Journey to Global Governance: IMF Roles and Function as International

Organization
Jasonia Putu N. Situmeang

Introduction
One of the most influential international organization is International Monetary Fund
(IMF), operating in economic sector globally. IMF provides short term loans for states to deal with
deficits, acting as lender of last resort. While its main purpose is to give stability for the world
economy, it is demanded to help with the journey to shift to global governance of world system.
Global governance itself can only be achieved when every actor in livingstates, groups,
companies, and individual can streamline their affairs, without the existence of world leader.
This paper asks about the contribution of IMF in forming a global governance. Findings
might have doubted over the aims of IMF to actually pursuing global governance, because it is not
necessarily parallel with maintaining financial stability. Therefore, the purpose of this paper is to
analyze how IMF achieve global governance while still concerning its main agendas, through its
role and function as an international organization.
In analysis, writer will pick IMF roles and function that have implication to the practice of
global governance itself, and propose alternative for overcoming it. Even if the issue is examined
as critical as possible, analysis might still have limitation regarding the rest of the worldwhether
they actually want to achieve global governance or not.

ApproachesCritical Theory and Historical Materialism

The convenient approach in understanding international organization is global views such
as critical theory, which will be used in this paper. The purpose of this approach is to free human
raise from the socially-created constraint1 which can take form in local government, sovereign
states, or even IOs. Those constraint is created by knowledge that came from those who held
power, for the reason that they have the ability to maintain knowledge by planting it in the society.
This ongoing process of knowledge transmission, is the exact opposite of critical theorys aim.
Since aim is to create a subject to fulfill every person needs, not elites. The approach has strong

1
Andrew Linkater, Beyond Realism and Marxism: Critical Theory and International Relations, London: Macmillan,
1990, p. 1-2
view about human as the member of global community, and less as citizen of sovereign state. It
strive to treat people as ends, not means2 because human needs to be valued as they are while states
and IOs on the other hand need to be treated as means not ends because they were created to bring
forward the human civilization.
Second approach is historical materialism or Marxism, which contributed to critical theory
also. The main argument is state and the bourgeoise are committed for capitalism survival3, which
applies in the liberal economic system. Society is divided into class, because problem starts from
the social gap. As this happens, one part of society is advantaged by the loss of the other society
and it can happen not only in transnational society but also interstate as well. Therefore,
globalization would only put loss for Lesser Developed Countries (LDCs).

Instrument, Forum or Independent Actor?

States interest in joining IMF is to gain advantages in financial aspects. Article 1 of the
Charter of the Fund stated, to facilitate the expansion and balanced growth of international
trade, and to contribute thereby to the promotion and maintenance of high levels of employment
and real income and to the development of the productive resources of all members as primary
objectives of economic policy4. As the Developed Countries (DCs) seek for economic instrument
to maintain power in international economy, while LDCs seek financial loans for their national
development. With different interest for each type of state, IMF has its own implications acting as
instrument. As the key similarity of Keystone International Economic Organizations (KIEOs)
namely World Bank and World Trade Organization (WTO) is they promote the free market, which
signify capitalistic system. Because states now have to deal with the capitalist international system
and their own national system, the capitalist states is highly benefited. This is not necessarily
absolute, but it surely will move IMF agendas toward the interest of DCs capitalist.
Reason for IMF close relation with DCs is that it seeks resources from them. Supported by
IMF weighed voting where quotas are based on economic position that implies states contribution
and subscription to IMF, and for the reason that IMF did not seek UN funds5. As the results, the

2
Ken Booth, Security and Emancipation, in Christopher W. Hughes Editor, Security Studies: A Reader, London:
Routledge, 2011, p. 39
3
Theodore H. Cohn, Global Political Economy 6th ed., Boston: Pearson Education, Inc., 2012, p. 104
4
Articles of Agreement of the International Monetary Fund, Washington D.C.: IMF, 1969
5
Cohn, Global Political Economy 6th ed., p. 26

1
DCs are taking control of the world economy through IMF. One way to stop this hegemonic system
is to change the international economic system to the system that focus on equality.
Not seeking UN funds and managing its own resource will make IMF an independent actor,
along with other factors. Providing short term loan makes IMF seen as an institution that provides
assistance and acts on their own in giving and declining loan. Problems emerge when IMF
renounce loan for LDCs due to their economic situation. Ideally, if state is turned down by IMF
for loans, then state must seek help from World Bank. But even if World Bank function was to
give long term loans for LDCs development6, it still consider IMF information about the credit-
worthy status of the state, to adjust amount of the loan. Not only World Bank, but WTO also ask
economic readiness level of a state to IMF before approaching the state with trade opportunities
and offers and sometimes, even DCs also seek IMF approval before giving loan to LDCs.
The dependence of other IOs with IMF raise the thinking that there should be one
international economic organization that deal with all economic problem, with the functions of
IMF, World Bank, and WTO combined. Thus, the decision will be made under one institution, not
inter-organization as the current system. Independent actors are conjoined into one, making an
effective and functional independent actors. Society at large would experience the simplifying of
impersonal relation, social transaction, and organization membership for the chase of cosmopolitan
society ala Immanuel Kant7 as the world system is simplified into one IO taking care of all
economic matters. It also will help if the other IOs that often overlaps in their routine can adopt
the same solution.
. IMF role as a forum does not as stands out as the first two role. IMF hold annual meeting
inviting each member, similar with other IOs in general. Consequently, IMF major roles as
instrument and independent actor come with several implications. First, it concerns more regarding
DCs interest, leaving a long-lasting inequality for the LDCs. And second, the role as independent
actor is questioned because there is an interdependence between the KIEOs and it will make it
harder for the society to be in such complicated system to achieve cosmopolitan society. To that
end, the roles should be reformed to a more just and efficient way in order to make global
governance a reality.

