Among the causalities of the U.S. budget dispute has been the chance to enact crucial changes at the IMF. Leaders of the G20 nations agreed in 2010 on the proposals that require approval by member governments to be implemented. The U.S., however, is delaying its endorsement, and as a result the enactment of the measures has been put on hold.

There are two proposals under review. One stems from the IMF’s 14^th General Review of Quotas, and the second takes the form of an amendment to the IMF’s Articles of Agreement. Among the changes that would follow from their implementation are:

• A doubling of the amount of funds available to the IMF through the quotas of its members to about $720 billion, scheduled to take place in January 2014.
• A shift of six percentage points of quota, which are the basis of voting shares as well as financial contributions, to emerging market countries.
• The establishment of an all-elected 24-member Executive Board in place of the current system that allots individual seats to the Fund’s five largest members. A reallocation of two seats from the European members to emerging market countries will also occur.

Are these changes important? The increase in total quota would not change the IMF’s current capability to assist countries in crisis. Member governments agreed to lend directly to the IMF in the wake of the 2008-09 crisis through a plan known as the New Arrangements to Borrow. The proposed quota increase would make access to the additional credit consistent with the IMF’s use of its quota resources, and would be offset by a reduction of the NAB.

The change in relative quota shares, on the other hand, would lead to a long-overdue realignment of the relative quotas of the member countries. All four BRIC nations would appear on the list of the ten members with the largest shares. The current ten largest members and the proposed new line-up are:

The reallocation of seats on the Executive Board is the logical counterpart of the quota realignment. The change in how representation is arranged would open the way for the Europeans to form coalitions to appoint common representatives, such as one for the Eurozone. Such a grouping, because of the size of its combined quota, could increase the influence of the Europeans at the IMF.

James Boughton, former IMF historian, believes that changing quotas and votes should have little impact on decision making. Votes are rarely taken, and the emerging market nations are unlikely to push the IMF in a different direction, particularly now that the IMF has adopted a new view on capital flows and the use of capital controls. But Boughton also claims that the reforms are vital to preserve the IMF’s creditibility. The current allocation of quotas and seats on the Executive Board is a relic of the political and economic landscape of the post-World War II era when the IMF was established. The Europeans are overrepresented on the Executive Board and the Managing Director of the IMF continues to be a European. Officials of the emerging market countries have expressed their impatience with the delay in changing the allocations in response to their growth.

Ratification of the reform measures requires approval of 85% of the total voting power of the IMF’s members, and the U.S. has a share large enough (16.75%) to prevent passage. Why has the U.S. not approved the changes? Congressional support is needed, and that has been held back. The basic reason for the delay is the same as the reason why Congress resisted raising the debt ceiling: politics. The Republican Chair of the House Financial Services Subcommittee has stated that he will consider the quota increase only if it is included within a proposal for fiscal consolidation.

But the failure of the U.S. to support the reforms also reveals an emerging drift towards isolationism. This reflects weariness with foreign wars as well as the slow recovery from the 2008-09 crisis. The latter was marked by the end of the domination of the G7 in international economic governance. We are still waiting to see whether the G20 will be an effective replacement. But the ability of any coalition to exercise leadership will be limited if the world’s largest economy turns away.

Chinese officials were incensed at the possibility of a default on U.S. debt. Further delay of the IMF reforms only reinforces the impression that the U.S. no longer takes its international responsibilities seriously. The inward turn of U.S. politics signals a further retreat from the internationalist vision that created the IMF and other multilateral institutions.

Great Britain, it was claimed, gained an empire “…in a fit of absence of mind.” The U.S. may, on the other hand, lose its global position through indifference.