PONARS Eurasia member Randall W. Stone discussed his new book "Controlling Institutions: International Organizations and the Global Economy," (Cambridge University Press, March 2011), at the George Washington University. Alex Mourmouras, chief of the European Division at the International Monetary Fund (IMF) Institute provided commentary. Randall Stone’s book was motivated by a series of questions regarding the operation of the IMF. How does the organization’s decisionmaking processes actually work? How important is the role of the United States? Is U.S. power more formal or informal?
Stone’s main observation is that while the U.S. has 17 percent of the vote in the IMF, it "runs the show." This discovery, perhaps not in itself surprising, leads Stone down a further avenue of inquiry: What are the informal governing procedures of the IMF? How and when do informal procedures trump the formal rules of international organizations (IOs)? How do formal and informal governance interact within IOs?
Stone sets out to compare formal and informal decision-making procedures in the IMF. The formal procedures of the IMF involve initiation of discussion by the IMF managing director via proposal power, weighted voting allotted among member states, and universal representation. Only the managing director has proposal power, and no one state has a proportion of votes great enough to singlehandedly hijack the decision making process. The informal procedure operates in some significantly different ways. While formal procedures stress the equality of representation (not just voting weights), informal procedures often involve U.S. intervention prior to the executive board meeting and the managing director's proposal, and an assertion of agenda control. Once proposals reach the executive board meeting, most states in opposition abstain rather than vote against the U.S. position. Stone asserts that a "norm of deference" is clear in this informal procedure. Furthermore, even outside the U.S., those states with higher levels of participation determine influence, rather than those that might be expected to be more influential. As an example of this, he pointed to Belgium having a higher level of clout than China. Stone also argues that informal procedures mitigate the problems of the IMF’s executive directorate. First, thanks to universal representation, the executive board has too many divergent interests for progress to occur on significant issues. U.S. intervention and assertion of agenda control streamlines the process and serves as a means of interest aggregation. Furthermore, with around 100 different representatives in the meeting room, little confidentiality is available for negotiations. Most of these representatives have not been delegated with decision-making responsibilities by their respective governments, so decisions are stalled further. In these ways, Stone argues that the executive board is deliberately ineffective. Beyond the IMF, Stone analyzes the WTO and the EU as comparative cases. He argues that similar characteristics (formalized dispute resolution, informal rule making procedures, and minimal or uneven delegation of executive authority) allow for comparison of these organizations. Stone concludes that by looking at formal and informal decision and rule making procedures, institutional design and intentional inefficacy of formalized processes, and the ways in which "important states" capture institutions without hampering legitimacy, scholars of international organizations can understand how these organizations function.