Transcript of an IMF Economic Forum -- Governing the IMF
September 17, 2002
Transcript of an Economic Forum
Governing the IMF
International Monetary Fund
Tuesday, September 17, 2002
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Forum Facilitator - My name is John Starrels and I work in the External Relations Department. Welcome all of you to our second economic forum in our current series. I have no doubt that today's session on Governing the IMF will be both substantive and provocative. Before turning over the floor to Jim Boughton, two brief house keeping announcements.
First, please avail yourself of the superb pamphlet "Governance of the IMF," written by Leo Van Houtven, former Secretary of the IMF and one of today's panelists.
Secondly, we value audience participation. To facilitate this, please use the microphone attached to your seat and identify yourself before hand.
That said, Jim, the floor is yours.
Mr. Boughton - Thank you very much, John. Welcome, everybody. We have a very hot topic today, one that I think will generate some fireworks, and of course this afternoon it is also a topic that until fairly recently was the kind of issue that the Fund might have felt comfortable discussing internally among ourselves but might have felt a little bit uncomfortable discussing in a public forum, and I think it is a very welcome and positive sign that we are able to have an open discussion on issues relating to governing the Fund.
I would just like to make a few very brief opening remarks to define the way I would see this topic, and then introduce each member of our distinguished panel.
The first point I would make is that any international organization has to be governed in some fashion, and if you were to look at a large number of international organizations, you would find that each one has solved that problem in a different way. But there are two fundamental issues that we have to deal with if we are going to try to find the right way to govern an international organization.
First of all, there is a fairly abstract question, and that is, how can you govern an institution like this in a way that is politically legitimate, that will be accepted as a politically proper process without sacrificing the organization's efficiency and its effectiveness in doing what it was set up to do? Non-international organizations face a similar kind of governance problem, but nowhere near to the same extent that you have with an international organization because whether it is a nation state or whether it is a country club, most organizations are made up of individuals, and there is a very long established solution to that problem, and that is democracy, and an organization is politically legitimate if it is governed democratically in a way that preserves the essential rights and interests of minorities.
But multilateral organizations cannot do that because they are not made up of individuals, they are made up of nation states, and nation states are inherently unequal. So different organizations try to solve this problem in a variety of ways, and let me just mention three very briefly. The most well known one, of course, would be the U.N. General Assembly where it famously operates on the principle of one country-one vote, as if each country were a representative individual. So you have China, with one-fifth of the world's population, having one vote in the General Assembly and Palau, which is a tiny Pacific Island nation with a population not much bigger than Foggy Bottom, also having one vote. Now, that is one way to solve this problem. If the General Assembly were a different kind of organization, it might find that kind of solution awkward.
The U.N. Security Council takes a rather different approach. There you say only the largest states have permanent membership, and each of those large states has a veto over any major decision that is being taken. That is a lot less democratic than the General Assembly, but it is a solution that works much better for the kind of body that the Security Council is.
Now, the IMF takes an approach that we might think of as kind of halfway between these two. The IMF has 184 member countries, everyone has a vote, but the votes are weighted, and the way they are weighted is a matter of some controversy. On the Executive Board, countries group themselves into constituencies, and so that each one has a reasonable vote, but again there are very substantial differences in the votes, as you look at each member of the Executive Board. Some major decisions require a very large majority, up to 85 percent majority before you can take action, so that for major decisions the IMF becomes a set of blocking minorities, if you will, or veto blocs. But primarily the Fund works because it works on the basis of consensus. So there are lots of issues that come up in thinking about how you balance off these different problems. Large countries, small countries, major decisions, minor decisions, and so on.
Now, so you have this broad question about the political legitimacy that is faced by any multilateral organization, and specifically thinking about the IMF in the modern world, there is a much more practical question. That is, how do you make sure that poor countries or developing countries or the borrowing countries that are so heavily affected by decisions of the Fund, how do you make sure that they have enough representation and voting power and influence without sacrificing the interests of the creditor countries who, after all, provide the financial resources without which the Fund could not do its job? How do you ensure that you have enough seats around the table in the Executive Board to make sure that each significant group of countries can be heard and can have its interests represented without making the Executive Board such a large body that it cannot function anymore? How can you preserve the technical independence of the staff so that we can make professional decisions and still ensure that you have proper oversight of the organization?
