probably would notmake sense, nor would it be likely to be tolerated bythe management or Board of Governors. Nonethe-less, the current character of IMF’s tasks, theincreasing salience of developing regions and thedifficulties that the Fund has experienced in achiev-ing local ownership of its programmes, all argue infavour of at least a marginal increase in geographicdecentralization.

Decentralizing a small proportion of the Fund’sstaff has already begun with the Residential Repre-sentatives programme. There are now 17 staffmembers assigned to the Africa Area Department andserving as Residential Representatives in Africa. TheSingapore Regional Training Institute and the JointAfrica Institute also recognize the value of geo-graphic decentralizing, but only with respect toinculcating IMF ideas in other locations. Decentrali-zation aimed at taking advantage of local knowledgeand on-the-ground experience would be a real inno-vation. Locating some small but critical mass of Fundstaff in a single location would create the possibilityof real interaction with the local community of econo-mists as well as developing some local esprit de corps.

Arguments in favour of decentralization can bemade in relation to the Asia Pacific region and forthe transitional economies of Eastern Europe and theformer Soviet Union, but they are probably strong-

est in the case of Africa. Given the number of PRGFoperations under way in Africa, the time and cost ofcontinually getting staff from Washington to theFund’s multiple African operations and back is con-siderable. The cost saving from doing some of theservicing of these programmes from Lagos, Nairobior Johannesburg would substantially compensate forwhatever economies of scale might be lost owing todecentralization.

The creation of some decentralized officeswould be one way of responding to the disparitiesbetween resources and obligations in the area de-partments discussed above. If the Africa AreaDepartment were to grow over the next three yearsat the same rate that it grew between 1996 and 1999(17 additional positions), and if these positions wereto be located in the region itself, a major step wouldhave been taken in the direction of decentralization.

Decentralization as a strategy for increasingthe voice of the South does, of course, have itsdownsides. Fund staff members working in poorcountries could easily become a small “goldenghetto,” isolated from the local environment almostas thoroughly as though they were living in Wash-ington, while creating a visible and divisive exampleof the distance between the life styles of internationaltechnocrats and normal professionals working in theSouth. If decentralized Fund personnel were simplyto become a “golden ghetto” of expatriates living ata level that isolates them from the community of lo-cal economists and policy makers, they would beunlikely to gain new insights based on local prob-lems and conditions. Serious thought would have tobe taken to ensure that decentralization produced real“on-the-ground” experience and involvement withthe local professional environment.

Integrating decentralized operations into theFund’s current organizational structure would alsorequire serious thought. The current emphasis onmobility among departments would have to be ap-plied with equal zeal to mobility between anydecentralized operations and the core departmentsat headquarters. In short, regionally decentralizedoffices should not be simply creatures of the areadepartments but should include staff from the majorfunctional departments that design and evaluate pro-grammes.

Downside problems need to be balanced againstthe upside of mitigating the effects of current trendstowards the flight of highly qualified professionalsfrom the South. If the South is to have an effective


voice in global policy debates (in the Fund or anyother global venue), it must strengthen local profes-sional communities. Creating a nucleus of 20 to 30top-flight macroeconomists by setting up a Fund sat-ellite operation would generate a significant additionto most developing cities (almost equivalent to add-ing a new university department of economics). Inthe ideal case, decentralization could contribute tothe kind of locally-based esprit de corps and innova-tive theorizing that was epitomized by CEPAL(ECLAC) in the Latin American context.

D. Valuing experience: the role of lateral entry

Questions of recruitment and career trajectoryraise the issue of local knowledge and expertise in adifferent way. At the grossest level, two kinds of skillsare required by Fund staff. First, they must masterthe analytical skills required to analyse and evaluategeneral models of macroeconomic performance and,ideally, improve upon them. Formal training in eco-nomics is the best source of such skills and recentproducts of top graduate programmes should havethem in abundance. Second, Fund staff must be ableto figure out how to use these models in a way thatwill effectively predict when and where crises arelikely to occur and to translate these models intopolicy suggestions that will improve (ideally in apreventative way) the macroeconomic stability ofmember countries, including developing countrieswhose institutions are unlikely to conform to the as-sumptions that underlie the models. This second kindof skill requires a keen sense of how institutions workon the ground and the politics of how they can bechanged. Formal economics training in academicsettings is unlikely to contribute a great deal to thedevelopment of such skills, which are much morelikely to have the character of what we have describedas “craft”, and draws upon “local knowledge”.

