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Voting in World Bank

Created at the Bretton Woods Conference in 1944, The World Bank Group is comprised of five agencies that make loans or guarantee credit to its 184 member countries. In addition to financing projects such as roads, power plants and schools, the World Bank also makes loans to restructure a country’s economic system by funding structural adjustment programs (SAPs). The Bank manages a loan portfolio totaling US$200 billion . The headquarters of the bank is situated in Washington D. C. and it currently employs approximately 10,000 people, 3,000 of which work in regional offices.

The bank’s executive body is the Board of Directors which contains 24 Executive Directors. The President who rules the Bank is nominated by the U. S. The Voting System:- The World Bank and the IMF have adopted a weighted system of voting. According to the Bank’s Articles, membership in the Bank is open to all members of the IMF. A country which is applying for membership in the Fund is required to supply data on its economy, which are compared with data from other member countries whose economies are similar in size.

A quota is then assigned, equivalent to the country’s subscription to the Fund, and this determines its voting power in the Fund. Thus, one thing is basic- the World Bank adopts a quota-based voting system. This quota is based on the economic strength of the countries. Each new member country of the Bank is allotted 250 votes plus one additional vote for each share it holds in the Bank’s capital stock. The quota assigned by the Fund is used to determine the number of shares allotted to each new member country of the Bank.

The membership and Capital Subscriptions Office of the Corporate Secretariat is responsible for coordinating the process for members to complete their periodic capital increases in IBRD, IDA, IFC, and MIGA. It provides advice on the procedures for subscribing to additional shares as authorized under resolutions approved by the Boards of Governors, including required documentation and capital subscriptions payments. The problem of weighted voting:- The problem which arises with the weighted voting system is that which member country should be given more importance, that is, which country should be given the maximum number of votes.

Rather, on what criteria should this decision be based on? Should this decision be based on population, economic conditions, power, or some other criterion? Weighted voting may be applicable for organizations which have limited goals, without widespread goals and aims. But with universal organizations like IMF and World Bank, the weighted voting system holds a bit dubious reaction. These institutions and organizations aim at the development of the whole world economy and development. Thus, with the vast array of set goals, it is actually improbable to fix up on any set of criteria for voting.

Weighted Voting: a good option:- The main organizations which use weighted voting system are IMF and IBRD (more famously known as the World Bank). There are two main reasons behind this weighted voting procedure in these two organizations. Firstly, their tasks are so closely confined to one specific area that criteria for weighted voting can be a valid decision. Secondly, and more importantly, insufficient funds and aids would be available if the donating member countries are not given a majority of votes.

The reason for the unequal status arises from the fact that although in one sense one may say a country is a country, this view oversimplifies the dynamics of the organizations. The U. S. and Japan have relatively small populations but tremendous influence on the world economy. India is a country with a very large population but with a lesser influence when compared to the United States and Japan. Thus, when voting occurs in an organization such as the World Bank or International Monetary Fund, one might want to have complicated rules for passing policies so that the different realities of the countries involved are taken into account.

A large group of small countries should not be able to set a policy telling a few rich countries what to do with funds that often come from these richer countries. The reality is that the aids and loans which the IBRD gives to the needy countries are dependant on the economically strong countries and the aids given by them. Thus, following a system of equal voting or importance may lead to a balanced distribution of power but this may ultimately lead to the sparse and less amount of funds, donations and other financial aids.

Hence, weighted voting is a wise and politically as well as diplomatically correct decision with respect to the bank’s development and the world’s economic development as well. Weighted Voting: the cons:- Some critics of the institution believe that the IBRD was not started to decrease the poverty scenario but to increase the U. S’ business interests and funds collection. Undoubtedly, since U. S holds the maximum amount of votes and is the epitome of importance in the World Bank, it is useless to term it as the “world” bank. It should be named as the “U. S” bank.

The bank has actually increased poverty, reduced the per capita income of the developing nations and also the living conditions and health scenario has deteriorated. The president of the bank can only be nominated by the U. S and also is an American. This has resulted in severe criticism of the bank and its functioning. The voting system, working system is not at all clear and transparent to the public. The Cato Institute, a right-wing think-tank, has just published a book, “Perpetuating Poverty: The World Bank, the IMF and Developing World” by Bandow and Vazquez.

It accuses the international agencies of financing faulty socialist policies and consequent misery, and says that successful Asian countries succeeded despite and not because of aid agencies. It says aid has “helped finance some of the world’s most burdensome public sectors, in creased recipients’ foreign debt, and subsidized harmful economic policies that caused poor people’s misery. ” It says that aid, “by ameliorating symptoms of economic collapse, is likely to postpone the adoption of necessary reforms. Governments that receive aid find it easier to avoid making the politically difficult decisions required by economic restructuring.

” According to a recent study, a very large proportion of the voting rights are vested in a very small number of industrialized countries the principal shareholders in terms of paid-up capital. In contrast, a large number of developing countries and the transitional economies are vested with a small proportion of the voting rights even though they are the principal stakeholders, interest payments from which provide most of the income of the World Bank. The need to restructure this economic disparity is thus, obvious.

Thus, we see that the IMF and World Bank have developed themselves as the pioneer economic reformers of the current scenario. But during their hour of creation, the scenario was much different from what it is today. Thus, they shouldn’t project themselves to be just the “loan donors” and spread their area of expertise to the institution of development. The vast era of globalization should be embraced by the World Bank and the policies and conditions should be reformed in such a way that every nation which deserves an equal amount of importance and rights should be given so.

The monopoly of importance and decisions should not just be captured By America and the powerful European countries but also should be spread equally to the emerging nations of the global era. The World Bank “should cease to be a moneylender” and “transform itself into an institution more concerned with development,” focused on development activities in poor countries. The Wolfowitz scandal should serve as a sobering wake-up call to the World Bank on the need for meaningful governance reforms.

Its archaic 1940s convention of allowing the US to name the Bank’s leader undermines the institution’s legitimacy as well as the accountability of the Bank’s president. The Bank does not need to look very far for reform proposals – including its own 2001 proposals for an open, competitive selection process that were summarily ignored.

References

• Who Rules the World Bank? by Bruce Jenkins and Nancy Alexander, September 2005 (BIC website) http://www. bicusa. org/en/Article. 3327. aspx • The Law of International Organizations http://books. google. com/books • World Bank’s Organizational Information http://www. oneworldtrust. org/? display=wb

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