Now, these are difficult questions. Nobody is ever going to find "the" right answer to these questions. What we have tried to do today is to bring together what I am proud to say is a very distinguished group of people who have thought about these questions for a very long time and have contributed quite a lot to what we know about them.
Let me just briefly introduce them to you in the order in which they are going to speak, and we will start with the gentleman on my right or on my left if you are looking at it from where you are sitting, and that is Ian Clark, who is president of the Council of Ontario in Canada. Now you might wonder what the president of the Council of Ontario knows about the IMF, but if you wondered about that, it would be because you did not know Ian Clark very well. He knows quite a lot about the Fund for a variety of reasons. He was a Rhodes scholar, and holds a doctorate from the University of Oxford. He was a research fellow at Harvard before entering government service in Canada some 30 years ago. He had a very distinguished career in the Canadian government, eventually became Comptroller General of Canada in the early 1990s. Then, having prepared himself well, he came to the IMF, where he spent two years as Executive Director here for a group of 12 countries consisting of Canada, Ireland, Belize, and several Caribbean island states. He then went to the private sector, became a partner at KPMG, then moved to the Council of Ontario four years ago. He has published extensively on governance issues, including at least two papers on the Fund, drawing on his experience here as Executive Director.
After we have heard from Ian, we will hear from Leo Van Houtven, a man who is also known to many of you in the audience today. Leo is president of the Per Jacobsson Foundation which honors our third Managing Director. He joined the staff of the Fund in the European Department in 1958, and spent many years in the European Department, and headed up the Fund's office in Europe, or what we call our Paris office in the mid 1970s. Then in 1977 Leo Van Houtven became the Secretary of the Fund.
The Secretary of the Fund is a very powerful individual. He sits at the left hand of the Managing Director on a daily basis, and one of my favorite pictures of Leo Van Houtven is when he is sitting on the podium behind President Ronald Reagan and he appears to be scowling over his shoulder during the annual meetings in that particular year.
In 1987 he was honored for his service by also being named not only the Secretary of the Fund but also being named Counsellor to the Managing Director. He retired in 1996, and since then he has been heading up the Per Jacobsson Foundation. He is the author of the pamphlet that John Starrels mentioned at the beginning. He is also the secret coauthor of probably thousands of internal documents in the Fund, including of ministerial committees and so on.
Then I have two very distinguished academic political scientists on my left. The third speaker on the panel is going to be Vikash Yadav from the University of Pennsylvania. One of his many claims to fame is that he has probably the best web site of any academic at least that I have ever seen [http://www.ssc.upenn.edu/~vikash1/]. You cannot only learn all about Vikash Yadav on his web site, but you can also learn a great deal about modern architecture which he describes as one of his many passions. He is a lecturer at the University of Pennsylvania where he is currently finishing a Ph.D. Dissertation on regulating risk in international financial markets. He was a visiting scholar at Saint Antony's College at Oxford, so on each end of the table here we have people with great Oxford connections, although I guess he was there more recently than Ian Clark was there. He is also the coauthor of a recent paper on reforming the Fund, and he will draw on that experience.
Our final speaker will be Professor Martha Finnemore, Associate Professor of Political Science at George Washington University, just down the street. She also has a Harvard connection, like Ian Clark, where her bachelor's I believe is from. She has a Ph.D. from Stanford. She has been a McArthur Fellow, and she has been a guest scholar at the Brookings Institution. She is internationally known. The one year I spent at Oxford I kept hearing her name. Whenever I would turn around, people would say, Oh, but you must read such and such by Martha Finnemore if you really want to understand international relations. She is a leading expert on issues of governing global institutions. She is the author of several books. She recently coauthored a paper on governing the Fund which was commissioned by the Group of 24 developing countries.
So with that introduction, let me turn it over to Ian Clark.
Mr. Clark - Thank you, Mr. Boughton. It is a pleasure to be back in this building and to be on the same platform as Leo Van Houtven who was Secretary during the two years that I was Executive Director. I have had the opportunity to read Mr. Van Houtven's splendid pamphlet as well as the thoughtful papers on IMF reform by our other two panelists. These three papers advance specific proposals for reform, including increasing the influence of developing countries and making the Fund more democratic, transparent, accountable, and participatory.
