Complacency a risk to reform

The second reason for lack of progress in global economic reforms is the reluctance of the United States to give up its veto power in the International Monetary Fund. In 1944, the US, as the hegemon, helped establish the rules and institutions of global economic governance. This led to financial stability and unprecedented economic prosperity, not only in the members of the G7 club, but also in other countries around the world especially the members of BRICS (Brazil, Russia, India, China, and South Africa).

Given their growing economic footprint in the world economy, the BRICS countries now desire a greater say in running the IMF, but some IMF members are loath to allow this. This is because, like many other clubs, the IMF is designed in such a way that the founding members ultimately maintain control. Hence, one of the centerpieces of the proposed global reforms, namely the G20 pledge to transfer 6 percent of quota and voting power to large emerging markets, has not been be implemented.

The third reason for limited progress in reforms is the relatively weak cohesion within BRICS. The establishment of the G20 in the aftermath of the global financial crisis has given the BRICS countries a historically unprecedented opportunity to sit around the high table with the G7 members and participate in discussions on international economic policies as key stakeholders. But BRICS is still "without mortar". For example, when the position of the managing director of the IMF fell vacant last year, even though it was well-known that the IMF tradition of locking out non-Europeans would be strongly protected, the BRICS countries should have quickly made a claim for the position, fielded a top-rate candidate, and provided strong backing for their candidate. But that did not happen. The BRICS claim came late, perhaps as an after-thought.

For the above reasons, many of the proposed global economic reforms have not been implemented and the world is not much safer now than it was before the global economic crisis.

An important lesson that China can learn from all this is not to allow complacency to set in. It is the more detailed policy packages and their implementation that will be the key to the success of the Third Plenum. The decision to establish a top-level group responsible for planning reform and supervising its implementation is a step in the right direction. This group must now act swiftly to dispel any doubts and misunderstandings about the design and pace of reforms.

The author is an associate professor of international political economy at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University. He is also coordinator of economic multilateralism and regionalism studies at the RSIS' Centre for Multilateralism Studies.

(China Daily 11/25/2013 page9)