For Fund personnel to acquire local knowledgeit must happen “on the job” and indirectly in thecourse of negotiations with local country officials.While a good deal of learning may take place, espe-cially if local officials are well-prepared and willingto defend their positions, this kind of indirect ac-quaintance with local problems is not a substitutefor long-term experience with on-the-ground immer-sion in the day-to-day operations of developingcountry institutions.

One potential opportunity for enhancing theFund’s stock of local knowledge lies in its already

extensive use of lateral, mid-career hiring. The Fundengages in two kinds of recruitment: the EconomistsProgramme (EP) which takes in newly trained Ph.Dson the one hand and various kinds of “lateral entry”or “mid-career” recruitment on the other. EP recruits(EPs) are hired as generalists for their strong ana-lytic skills. While diverse in nationality, virtually allhave been trained in prestigious European and NorthAmerican universities (see table 4). They spend twoyears at the Fund in two different departments forone year each, where they are taught Fund methodsof analysis and how the Fund works as an organiza-tion. At the end of their two-year training, EPs areeither offered a permanent job and accept, or moveon. About 80 per cent of EPs stay on at the Fund aspermanent employees.

In a normal year more people are hired by theFund at the mid-career level than in the EP, and theproportion of mid-career hires has grown substan-tially in recent years. About half of these mid-careerhires are generalists hired for their strong analyticskills similar to those of the EPs. The other half arespecialists hired for particular expertise gained out-side the Fund in some functional area. Mid-careereconomists may be hired from universities, but mayalso have hands-on experience in member state Fi-nance Ministries, Central Banks, or even the privatesector. Most mid-career hires of both types arebrought in on two to three-year contracts, at the endof which the Fund decides whether to make thempermanent offers. As with EPs, most are made per-manent.10

Currently, the distribution of mid-career hiresby geographic origin is similar to the overall distri-bution of Fund economists. Only a third are fromdeveloping countries (see tables 5 and 6). Since someproportion of this group may well come out of ca-reers in industrial country academic or policyinstitutions, it is unclear how much current mid-ca-reer hires result in a significant infusion of localknowledge from the South. One obvious strategy fordiversifying the Fund’s intellectual portfolio wouldbe to make systematic efforts to increase the propor-tion of staff whose perspectives have been shapedby the experience not just of negotiating with devel-oping countries or gathering information about thembut also of working inside their economic institutions.

Increasing the proportion of lateral entries withpractical policy experience in developing countrieswould enhance the possibility that policy innovationsmight reflect the lived institutional experience ofdeveloping countries. It is an organizational reform


with implications for the definition of expertise andthe nature of the IMF paradigm. If recruitment ofsuch personnel could be extended beyond the Cen-tral Banks and Finance Ministries of the South, thedeparture from “intellectual monocropping” wouldbe even greater. Economists with extended “hands-on” experience in dealing with the local politicalprocesses and involved in building the “broad pub-lic ownership” of macroeconomic policies that theManaging Director hopes to achieve (IMF, 2000b:55) would be particularly useful in diversifying cur-rent perspectives.

Some at the Fund would, of course, feel thatsuch a strategy ignores the advantages of closelyshared perspectives. Such fears are probably mis-placed. Without negating the value of strong generaltraining or the usefulness of shared perspectives de-veloped over long periods of interaction, it remainsthe case that tightly shared perspectives also havetheir disadvantages. Small differences become lifeor death intellectual issues, while innovative alter-natives become unimaginable. This may not be aproblem if the challenges the organization is facingare stable and homogeneous, but the wide range ofinstitutional variation confronted by IMF and therapidity of change in its overall environment increasethe risks of intellectual monocropping. At the sametime, the risk of excessive diversity is small. The Fundcould go a long way towards diversifying its intel-lectual portfolio before the cacophony of excessivediversity would become a problem.