The title of my presentation is Institutional Realities in a Membership-Based Organization: Eight Propositions Regarding IMF Reform. When I wrote about Fund reform six years ago from my position as Executive Director, my title included the word adaptiveness, and I made a measured pitch for modest change. Today I suspect that I may be the conservative on this highly reform-minded panel, and my presentation, which has the give-away word realities in its title, will make some cautionary points.
I do not believe that my views on these matters have become more reactionary since I worked in this building, so this must mean to the surprise of most of us who viewed the IMF secretariat as the bastion of procedural tradition, that the Fund's former Secretary is becoming more radical as the years go by.
I am neither an international financial expert nor an international relations scholar. I offer my eight propositions as a long-time public administrator who has tried to understand and describe the realities of decision making in the places he has worked. Before coming to the Fund, I worked in the Canadian federal government. I served as deputy secretary to the cabinet of two Prime Ministers and later as the Deputy Minister for the body that allocates budgets and oversees management practices for all departments. As Mr. Boughton said, since 1998 I have been the president of a university council which is a membership-based institution through which 17 universities exercise their collective management responsibilities.
My central thesis today is that in considering governance reform we must constantly remember that the IMF is a membership-based institution, and avoid attributing to it characteristics of a government. The crucial difference is that in a membership institution, members have the ability to opt out and conduct business in other forums, whereas in a nation state, most citizens do not have the ability to avoid the ministrations of their government. Principles of democracy and inclusiveness are fundamental to governance in a modern nation state, they are not central to governance in a membership-based institution. Indeed, I would assert that some of the superficially attractive reforms to address alleged democratic deficits, in quote, or to force more openness and transparency could weaken the IMF and undermine its governance.
My eight propositions deal respectively with the importance of the legal framework, the motivation of Fund governors, the durability of international institutions, the nature of the issues they can successfully tackle, the reality of national power, the limits to openness, the capacity of the Board, and the value of administrative reform.
A well governed organization, be it a government or membership-based institution, should produce authoritative decisions in a timely and accountable manner. For decisions to be authoritative, they must be made within a legal framework and must reflect the positions of the formal governing body. Much of the modern literature on governance and the role of boards stresses the need for governing bodies to focus on the interests of the legally constituted membership and not be diverted by ancillary interests which in the case of the IMF would include, with due respect, those of staff, media, and civil society groups. So my first proposition is the Fund currently meets the essential legal and constitutional requirements of good governance.
Although many of the Fund's critics would wish it otherwise, it is important to remember who the IMF's governors are. They tend not to be prime ministers and heads of social service agencies in member countries. They are usually finance ministers and heads of central banks. One must assume that this is how the duly constituted leadership in member countries wants it to be. If my Canadian experience is typical, the fiscal and monetary authorities value the current role of the IMF and are within their capitals rather proprietary about the relationship with the Fund.
During the early 1990s when Canada faced record deficits, despite a decade of desultory attempts to control spending, one heard dire warnings that if the government did not soon take more drastic action the country would, in quotes, hit the wall, and that, in quotes, the IMF would come in. Although the implication that the IMF could exercise autonomous powers outside the will of its members is constitutionally inaccurate, the specter of the IMF coming in provided a helpful metaphor for those trying to introduce long overdue fiscal rebalancing.
After coming to the Fund, I soon discovered that the IMF was an articulate exponent of a comprehensive economic framework, one that at least I found compelling in its relevance to Canada. It reinforced what I had learned from my home country experience with various attempts at regional industrial policy, deficit financing, and regulatory intervention. Its prescription seemed to me to be almost exactly what Canada needed at the time. I also began to realize that the IMF principles had, over the previous years, helped my colleagues in the Department of Finance bring to interdepartmental meetings an impressively comprehensive perspective and perhaps more importantly the confidence that they were advancing solutions of potentially universal application. This leads to my second proposition. The governors of the IMF derive substantial benefit from the services the Fund provides, including its symbolic value as the harbinger of measures best avoided by homegrown fiscal and monetary discipline. In other words, the interests of most of the IMF's members, particularly the governors, are well served by a Fund that is somewhat opaque and moderately demonized.
