I have talked about three major issues today. First is the impact of IMF reform and giving voting rights to groups who desperately need it, those up and coming economies. Second is how China must fix its currency problem. Finally, how Sudan is critical to U.S. leadership. That leads to the next question of what does it mean to be a leader and why does reform help?
I believe reform to be useful for those who think the system is unfair. Those at the top usually do not want a specific system reformed because it gives them an advantage. For instance, Europe does not want more votes given at the IMF because it would lose power. China does not want to change its currency policy because it would not be able to sell goods as cheap. Does that make them bad countries? No, every country desires power in the international system. The key point is if you do reform the system, you will gain allies. If the IMF were reformed by western nations, they would have stronger relationships with developing economies. If the U.S. made sure the Sudan referendum worked out fine then it will show that it can follow through on negotiations. Power comes through strength, but also from willingness to want to change the system to make it better for others.
To sum up my posts:
1. No “Morning Memo” today
2. EU-Asia Summit is mostly talk with no action
3. Desmond Tutu retires and the almost Nobel Winners
4. Geithner Challenges China
5. How to reform the IMF
6. Sudan Policy (last 2 posts)
Thanks for reading. See you tomorrow!
Two great pieces offer more information on current U.S. policy in Sudan and how to improve it. One is from the Center For Preventive Action. The other is an op-ed from Nicholas Kristoff, a columnist at the New York Times. They explain reasons why this vote in Sudan will be very important and the U.S. can do to make sure it goes off without a hitch.
In January 2011, Southern Sudan will finally go to the polls to decide whether it will be an independent nation as part of a 2005 peace agreement negotiated between the north and the south by President Bush. One big reason this is so controversial is because Southern Sudan has large amounts of oil in a region called Abyei. Currently, northern Sudan claims this as their own land, but that could change after this referendum. Omar al-Bashir is the current leader in Khartoum, the capital of Sudan. He is also wanted by the International Criminal Court (ICCC) for war crimes.
Most people are probably asking themselves: why is this referendum so important to the U.S.? Granted, Sudan does not have a perfect solution, but it does test U.S. power to negotiate. The U.S. was one of the major mediators on the 2005 peace agreement. If it does not work out, then it will partially be our fault. Also, the U.S. will lose clout in the region as a leader. When the U.S. negotiates between two groups or nations, it is a test of its leadership. The U.S. is doing the same thing with Israel/Palestine. If those talks fail, it will hurt the U.S. credibility to negotiate.
What can the U.S. do to make sure the referendum goes off smoothly? It must watch the vote closely. If the South wins, recognize the government immediately. If the vote does not work out, the U.S. can send troops to Sudan, but after fighting 2 wars that might not be a great idea. The U.S. could also institute a bilateral arms embargo or go for U.N. sanctions against Sudan. That will be difficult because China is on the Security Council and they trade with Sudan. The key is for the U.S. to keep pressure to make sure that this vote goes through, not only as a test of U.S. credibility, but if it doesn’t the U.S. does not have a lot options for a new plan.
At the EU-Asia summit, there was a debate that revolved around reforming the IMF and giving more voting power to up and coming countries. Of course, there are other reforms that the IMF could do such as governance reforms, surveillance reforms, currency swaps, and better ways to stabilize the financial system in times of crisis. This is an interesting article from China Daily that sums up some of basic elements of IMF reform. Here is on part on vote reform:
The IMF was established in 1944 as one of the three main pillars of the Bretton Woods System. During the period from 1945 to 1971, it was a well-respected institution with a clear-cut mandate and a set of actionable rules. It was also successful in preserving economic and financial stability in the West. This hard-earned fame, however, was quickly squandered after the collapse of the Bretton Wood System.
Now it seems that the IMF is inflicted by at least three problems: legitimacy and representation, relevancy, and effectiveness. To solve these problems, reforms should be implemented in the following four areas.
First is the quota and voice reform. When the IMF was created, it had only 45 members. Now it has 187. Before the 2008 crisis, however, the quota and voice distribution of the IMF remained largely unchanged, little reflective of the present economic reality. For example, the BRIC countries, which have 40 percent of the world population and 15 percent of the world GDP, only had 12 percent voting rights before the reform. In contrast, America alone held 17 percent voting rights or a de facto veto right. This quota and voting rights structure weakened the legitimacy of the institution, rendering it ineffective in solving major problems the world was facing.
In 2008, the IMF began to address this issue. At the G20 Pittsburgh summit in September 2009, the leaders of the 20 countries agreed to transfer at least 5 percent of the IMF quotas to emerging markets and developing countries. At the G20 Toronto summit in June 2010, the world leaders urged the IMF to complete the reform plan before the Seoul summit in November 2010.
Although the developed countries are still quarreling over who should bear the burden to make this transfer, the decisions of the G20 meetings are propitious signs that the major countries are both wanting and willing to reform the international monetary and financial system in a coordinated and more transparent way. The positive message these signs have conveyed should not be underestimated.
The Nobel Prize winners were announced recently. There are always controversial picks for this event. So, here are some of the people, according to Foreign Policy who should have won.