6
Ibid., p. 23
7
Bob Sugeng Hadiwinata, Studi dan Teori Hubungan International: Arus Utama, Alternatif dan Reflektivis, Jakarta:
Yayasan Pustaka Obor Indonesia, 2017, p. 160

2
IMF FunctionsPursue Global Governance or Not?
IMF as international organization has several function, but only two has stands out in the
development of global governance. First, IMF as normative institution. IMF had set several norms
of behavior to maintain economic affair throughout the world until this second. Second, IMF take
the role in operational functions. This means it can operate in such a government way or take
matters when government unable to, with the purpose of actually getting things done.
In IMF rules and regulation section G-5, stated When a member expects to purchase from
the Fund, in a single transaction or a series of transactions, an amount of another members
currency that is unusually large in relation to the quota of that other member, the member shall
give the Managing Director as much notice of the proposed transaction or transactions as can
reasonably be effected8. So, the more a state propose for loan and economic assistance, policy
become strictit would be implemented depending on the amount of loan paralleled with states
quota. This means IMF can actually control the government to make sure that state will fail and
losing its ability in to repay the loans. This could means settlement of low wage attract investors,
lowering production that cause environmental degradation, or even inter-class conflict as
inequality increase. In brief, it infringe states practicing in sovereignty. To solve this, IMF must
reconsider its policies and intervention to pull back from state sovereignty, as the main idea of
global governance is to avoid hierarchical condition. It also demanded to concern more about the
social, cultural, and environmental effect of its policies.
Moving to operational functions, IMF has always have the function as lender of last resort.
To achieve that, certainly IMF need resources. But, the resources has only little percentage
compared to the total amount of money in the international market. Since IMF only focused on
contribution from the DCs, it exclude Multi-National Cooperation (MNCs) and other non-state
actors from its terrain. This state-centric view is keeping us further from the achievement of global
governance, because every individual, groups, companies, all have impact to the overall global
situation. Therefore, structural adjustment to consider every economic actor is needed for IMF to
maintain compatibility with the emerging global governance.
Same as IMF roles in international affairs, several reforms is needed for IMF functions in
order to bring closer global governance reality. It need to concern more about non-state actors that

8
IMF 63rd issue of Rules and Regulation, published April 2016

3
give much contribution to the global economy. Also, concerning about social, cultural, and
environmental aspects is necessary in IMF further agenda. As one of the most influential IO in the
world, it is important for IMF to take first step, so others will follow.

Conclusion
In international affairs, IMF does not produce a situation of global governance. In fact,
IMF slowed the process of pursuing global governance. To sum up about findings from this
writing, IMF has violated some aspects regarding the interest of global society. First, it really
support the hegemon power exercise through acting as the instrument for DCs for their capitalist
interest, leaving the LDCs as only help seeker. Second, it does not perform effectively in structural
way, often overlaps with other IOs. Third, does not manage the other candidate in international
economic affairs such as MNCs and influential individual moreover not concerning about the non-
economic impact of its policies in the society at large.
If the global society is serious in pursuing the global governance, then IMF need serious
change. This change would be done in ideological as it need to set aside the capitalist way of
operating and in structural way in order to make an effective, open, and just institution.

References
Booth, Ken. 2011. "Security and Emancipation." In Security Studies: A Reader, by Christopher
W. Hughes and Lai Yew Meng, 36-43. New York: Routledge.
Cohn, Theodore H. 2012. Global Political Economy 6th ed. Boston: Pearson Education, Inc.
Hadiwinata, Bob Sugeng. 2017. Studi dan Teori Hubungan Internasional. Jakarta: Yayasan
Pustaka Obor Indonesia.
International Monetary Fund. 1969. "Articles of Agreement of the International Monetary Fund."
Washignton D.C.: IMF.
. 2016. "IMF Rules and Regulation 63rd issue." IMF.
Linkater, Andrew. 1990. Beyond Realism and Marxism: Critical Theory and International
Relations. London: Macmillan.