These first two propositions provide little impetus for reform. Despite calls from some quarters for radical change. My arrival at the IMF coincided with the 50th anniversary conferences, and some of you will remember the dramatic propositions being floated in 1994 under the rubric of 50 Years Is Enough, including the suggestion that the Fund and the Bank should be combined or wound up entirely. I had observed institutional dynamics in large institutions long enough to know that such propositions were naive. Early in my reading of international relations literature, I came across a claim that still rings true. Nothing less than a world war is required to wind up an international institution. I also discovered that the IMF has been subject to almost continuous review by some group or other since its inception. My third proposition is there will be continued calls for reform as long as international institutions exist, and this will be a long time, indeed.
One of the issues that initially puzzled me when I first came to the Fund and saw the professionalism and competence of the staff and the relatively efficient decision making process was why large countries preferred to deal with some issues of international finance outside the Fund. Did this indicate a need for reform and strengthening of the IMF? I found the answer at least to my satisfaction in the distinction between two classes of problems - multilateral or universal participation problems where the agreement with the greatest net benefit will involve all countries and pluralateral or limited participation problems where maximum net benefit to participants can be obtained from agreements involving a limited number of countries because the cost of achieving a larger consensus becomes comparable to the benefit of the collaborative solution.
This provides the explanation of why when exchange rate coordination is undertaken, it is done in a G-2,G-3, or G-5 setting. I assume it helps explain why the G-7 countries decided to create the G-20 and the Financial Stability Forum outside the Fund. This is at least my fifth proposition. Attempts to use multilateral institutions to deal with pluralateral problems will not usually succeed and there will always be an incentive to create forums outside multilateral institutions to deal with these issues. There is a continuum from clearly multilateral to clearly pluralateral problems, and the IMF should always try to see how much of each issue it can deal with in its multilateral forum. However, it is not necessarily a sign of a governance problem in the IMF if a group of member countries chooses to create a pluralateral mechanism outside the Fund.
The ease with which any group can create a new forum makes the mechanism of weighted voting particularly important. One scholar, in comparing the effectiveness of the IMF with the United Nations, has called the IMF's voting system, quote, the subterranean centerpiece of the Fund's decision making machinery, end quote.
My next proposition is decision making in membership-based institutions is more efficient and the institutions more viable when voting power is proportional to the relative power of the individual members. Of course, relative power is an elusive and contentious concept. For the purposes of the IMF, should the basis be financial power, economic power, or military and diplomatic power or a combination of all these, and how would one measure it? I will leave these questions to others, but the crucial point is that when you are adjusting voting weights, if powerful members are not accorded a sufficiently influential role in a membership institution, they will reduce their commitment and devote their energies to forums where they feel they can better advance their objectives.
One consistent theme in the calls for reform is that of greater openness. The IMF has made huge strides since the mid 1990s in providing more information about the analyses going into the decision making process and the decisions that come out. The Fund's web site is truly remarkable. But let me suggest in this open forum that one can have too much openness in an organization where consensus building is crucial. Taken too far, openness initiatives can subvert the governance process and drive the real business of compromise and consensus building outside the institution's formal processes and in extremis right outside the institution. Effective consensus building, which often involves floating trial balloons, hard bargaining, and ultimately compromise on strongly held positions requires part of the process be held outside the public limelight. While decision-makers must be accountable for the position they finally take, they should not be held to account for all the positions that they advance and from which they often have to retreat in the course of generating a viable consensus. Again, if the IMF were to impose excessive openness requirements on its deliberations and try to formalize all the informal parts of the consensus seeking process, its decision making efficiency could be diminished to the point where groups of members could turn to other forums to hammer out decisions on contentious issues. So my sixth proposition is, IMF procedures should respect the fact that effective consensus building requires that part of the process be conducted in confidential forums.
In my farewell address to the Executive Board in October 1996, I recommended the Board should become more strategic, more activist, and more vigilant of its fundamental prerogatives in the governance of the institution. I suggested that the Board review its role with a view to focusing more of its energies on issues of institutional mandate, relationships with other organizations, the image the Fund presents to the outside world, and less on administrative issues and routine country and program matters.