Even though “epistemic communities”, particu-larly in the economic arena, are increasingly global,perspectives developed in local communities con-tinue to be important in shaping economists’attitudes. Survey research has shown that the opin-ions of economists with regard to policy issues vary

substantially, sometimes quite dramatically, acrossgeographic jurisdictions, even when only a small setof industrialized countries are considered (Frey etal., 1984). If economists whose training and workexperience is grounded in the South had been in-cluded in these studies, the already impressivegeographic variance would have been even greater.Practical experience in confronting the recalcitrantinstitutions of developing countries is likely to fur-ther increase diversity.

Even serious efforts to increase the recruitmentand selective retention of economists with substan-tial, practical, developing-country experience isunlikely to introduce cacophony. Exceptional profi-ciency in the mathematical skills required for moderneconomics would continue to be a criterion forhiring. The most likely “practical experience” can-

Table 5

MID-CAREER ECONOMISTS HIRED FROMDEVELOPING AND INDUSTRIAL COUNTRIES BYGRADE LEVEL, 1 JANUARY – 31 DECEMBER 2000

Developing Industrial Total

A11 0 4 4A12 7 19 23A13 14 13 27A14 7 16 23A15 1 4 5Total 29 59 85Per cent 34 66

Source: IMF.

Table 6

MID-CAREER AND ECONOMIST PROGRAMME HIRES

1994 1995 1996 1997 1998 1999

Economists programme 41 30 35 31 41 37

Mid-career economists 48 40 34 53 63 67

Total economists 89 70 69 84 104 104

Source: IMF.


didates for hire would be central bankers and high-level Finance Ministry officials, who are likely toshare the Fund’s perspectives as much as they wouldshare those of their colleagues in other Ministries.In so far as recruitment came from the private finan-cial sectors of developing countries, the match withFund perspectives would be equally close (thoughthe content of the disagreements might be different).

Without exaggerating the degree of diversitylikely to be attained, it is still the case that a shifttoward a greater proportion mid-career entrants withdeveloping country experience would make a differ-ence, increasing in particular the probability thatFund policies and programmes would take more ef-fective account of the institutional diversity withwhich the organization has always had to deal. Sincedeveloping country EDs themselves often have prac-tical experience in Finance Ministries or CentralBanks, increasing the proportion of Fund personnelwith this kind of experience might also facilitate theability of staff to understand the way in which de-veloping country EDs look at policy and programmeissues.

Finally, it might be argued that increasing theprobability of mid-career entry from developingcountry positions would also have a salutary exter-nality in its effect on the career calculations of youngdeveloping country economists studying in top USgraduate schools. Spending some time “at the coalface” in one’s home country might be seen as lesslikely to preclude subsequent international careeroptions, or even to be a way of gaining credentialspotential useful in an international career. Anythingthat might mitigate the calculus that currently gener-ates such severe “brain drain” from developingcountries would be a valuable contribution in itself.

E. Sub-contracting the project ofdiversification: increased support fordeveloping country researchers

The Group of Independent Experts that evalu-ated the Fund’s research output in 1999 expresseddissatisfaction over the extent to which the Fund wasdoing country-specific research on industrializedcountries. The panel suggested that such research“does not have sufficient value added”, since it rep-licates work being done anyway in researchinstitutions in the North, and recommended that moreresearch be done on developing and transitionaleconomies (IMF, 2000c: 11, 20). The IMF Directors

endorsed the idea of shifting the focus of researchtoward topics with more “value added” but did notoffer any concrete strategies for increasing theamount of work done on developing economies.

