Leech, Dennis (2002) Voting power in the governance of the International Monetary Fund. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers.

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Abstract

In general in an organisation whose system of governance involves weighted voting, a member's weight in terms of the number of votes and the formal power it represents differ. Power indices provide a means of analysing this difference. The paper uses new algorithms for computing power indices for large games. Three analyses are carried out: (1) the distribution of Banzhaf voting power among members in 1999; the results show that the United States has considerably more power over ordinary decisions than its weight of 17% but that the use of special supermajorities limits its power; (2) the effect of varying the majority requirement on the power of the IMF to act and the powers of members to prevent and initiate action (Coleman indices); the results show the effect of supermajorities severely limits the power to act and therefore renders the voting system ineffective in democratic terms, also the sovereignty of the United States within the IMF is effectively limited to just the power of veto; (3) the paper proposes the determination of the weights instrumentally by means of an iterative algorithm to give the required power distribution; this would be a useful procedure for determining appropriate changes in weights consequent on changes to individual countries' quotas; this is applied to the 1999 data. Policy recommendations are, first, that the IMF use only simple majority voting, and discontinue using special supermajorities, and, second, allocate voting weight instrumentally using power indices.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory J Political Science > JF Political institutions (General)
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	International Monetary Fund, Voting research, Corporate governance, Keynesian economics
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	July 2002
Number:	No.583
Number of Pages:	40
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Description:	Original version, December 2000; revised, July 2002
Funder:	Economic and Social Research Council (Great Britain) (ESRC), University of Warwick. Centre for the Study of Globalisation and Regionalisation (CSGR)
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[12] -------------------------------- “The Origins of Weighted Voting Power in the Fund”, Finance and Development, March 1981, pp. 25-28. [13] Hosli, Madeleine, "The Admission of the European Free Trade Association States to the European Economic Community," International Organization, 47, 1993, 629-43. [14] --------------------------------"An Institution's Capacity to Act: What are the Effects of Majority Voting in the Council of the EU and in the European Parliament?," European Institute of Public Administration, 1998. [15] Keynes, John M. Speech to House of Lords, 18 May 1943, in D. Moggridge, The Collected Writings of John Maynard Keynes, Cambridge University Press, 1980, vol. XXV, p. 278. [16] --------------------------------, Letter to J Viner, 12 July 1943, in D. Moggridge, The Collected Writings of John Maynard Keynes, Cambridge University Press, 1980, vol. XXV, p. 328. [17] Lane. Jan-Erik and Sven Berg, "Relevance of Voting Power", Journal of Theoretical Politics, 1999, vol. 11, no. 3, 1999, 309-19. [18] Laruelle, Annick and Mika Widgren, “Is Allocation of Voting Power among EU States Fair?”, Public Choice, 94, 1998, 317-339. [19] Leech, Dennis, “Power Relations in the International Monetary Fund: A Study of the Political Economy of A Priori Voting Power Using the Theory of Simple Games", Centre for the Study of Globalisation and Regionalisation, University of Warwick, CSGR Working Paper No. 06/98 (revised March 2000). [20] --------------------------------, “An Empirical Comparison of the Performance of Classical Power Indices," Political Studies, 50, no.1, March 2002, pp.1-22. [21] --------------------------------, “Designing the Voting System for the Council of the European Union”, Public Choice, forthcoming. (Earlier versions as a working paper under the title, “Fair Reweighting of the Votes in the EU Council of Ministers and the Choice of Majority Requirement for Qualified Majority Voting during Successive Enlargements,” at Voting Power and Procedures programme, CPNSS, London School of Economics, VPP03/01 and Centre for the Study of Globalisation and Regionalisation, University of Warwick, CSGR Working Paper No. 75/01. [22] --------------------------------, “"Computing Power Indices for Large Weighted Voting Games," Warwick Economic Research Papers, no. 579, revised July 2001, University of Warwick. [23] Lucas, William F , “Measuring Power in Weighted Voting Systems,” in S Brams, W Lucas and P Straffin (eds.), Political and Related Models, 1983, Springer. [24] Nurmi, Hannu "The Problem of the Right Distribution of Voting Power", in M.J.Holler (ed.) Power, Voting and Voting Power, 1981, Physica-Verlag. [25] Owen, Guillermo, Game Theory,(3rd Edition), 1995, Academic Press. [26] Penrose, Lionel.S., "The Elementary Statistics of Majority Voting", Journal of the Royal Statistical Society, 109, 1946, 53-57. [27] Roth, Alvin E., The Shapley Value, 1988, Cambridge U.P. [28] Sadako, Ogata, “Shifting Power Relations in Multilateral Development Banks,” The Journal of International Studies (Institute of International Relations, Sophia University, Tokyo), Number 22, 1989, January, 1-25. [29] Shapley, Lloyd. S. and Martin Shubik, “A Method for Evaluating the Distribution of Power in a Committee System,” American Political Science Review, 48, 1954, 787-792. [30] Straffin, Philip D., “Power and Stability in Politics,” in R.J.Aumann and S.J.Hart (ed.), Handbook of Game Theory (Vol. 2), 1994, Elsevier, pp. 1128-1151. [31] Strand, Jonathan R., David P. Rapkin and David B. Wood, “The Political Economy of A priori Voting Power in the World Bank and IMF,” mimeo, 1997. [32] Zamora, Stephen, “Voting in International Economic Organizations,” American Journal of International Law, 74, 1980, 566-608.
URI:	http://wrap.warwick.ac.uk/id/eprint/1595

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