I raised the need to be vigilant about the Board's prerogatives and responsibilities, not because I saw any conscious plot on the part of management to enfeeble the Board, but because there is a natural institutional dynamic in membership-based organizations for the power of management to grow and that of Boards to diminish. This should not be viewed in zero sum terms. An institution will be stronger if both the Board and management are strong.
My penultimate proposition is therefore continued effort is required to maintain the capacity and strategic focus of the Executive Board.
Let me turn finally to administrative reform. One of the first impressions I had coming from a national government is how methodical and deliberate the Fund's work practices were. In contrast, during the 1990s, government institutions in most national governments, certainly those of the U.K., Canada, Australia, and New Zealand, had undergone significant adjustment in size, mandate, programs, organizational structure, and internal operations.
Common themes of these reforms, often referred to as new public management, included greater use of markets and market-type mechanisms, greater participation of employees and clients in decision making process, deregulation of internal controls, and greater flexibility in operations. Not all new public management reforms have stood the test of time, and many of the IMF's long-standing practices have proved successful, and rather than being changed, they should be held up as examples for formal policy-making organizations within governments. Nevertheless, the relatively modest application of administrative reform in the IMF, at least when I worked here, had left some of the administrative practices less efficient than those in many governments.
My final proposition which paraphrases the conclusions from my 1996 working paper is therefore international institutions face fewer pressures to adapt than do government and private sector organizations, and this puts a special responsibility on the management with support from the Executive Board to maintain a responsible reform agenda that continues to adapt the Fund's rules, instruments, procedures, and resources to best serve the needs of its members.
Most of my eight propositions are descriptive and do not suggest a particular direction for reform. All eight propositions suggest that reformers will need sophistication and skill to be successful, qualities the members on this panel possess in abundance. Let me close by wishing them good luck.
Mr. Boughton - Thank you very much, Ian. Our second speaker is Leo Van Houtven.
Mr. Van Houtven - Thank you very much, Jim. I am delighted to be here. Let me say immediately that this is the first time in my life that the label radical is being pinned on me.
Fund governance is basically concerned with the question how the institution pursues its purposes as defined in the articles for the benefit of its members, and how the institution demonstrates leadership in reexamining and adjusting the mandate of the institution in light of changes in the global economy and in the circumstances of members.
By that standard, Fund governance of its system of quotas and voting power has not been satisfactory because of growing distortions which have developed over time are only now beginning to be addressed in discussion in the Board. The system as it exists is geared to defending the status quo, and this has played to the advantage of Western Europe and to the detriment of Asia and of the developing countries as a group, which is the overwhelming majority of Fund members and of the global population. The institutional failure to correct more promptly the inequities in the distribution of voting power has added to the public perception of the Fund as being dominated by the western European and North American industrial countries.
Even though the weight of the world economy continues to shift to the group of industrial countries, there are compelling reasons to raise the share of the developing countries in total voting power, which has been around 40 percent for the past quarter century, to a level which would still leave an overall majority with the industrial countries which are the overwhelming creditors of the Fund.
The Fund is a financial institution and must maintain the confidence of its creditors. At the end of the correction process, which is not for tomorrow nor for the day after, I believe that there could emerge a smaller Executive Board than the present one, which I think institutionally would be very welcome, with a majority of members from the developing countries while a majority of voting power would remain with the industrial countries.
While the Fund was unduly slow in tackling the quota and voting power issues, it reacted promptly to the Asian crisis by calling for a broad program of action to strengthen the financial architecture with emphasis on crisis prevention and crisis resolution in an environment of increased accountability to public opinion at large.
Now, in a few years' time, much has been done to strengthen the coherence of macroeconomic, exchange rate, and capital account policies, while the implementation of standards and codes contributes to reduce policy vulnerability and improve performance. The 1990s also became the decade of Fund transparency and collaboration with civil society.
The repeated calls for reducing the financial role of the Fund, which we have heard in recent years, while an orderly framework for restructuring unsustainable sovereign debt has not yet been developed, may appear to have been poorly timed. Moreover, strengthening financial systems, which is essential to reduce crisis, particularly in emerging markets, is an enormous systemic task that will require much time and increased global cooperation and institution building. As a result, with crisis continuing in some emerging markets, the search light remains focused on the adequacy of present and prospective of members' policies as well as on the effectiveness of Fund assistance to, as mandated by Article I, Section 5, give confidence to members to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity. To me, that is the most important and the most famous line of the IMF's constitution.