The kinds of staffing shifts that we have rec-ommended might have some effect in this direction,but more a more direct attack on the problem seemsin order. The Fund’s permanent staff is not the onlysource of its ideas and expertise. Consultants andcontracted research also play a role. The current ten-dency is for the recruitment of outside expertise toflow through the same networks that produce pat-terns of permanent staff recruitment, to draw heavilyon elite US academic institutions, and therefore toreinforce the paradigms and presumptions alreadyin place within the organization itself. Making greateruse of the expertise of developing country-based pro-fessionals would require investing effort in buildingnetworks and identifying the most talented and reli-able researchers. Nonetheless, such extra effort wouldgenerate important returns. It would, first of all, pro-vide another avenue through which local knowledgeof the distinctive institutional characteristics of de-veloping member could be introduced into IMFthinking. As such it would also enhance the prob-ability that Fund policies and programmes wouldsucceed in generating the “local ownership” that theorganization is seeking. Finally, as in the case of mid-career recruitment, it would generate positiveexternalities, by enhancing the incentives for talentedprofessionals to commit themselves to working indeveloping country institutions rather than joiningthe “brain drain”. The World Bank’s Global Develop-ment Network represents one variation on this idea.11

The Fund could learn from this experiment in devel-oping another variant adapted to its own specific needs.

External subcontracting to researchers based inthe South could also be complemented by a pro-gramme of setting up a nucleus of temporary,subcontracted researchers inside the Fund. This couldbe some kind of Fellows or Visiting Researcher pro-gramme designed to bring top talent into theorganization and focus their work on a researchagenda collectively generated by the EDs from theSouth, along the lines of the current Group of Twenty-Four research initiative. Housing them in the Funditself, or at least bringing them together regularly tomeet there, would allow interaction more directlywith Fund researchers. Creating this kind of collec-tive research resource for the South would be analternative to the idea of assigning limited termresearch personnel to individual EDs that was intro-duced under our first proposal.


Each of these five proposals in itself is mar-ginal, but there are obvious synergies among them.Increasing the capacity of developing country EDoffices would intensify the “market” for ideas reflect-ing the experience of the South inside the Fund.Building up developing country divisions in areadepartments would give developing country ED of-fices more support in working on individual countryprogrammes. Regional satellite offices would do thesame. Increased recruitment and retention of mid-career professionals with practical experience indeveloping countries would not only increase thediversity of the Fund’s intellectual portfolio, but alsoincrease the pool of staff with the skills and adapt-ability necessary to make regional satellite officesrun successfully. Increased reliance on developingcountry-based researchers for consulting and contractwork would strengthen networks that would facili-tate effective mid-career recruiting, just as moredeveloping country-based mid-career recruitingwould strengthen the networks necessary for findingeffective consultants and outside researchers in devel-oping countries. In combination these reforms wouldchange the character of the Fund’s relationship withthe South, on a day-to-day and long-term basis.

VI. Conclusion

None of these suggested reforms is radical. In-deed the Fund has already started moving in thedirections we propose here. The proportionatelygreater expansion of the staff of the Africa Depart-ment in the last 10 years recognizes the importanceof having more staff focused on areas where povertyreduction is the issue. The initiation and expansionof the Resident Representatives programme acknowl-edges the importance of long-term immersion in localenvironments. The creation of the Joint Africa Insti-tute and the Singapore Regional Training Instituteacknowledge the importance of more decentraliza-tion of Fund activities. Our suggestions extend andcomplement these existing initiatives.

Despite their consistency with current trendstoward organizational reform at IMF, we expect thatmany who know the Fund, both inside and outsideit, may disagree with these suggestions, and we wel-come such disagreements. A more open debateregarding the organization and staffing of the Fundwould be a healthy development. Transparency andaccountability should not be limited to questions ofpolicy. The way in which resources are used inter-

nally, especially as regards the marshalling of exper-tise, should equally be subject to discussion amongIMF members. The rationales for how these key re-sources are allocated should be made transparent.Management and Governors should be held account-able for the choices they make. If the only result ofthese proposals for reform is to elicit clear, crediblejustifications for maintaining the status quo, thatwould be a salutary result in itself.

