Money & Politics on the International Stage: The Political Economy of the UN Security Council

Cooperation & Change

A more historical example? Tanzania 1961-1974 no IMF, no UNSC 1975 UNSC member First IMF arrangement – exceedingly weak conditionality

IMF reply in the Washington Post (November 1, 2006): An IMF spokesman said “the [Tanzania] evidence is anecdotal and circumstantial.” To convince people, we need many more anecdotes statistical evidence (it’s not just luck)

(non-UNSC: n=5719) (UNSC: n=339) Descriptive data (non-UNSC: n=5719) (UNSC: n=339)

Enter the IMF & the World Bank

Two Key points about the IMF & World Bank Involved with developing countries through “programs”: loans + conditions. Influence over decisions pegged to economic size.

Why use IFIs to influence the UNSC? Political benefits (for both actors) “DIRTY WORK” (Vaubel) Leverage benefits Conditionality & loan disbursements Cost benefits

World Bank evidence “It is true that during the Cold War years aid was politically motivated.” “Now however, aid is being delivered to countries most in need and to those who show they are determined to use it well.” (World Bank, FAQ, www.worldbank.org)

Average # of World Bank projects by UNSC membership If politics mattered during the Cold War, but not after, this bar should be above the line, and this one should be at/below the line… UNSC members continue to get more World Bank programs 2.5 2.0 1.5 1.0 0.5 0.0 avg=1.29 std=1.95 avg=2.13 std=2.93 avg=1.29 std=1.95 n=5333 Non- member 1st.year 2nd year Over time avg=2.06 avg=2.19 std=2.75 std=3.11 n=176 n=181 avg=1.28 avg=1.30 std=1.96 std=1.93 avg=2.15 avg=2.10 std=2.96 std=2.92 Non- n=5333 n=357 member Member Total sample n=2638 n=183 n=2695 n=174 Non- member Member During the cold war After the cold war

Is this a US-thing? Regional Organizations Regional Hegemons

Asian Development Bank Daniel Yew Mao Lim, Class of 2011

Table 5.6: The effect of UNSC membership on African Development Bank lending   Pre-1982 1982 and onward: UNSC Member -0.104 1.717*** (0.06) (3.55) Pariah state 6.193*** 0.904 (4.43) (0.48) War 0.072 -1.519** (0.04) (2.05) ln(GDP per capita, PPP) 6.582** 1.368 (2.14) (0.90) Political regime -0.043 0.026 (0.29) (0.44) Number of observations 355 1,338 R-squared 0.39 0.07 Notes: All regressions include country and year fixed-effects and regional quartics (for North Africa and Africa South of the Sahara). Numbers in parentheses are the absolute values of t-statistics.

Reading regression tables: The cheat sheet What is the dependent variable? (Maybe in the title) Consider the number of observations What is the unit of analysis? What are the “explanatory”/independent variables? Consider the coefficient for each variable Is it positive/negative? (Don’t be too persuaded by the magnitude – the real effect depends on how the variable is measured… and whether the model is “linear”) Consider the SIGNIFICANCE Standard error < about ½ the size of the coefficient |T-stat or Z-stat| > 1.96 P-value < 0.05 Or… lots of * (stargazing!)

The cheat sheet for reading quantitative social science articles Study the abstract Read intro & conclusion Study the stats tables Look up the definitions of variables Skim the rest Read the abstract one more time

Summary Observation by Russian Student Bribes – no surprise Trade money for votes But the US & allies bribe… with a loan must be repaid! Impressive!

Who is surprised?

DISCUSSION

DISCUSSION: Will China play the foreign aid game? How China might use its powerful position in international politics to try to obtain its foreign policy goals? Dalai Lama? Caribbean recognition of PRC vs. ROC? Chiang Mai alternative conditionality?

So what should we do? Reform debate focuses on: NUMBER of representatives elected permanent No discussion of accountability

Accountability, the UNSC, & the Paradox of Stability Criteria are too high! Criteria are too low!