Let me now focus my remaining remarks on decision making in the Fund and on political oversight of the institution. Decision making by consensus has been a basic feature of Fund governance since the outset of the institution in order to ensure that policies would be set in a collaborative manner by all and for all. The diversity of interests among the Fund's worldwide membership has further enhanced the importance of that feature called governance which is often not well understood, particularly outside the Fund, and I do spend perhaps, if anything, more pages than should be necessary in my little pamphlet to explain what consensus decision making is all about, how it works, where it applies, and where it does not apply. Briefly, Fund policies are developed through a deliberate and reiterative process involving the Board, the management, and the staff working continuously together on all aspects of an issue in order to arrive at understandings and decisions that all can support. It is often the practice, particularly for complex issues, that nothing is decided until everything is agreed. No piecemeal decision making.
Policy-making, by consensus, continues to be supported by all members of this institution, and it provides particular protection for the developing countries who are the minority shareholders. The developing countries are keenly aware that it is in their interest to have strong Executive Directors who will be active participants in Board negotiations. Board meetings offer an environment in which the influence of an individual Executive Director can and frequently does reach well beyond his or her voting powers. Executive Directors from developing countries are not wallflowers. Not infrequently complex policy issues involve financial matters such as the rate of charge or of remuneration which require a special majority of 70 percent, and that provides the developing countries as a group with a potential veto power, which they have effectively used over the years to ensure that the outcome would be satisfactory to them.
While ensuring that major decisions command very wide support, special voting majorities need to be utilized cautiously because they are a double-edged sword of protection as well as of hindrance against change. In order for Fund governance through consensual policy-making to work well, the system requires that Board members have seniority in their capitals and have the necessary room for maneuver and give and take in decision making. The Group of 7 major industrial countries sometimes tends to act in recent years as a self-appointed steering group of the Fund, thereby raising the question whether their EDs always have the necessary room for negotiation. The recent creation of the group of deputies to the members of the International Monetary and Financial Committee raises similar questions. The deputies should avoid immersing themselves in what the Board does best.
Finally, in the area of political oversight, the establishment in the early 1970s of the Interim Committee to oversee the adaptation of the international monetary system was a major step to strengthen Fund governance at a time of great turbulence in the system and in the world economy. The quarter century experience with the Interim Committee was fruitful. The committee immersed itself in all major issues that were on the institutional agenda. However, in its first decade, the interim committee probably failed to strengthen multilateral surveillance over the policies of the major industrial countries which were lackluster in several respects. Now, the view is put forward that policies of the major industrial countries are for that group of countries, the G-7, to tackle, and to surveil. That is true to a certain extent, but they are also a multilateral issue to the extent that economic developments in that group of countries are going to be determined for the world economy at large. Moreover, a grand principle of Fund surveillance has been, from the beginning, that what happens in any one country is, in the end, of interest to all, and therefore a multilateral issue.
The Interim Committee also failed in its later years to give leadership on the implications of global financial markets for national economic policies and for the evolution of the monetary system. Because of that failure, the Fund was caught off guard in the eruption of the Mexican and Asian crisis. The transformation of the Interim Committee into the IMFC in 1999 has thus far failed to open a new chapter in political leadership and Fund governance. The IMFC keeps following in the footsteps of the IC. The creation of the initiative of the G-7, of two new groups outside the Fund, the Group of 20, which focuses on the emerging market countries, and the Financial Stability Forum, both of which focus on issues that form part of the Fund's core tasks, illustrate the continued ambivalence of the major industrial countries vis-a-vis the Fund. The credibility and effectiveness of the G-7, for which there is no counterpart nor counterpart in sight, would be much enhanced if it exercised its influence through the global framework of the IMFC rather than appear to impose its views from above.
The transformation of the IMFC into a decision making council remains a possibility, but that would not necessarily be a road forward. We are, of course, even farther away from more ambitious initiatives such as the creation of an Economic Security Council.
Effective political governance of the Fund remains essential to guide the evolution of the monetary system with global capital markets and to promote the sharing of the benefits of an open world economy. Effective political governance of the Fund means that our members do not sit on the fence but actively participate in the oversight of the institution and the achievement of its mandate. Moreover, accountability of the Fund to its member governments and electorates would thus also be enhanced through effective political governance. Thank you very much.