Given the modest nature of the reforms pro-posed, their strongest critics may be advocates ofchange rather than defenders of the status quo. Theyare more likely to be dismissal as ineffectual band-aids than rejected as too radical. Admittedly, thesereforms would have only a marginal effect on theIMF organizational structure. They would not un-dermine the meritocratic character of recruitment andpromotion on which the Fund justifiably prides it-self. Nor would they change the basic paradigm withwhich the organization approaches problems ofmacroeconomic stability. Even if all of the proposedstrategies were adopted simultaneously, the recruit-ment and career trajectories of Fund staff would beaffected only marginally. Indeed, much of its currenteffort to integrate emerging market countries into theinternational financial system would, in all likeli-hood, proceed on its current course. In all, they aremodest proposals compared to the quite radical de-centralization recently undertaken by the WorldBank.

These reforms are not substitutes for resolvingmore politically difficult issues, such as readjustingquota allocations to reflect current purchasing powerparity economic weights in the global economy, orreadjusting charges on Fund financing to reflect theexceptionally low risk and strong conditionality thatmakes this funding different from private financing.However, while making the IMF organizationalmachinery more responsive to developing countryperspectives may not have the dramatic appeal ofmajor political battles, it does offer important returns.

The reforms proposed here would do threethings. First, they would increase the extent to whichdeveloping countries perspectives make their wayinto IMF policy debates and thereby increase the like-lihood of developing countries’ experiencing thedesired sense of “ownership” vis-à-vis Fund policiesand programmes. Second, they would increase thevoice of developing countries on the ExecutiveBoard, both directly by increasing the capacity ofdeveloping country ED offices, and indirectly by in-creasing the likelihood that the work of other staff


would reflect the concerns of developing countryEDs. Third, they would increase the degree to whichthe Fund contributes to the creation of expert capac-ity in developing regions, giving qualified economistsfrom developing countries more opportunity to workin their own regions and on problems relating to theirown regions.

These are not trivial results. They would con-tribute to achieving the goals of “ownership” and“participation” which are now seen as crucial to pro-gramme success in developing countries. Moregenerally, they hold the promise of improving theFund’s current record of programme performance inthe developing world, which is “uneven”, to put itcharitably. They would make the Fund more respon-sive to the developing countries that have becomeits most salient constituency and increase the possi-bility that the Fund might, in addition to smoothingthe way for the global expansion of the activities ofprivate financial actors, help to redress some of theinequities that the uneven development associatedwith globalization has brought in its wake.

Notes

1 On the notion of “voice” see Hirschman (1970).2 Of course, even in the early years of its operation, the

Fund’s construction of the “absorption approach” to ana-lysing balance-of-payments imbalances had an importanteffect in shaping the kind of data that Central Bankers andFinance Ministers in the South paid attention to and theway in which they interpreted its implications (Finnemore,2000; Polak, 1997). As Finnemore puts it (2000: 9): “Fundstaff made important contributions to and ‘created’ knowl-edge in fields of economics relevant to it work” (see alsoDeVries, 1987, and James, 1996). The Fund’s ideas wereas important, if not more important, than the loans it of-fered in shaping the policy in the South.

3 See, for example, the response of the Fund to the externalevaluation on surveillance, which recommended that sur-veillance should focus “only on the core areas of exchangerate policy and directly associated macroeconomic poli-cies”. In the view of the Fund, this recommendation “rancounter to the demands of IMF members and the interna-tional community for more emphasis on interactionsamong macroeconomic, structural and social policies”(IMF, 2000b: 29).

4 See Mohammed (2001) for a more complete discussion.Obviously, poverty reduction is even more central to therole of the World Bank, but the view – popular in somepolicy circles – that there is a “division of labour” be-tween Fund and the Bank which absolves the Fund frombeing directly concerned with poverty reduction is notsupported either by the policy pronouncements of theFund’s management and most powerful member or by areview of the Fund’s actual practices.

5 For extended discussions of the particular intellectual per-spective (and foibles) of economists, see McCloskey(1985, 1994).

6 It has been argued that more intense competition from theprivate sector now makes it much harder for the Fund torecruit and retain top-flight economists and that the Fund’sorganizational priorities should therefore focus on coun-tering this threat. The Fund’s own statistics on separa-tions do not provide any dramatic numerical support forthis contention. Losses to the private sector account for aminority of resignations and seem to have declined sub-stantially since 1998. However, anecdotal evidence sug-gests it may be a problem in relation to economists withcertain kinds of financial expertise and skills.