Suggested reforms: Do away with term limits Let regions elect

Typical debate on reforming the UNSC: Not focused on accountability Focused on representation: How many elected seats? Expanded from 6 to 10 in 1966 How many permanent members? Various (so far failed) proposals to include the “G4”: Brazil, China, Germany, India

Role playing! REFORMING the UNSC Options: Status quo Increase number of elected members Increase number of permanent members (Variants allowed – e.g., permanent with/without veto power)

Actors (networking time!) 1 2 3 4 5 6 7 8 9 10 11

Actors Argentina Brazil China Germany India Italy Japan Republic of Korea Pakistan United States African Union (53 countries)

Discussions 1st within groups Then as plenary

Actors Japan, Germany, Brazil, India Korea, Italy, Argentina, Pakistan African Union (53 countries) United States China

Take-aways from this discussion Great powers Strengthened by expansion of elected seats, but don’t need it Strengthened by non-veto permanent seats - iff allies! Weakened by expansion of veto-permanent seats Rising powers Helped if they get permanent seats (veto or not) Hurt by expansion of elected seats Middle powers Hurt if permanent seats go to regional rivals (veto or not) Helped SYMBOLICALLY by expansion of elected seats Small countries Don’t get much out of expanding permanent seats Short-run foreign aid benefits Long-run foreign aid benefits? Or do we get minimum winning coalitions? Status quo bias – changing the United Nations Charter requires 5 permanent member unanimity At least 4 additional votes at UNSC (total of 9 votes) 2/3 majority of General Assembly

What does the G20 world look like?

G20 Calls for a reevaluation of the BWI vote shares Why care about the G20? Doesn’t do anything Arbitrary membership (out of date) Represents the arrival of the emerging markets! More representative? Who is the G20?

Who is the G20? G7 + BRIC + EU + MAKTISAS 11 down, 9 to go? NO! Only 8 to go. Only 19 countries in the G20.

Who’s missing?

Wrong guesses EU Europe The bad guy Large populations Big economies Spain, Poland, Netherlands Europe Switzerland, Norway The bad guy Iran Large populations Pakistan, Bangladesh, Nigeria Big economies Thailand, Taiwan, Malaysia, Venzuela, Egypt,

The G20 World

Thank you WE ARE GLOBAL GEORGETOWN!

Note Ecuador’s IMF participation pattern above Gulf War Examples Ecuador – UNSC member 1991-92 IMF arrangement in 1991 Of course Ecuador is a regular IMF customer: 1961, 1962, 1963, 1964, 1965, 1966, 1969, 1970, 1972, 1983, 1985, 1986, 1988, 1991, 1994, 2000 Voted for all but 2 Iraq resolutions Note Ecuador’s IMF participation pattern above Countries participate in IMF programs about 25% of the time (including ALL countries). Typical pattern: 5 years in, 5 years out, 5 years in, etc…

Nature reveals local politics b Member Member Request aid No request Donor No offer Offer aid, set a>0 Nature reveals local politics b Member Member Vote against Vote with Defect Comply Member: b Donor: 0 Member: 0 Donor: v Donor Donor Cut Disburse Cut Disburse Member: b Donor: 0 Member: b+a Donor: –a Member: 0 Donor: v-r Member: a Donor: v–a

Is this a US-thing? Regional Organizations Regional Hegemons

Implications for governance reform of the IMF: Q # 1: Is this a bad thing? Q # 2: Is it in the US interest to change things? Perhaps not – Short-run political gains. Long-run economic development? Elected to the UNSC 6 times 15 IMF arrangements since 1958 32 out of 48 years (66% of the time)

In the meantime: The actual governance reform of the IMF Increase the voting power of: China, South Korea, Brazil, Mexico and Turkey How will this address the political manipulation of the IMF? It won’t. “It is the correct thing to do, but probably won’t make much difference.” [personal conversation with Pres. Henrique Cardoso, Brazil & Pres. Ernesto Zedillo, Mexico]