Mr. Boughton - Thank you, Leo. You set a standard for radical thought that we will try to continue now as we turn to our academic speakers. I am happy to say that we have once again demonstrated the efficiency of the institution by managing to correct Vikash Yadav's name card before it was his turn to speak, so I will call on him next. Thank you.
Mr. Yadav - My comments today are based on a paper I wrote with a colleague, Pruvehn Choudhry and Dr. Vijay Kelkar. Many of you know Dr. Kelkar was formerly Executive Director for a group of countries, including India. The paper is entitled Reforming the Governance of the International Monetary Fund.
As many of you will know, the ability of the Fund to carry out its mandate has been called into question since a series of financial crises have threatened to shred the economic, social, and political fabric of several emerging market countries in Asia and South America. The IMF is attempting to enhance surveillance and harmonize rules related to member countries' banking and financial systems in order to strengthen the international financial architecture. However, the efficacy of these initiatives is dependent upon the level of compliance by the Fund's member countries. We argue in our paper that democratizing the Fund will make the organization's initiatives more effective as decisions produced by democratic process have greater legitimacy and credibility.
A failure to reform the Fund coupled with the recurrence of financial crises in the emerging market economies may hinder the growth of the global economy. Moreover, the recurrence of financial crises have an asymmetric impact on the poorest segments of the international economy, and so although the need for reform is urgent, we also want to emphasize in our paper that reforms must be transparent and based on principles. By grounding reforms on principles, the Fund will enhance its legitimacy and accountability as a rulemaking body for international economic policies over the long term. Of course, realistic proposals for reform must accept that the IMF is an international financial institution in which creditor confidence requires that the majority of voting power must remain with the creditor countries, and within this majority the largest contributor, the United States, will maintain its existing veto power. Nevertheless, we believe there is great latitude for undertaking principled and forward-looking reforms within these constraints.
So what is to be done? We argue that the distribution of power within the Fund must adapt to reflect the growing weight of developing and emerging market countries in order to make the Fund more effective as an institution. Just as an example, the developing countries' share of global GDP valued at purchasing power parity has increased from 31.8 percent in 1992 to 37.5 percent in 2001. In the same period, the European countries' share has declined from 34 percent to 29 percent. Unfortunately, the growing contribution of developing countries to world output and trade is not reflected in the distribution of power.
Developing and emerging market country members need to have a more prominent platform from which their voices can be heard and incorporated into crisis prevention and management policies. As Professor Evans and Professor Finnemore have recently argued, the quality of information used for surveillance and the design of programs depends critically on the level of member country participation. Hence, an increase in the effective participation of developing and emerging market countries is desirable in promoting the success of IMF crisis prevention management policies. We believe that effective participation can be enhanced through democracy or, more specifically for political scientists, the term we use is polyarchy.
A polyarchic process of governance, characterized by the diffusion of power and networks of reciprocal influence, will better resemble the process of governance within the growing number of democratic states on the Fund's membership roll. Moreover, and echoing some of the concerns of Eisaku Sakakibara, we believe that the diffusion of decision-making power should help to prevent the blind acceptance and application of universal models of macroeconomic management.
In order to democratize the Fund, one must look at the Fund's quota regime because the quota regime is the basis for the distribution of voting power. The quota regime determines the required contribution of members, their level of access to Fund resources, and the distribution of voting rights. The quota regime is not an abstract formula. It is the basis of power relations between member states of the Fund. While it is true that consensus rather than actual voting characterizes most decisions by the Fund's Executive Board, it is also the case that member countries will usually not submit issues which are likely to be vetoed by the U.S. or the majority of members. In essence, the distribution of voting power implicitly influences the character and scope of issues on the Fund's agenda.
Now the quota regime is reviewed every five years, and members can request an ad hoc revision of the their quota. Nevertheless, despite these periodic changes to the quota regime, developing and emerging market economies have argued that the distribution of voting power within the Fund does not adequately reflect their importance in the world economy.