7 It should also be noted in this regard that Japan, in sharpcontrast to the English-speaking industrial countries, isunder- rather than over-represented among the staff. Infact, Japan is the most under-represented of all 182 mem-ber countries relative to its quota (Lahti, 2000: 23).

8 Some would argue that recruitment from a restricted setof institutions does not really lie at the core of the intel-lectual diversity problem. In their view, IMF’s recruitmentpractices result in the selection of an excessively homo-geneous subset from among the graduates of these insti-tutions and that this, combined with the intensity of intel-lectual socialization within the Fund, results in a eventualrange of views that is much narrower than the range amongeconomists (faculty and students) at the institutions fromwhich the organization recruits. This hypothesis is, ofcourse, very germane to our overall argument, but we couldfind no systematic data to either confirm or refute it.

9 Maximizing the impact of increased staff would probablyrequire recruitment rules that better balance the necessityfor EDs to be able to develop an effective “team” againstthe legitimate desire of the Chair’s constituency to havean input into recruitment of staff. The difficulty of resolv-ing this problem might be considered an argument for cre-ating a pool of staff, rather than attaching additional staffto individual EDs.

10 IMF Human Resources staff estimate that out of mid-ca-reer economists hired in 2000 about 40 per cent came fromuniversities, 35 per cent from the public sector (mostlyFinance Ministries and Central Banks), and 25 per centfrom other international organizations or the private sec-tor. About 80 per cent are made permanent at the Fundupon the expiration of their two to three-year contracts.

11 For details see the Global Development Network websiteat www.gdnet.org.

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G-24 Discussion Paper Series*

Research papers for the Intergovernmental Group of Twenty-Four on International Monetary Affairs

No. 14 September 2001 Charles WYPLOSZ How Risky is Financial Liberalization in the DevelopingCountries?

No. 13 July 2001 José Antonio OCAMPO Recasting the International Financial Agenda

No. 12 July 2001 Yung Chul PARK and Reform of the International Financial System andYunjong WANG Institutions in Light of the Asian Financial Crisis

No. 11 April 2001 Aziz Ali MOHAMMED The Future Role of the International Monetary Fund

No. 10 March 2001 JOMO K.S. Growth After the Asian Crisis: What Remains of theEast Asian Model?

No. 9 February 2001 Gordon H. HANSON Should Countries Promote Foreign Direct Investment?

No. 8 January 2001 Ilan GOLDFAJN and Can Flexible Exchange Rates Still “Work” in FinanciallyGino OLIVARES Open Economies?

No. 7 December 2000 Andrew CORNFORD Commentary on the Financial Stability Forum’s Reportof the Working Group on Capital Flows

No. 6 August 2000 Devesh KAPUR and Governance-related Conditionalities of the InternationalRichard WEBB Financial Institutions

No. 5 June 2000 Andrés VELASCO Exchange-rate Policies for Developing Countries: WhatHave We Learned? What Do We Still Not Know?

No. 4 June 2000 Katharina PISTOR The Standardization of Law and Its Effect on Develop-ing Economies

No. 3 May 2000 Andrew CORNFORD The Basle Committee’s Proposals for Revised CapitalStandards: Rationale, Design and Possible Incidence

No. 2 May 2000 T. Ademola OYEJIDE Interests and Options of Developing and Least-developed Countries in a New Round of MultilateralTrade Negotiations

No. 1 March 2000 Arvind PANAGARIYA The Millennium Round and Developing Countries:Negotiating Strategies and Areas of Benefits

* G-24 Discussion Paper Series are available on the website at: http://www.unctad.org/en/pub/pubframe.htm. Copies ofG-24 Discussion Paper Series may be obtained from the Editorial Assistant, Macroeconomic and Development Policies Branch,Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD), Palais desNations, CH-1211 Geneva 10, Switzerland; Tel. (+41-22) 907.5926; Fax (+41-22) 907.0274; E-mail: MDPB-Ed [email protected]

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