The question, however, is whether they will be remembered as the doctrine ushering in a truly inclusive new world economic order, whether they will be remembered as the first demonstration of the powers that are coming to rival the hegemony of the West or whether they will be remembered as simply wishful thinking or rhetoric employed by the dominant powers to maintain the status quo.
Broadly speaking, the İstanbul Decisions comprise four key guiding reforms which the 186 member countries that make up the World Bank and the International Monetary Fund (IMF) will use to guide and construct the “new world order.”
First the IMF's mandate was reviewed with an eye to revamping the range of macroeconomic and financial sector policies relevant to affecting global stability.
Second, the fund's financing role will be assessed looking at ways in which the fund would be able to further the success of such instruments as the flexible credit line (FCL) -- a no-strings-attached credit line opened to countries that meet certain criteria -- and assess whether or not such instruments could work as a form of insurance for countries that feel the need to stockpile reserves against speculative attacks. Next, the IMFC also endorsed the declarations to work towards creating a global monitoring system.
Finally, the so-called İstanbul Decisions, as they were coined by IMF Managing Director Dominique Strauss-Kahn, endorsed the previous G-20 resolution to make the IMF a more inclusive body by shifting quota shares towards developing countries by at least 5 percent, by January 2011. The İstanbul Annual Meetings took place less than two weeks after the Pittsburgh G-20 summit -- both of which were “historic” in the sense that they followed the worst economic crisis since the dirty '30s and were both the capstones of unprecedented global cooperation amongst even some of the most historically antagonistic countries.
“The tide has gone out and exposed that there were a lot of problems in the system as a whole,” said Indermit Gill, World Bank chief economist for the Europe and Central Asian region, stating that institutions such as the World Bank and IMF had to be revamped to take into account the changing landscape. Former Turkish Economy Minister Kemal Derviş also signaled the changing role of the fund when asked by reporters if he thought that there was really going to be a change in the philosophy of the IMF and the World Bank. He responded by saying the fact that Joseph Stiglitz and he were even invited to the Annual Meetings shows that there was a profound change at hand. Even Stiglitz, one of the most outspoken critics of the fund, was quoted recently in The Wall Street Journal as saying that the IMF “should be recognized for not repeating earlier mistakes they made during the Asia crisis. Strauss-Kahn is presenting the institution in a very different way. They are acting more openly.”
The proposals to make the fund a “lender of last resort” through the provision of special drawing rights (SDR) on IMF funds -- which are granted without the same conditionality associated with regular stand-by agreements -- are also a positive development. Straus-Kahn repeatedly said his hope was for these funds to contribute significantly to “global imbalances” -- caused by some countries stockpiling reserves to hedge against sudden outflows of “hot money,” while other's have very few reserves. Todayszaman
“Reserves are important. If countries are putting aside large amounts of reserves, that's money that's not being spent. When you say you need more global demand, an obvious way to resuscitate global demand is to fix the global reserve system.”
But despite the optimism, there is much to doubt that the İstanbul Decisions will live up to all that is hoped for. “This is a process that will take time. It won't happen overnight," said Committee Chairman Youssef Boutros-Ghali. "We are reforming an organization that is complex, sophisticated and reaching every corner of the world economy."
And there is much to cause people to question the sincerity of this new position. Despite Strauss-Kahn's many statements about the fund's quota reform being “crucial for increasing the legitimacy and effectiveness of the fund," the US will be hanging on to its 17 percent voting quota -- a veto given that an 85 percent vote is required to finalize any significant votes. US Secretary of the Treasury Timothy Geithner said, "A more representative, responsive and accountable governance structure is essential to strengthening the IMF's legitimacy," yet in the same breath he said there would be no change to the number of votes the US holds.
Derviş, who is also vice president and director of global economy and development at the Brookings Institution, wrote on Thursday in a report published by Brookings, “The provision of sufficient and stigma-free precautionary finance by the IMF cannot be delinked from the governance issue.” He asked: “What does it really mean to ‘shift … quota share to dynamic emerging markets and developing countries of at least 5 percent from over-represented countries to under-represented countries using the current quota formula' as the basis to work from? The current quota formula is highly problematic because the dimensions relating to openness and volatility bias the quotas toward mainly European countries.”
“To implement real change, the existing formula may be a starting point but needs to be amended in a fundamental way,” he said.
