Recently, it has been posited that the IMF needs structural reforms to make it more responsive to the needs of developing nations by removing the prominent position of the International Monetary Fund’s major shareholders.
“For their own sake – and that of an institution that is needed today more than ever – the Fund’s major shareholders must leave the building.” — Professor Ashoka Mody (Project Syndicate)
In the absence of a better IMF vision, that would surely be the plan. Everything is right about it, there is nothing better to be done.
But in the presence of a visionary plan for the IMF and a ramping-up of it’s mission by one order of magnitude, depowering the Fund’s major shareholders from their overarching role must be considered ‘Plan B’.
Meaningful IMF Reform
If the IMF, it’s benefactors, supporters, and beneficiaries can agree to implement a 1% Tobin Tax within their respective jurisdictions, with the proceeds used to fund IMF operations then the International Monetary Fund will become one order of magnitude more effective, and this must become our logical ‘Plan A’.
Nations contributing their quarterly Tobin Tax proceeds (minus uniform administration fees) would thenceforth receive robust International Monetary Fund support including proactive advice and assistance. (Think: ‘Someone to Watch Over Me’)
Both minor and major shareholders would remain within the International Monetary Fund membership via their respective Tobin Tax contributions.
By displacing the present funding scheme with a universal, members-only Tobin Tax funding scheme, the IMF would suddenly have single-digit trillions of dollars available to help it advance member economies.
Yes, it is bold and daring. And yes, a lot of money could accrue. And on account of that, the International Monetary Fund would need to become proactive, sending targeted assistance on a ‘just-in-time delivery’ basis — with easy repayment terms for developing nations.
If generous IMF funding for job creation exists, national economies will suddenly find themselves structurally sound in months instead of decades, and therefore, require lower levels of future assistance.
I’m not for a minute suggesting, throwing shiploads of money at problems in an effort to make them disappear because we suddenly have shiploads of money available; Rather, I’m suggesting that such a lucrative funding mechanism could finally allow the IMF to become all that it can and should be, and should have been all along.
Instead of trying to push major donor nations away in an attempt to lessen their influence on today’s very finite IMF funding — why not change the entire conversation to an IMF-members-contribute-via-1%-Tobin-Tax and are thereby generously and proactively assisted by the International Monetary Fund.
The question: ‘How can we afford to fund what needs to be done?’ need never be considered again.
Note about Non-Participant IMF Members:
Nations that decide against contributing to the IMF via a national Tobin Tax contribution programme would lose the ability to benefit from the IMF — except in the case where ‘country A’ would pay the IMF directly to ‘survey’ or ‘comment’ or ‘create a report on’ the economy or prospects of ‘country A’.