In our paper we traced three causes of what is now being called the democratic deficit:
First is the decline of the role of basic votes, which are the basic quantity of votes that all members are allowed to have. Second are biases in the calculation of economic strength, and here we go into an argument about calculating GDP using either purchasing power parity or the market exchange rate, and we favor the use of purchasing power parity. Third, source for the democratic deficit is the needless complexity and opacity involved in the calculation of quotas.
As we go into a lot of detail on this in the paper, I will refer you to the paper if you have a question. I think many of you are probably familiar with the arguments for and against purchasing power parity. So what I would like to discuss is our proposed solution for reforming the quota regime and thereby addressing the democratic deficit.
We believe that the basic problem with the current quota formula is that there is a mismatch between the number of instruments and objectives. This is what Tinbergen called an assignment problem. Presently there is only one instrument to achieve multiple objectives. Those objectives are the determination of contribution, determination of access to resources, and the determination of voting rights within the IMF. We believe that in an optimal arrangement, three instruments should be created to achieve these three objectives. First, a member's contribution to the Fund's resources should be based on a member's stake in the global economy as well as their ability to pay, which is a function of its share of global output. Members need to support the global public good the Fund provides consistent with the size of their economies. All other things being equal, a larger economy uses greater resources and has a greater systemic impact in the event of a financial or currency crisis. Hence, larger economies should contribute more to the resources of the Fund than smaller economies.
Access to the resources of the Fund should be on the basis of gross financing need. Currently access to the Fund resources is supposed to be limited to 300 percent of a member's quota. However, as nearly 70 percent of the Fund's outstanding credit is currently confined to five borrowers who are borrowing as much as 300 percent of their quota, it is apparent that present access policy is not being observed. Therefore, it is evident that the rules concerning access to Fund resources were not used as a factor in determining access limits for large borrowers. The Fund has recognized de facto the limitations of the present quota-based access limits. It should be recognized de jure and the link between access and quotas should be broken. Access to Fund resources, however, should be subject to two prudential norms, first, the Fund should supply only a limited percentage of the gross financing need, thus confirming the role of the Fund as a catalyst for private sector involvement. A prudential norm should be in place to limit Fund exposure to any one individual borrower. The Fund could limit access beyond 10 percent of the Fund's total resources. Voting rights should balance a member's financial contribution with the principle of sovereign equality. Maintaining a strong link between a member's contribution to the Fund and its voting power is necessary to inspire confidence amongst creditor members and financial markets. However, there remains a need to balance the capitalist norm with the principle of sovereignty. Quality can be advanced by enhancing the weight of basic votes in the determination of voting power. We argue that any increase in the size of voting power of small members, nearly all of which are non-oil producing developing countries, would have an effect on the highly skewed distribution of voting power within the Fund. If each country were given basic votes at what is known as the 1945 ratio, 11.3 percent of total votes, it would be possible for the 173 bottom and middle tier countries to hold a simple majority over the top ten countries.
The Fund's Articles of Agreement should be amended to ensure that basic votes would constitute 11.3 percent of total votes regardless of future quota changes. What we do in our paper is we propose what would happen or we create a scenario of if some of these reforms were implemented what the Fund's dynamics would look like. If voting power were set through weighted averages for GDP valued at PPP at 88.7 percent and basic votes constituted 11.3 percent, the results would roughly approximate the weight of developing countries without eroding the veto power of the U.S. In our model, Asian and African countries would have a greater voice, Japan, China, and India would be able to have veto power, similarly Africa and Latin America would gain a veto power or a combination of Japan and Latin America would have veto power. The voting share of the Middle Eastern countries not including Saudi Arabia would remain relatively the same. The voting share of smaller European states would decline significantly, but the EU countries as a whole would continue to have a veto power. What we believe this would create is a contestable market for veto power. The contestable market would require the Fund staff to take into account ex ante a wider menu of economic policy descriptions brought before the Executive Board. We also argue that by having a more diverse or giving greater weight to the developing countries would lead to a change in the composition of the Fund staff, although the Fund does not have a formal recruitment policy, the staff of the Fund does tend to reflect the quota allocations of the members, and we believe that a diverse membership would be able to bring about a greater diversity of opinions.
To conclude, enhancing the diversity of the Fund's governing body will increase inputs from alternative perspectives, thereby contributing to crisis prevention and management while allowing a multiplicity of capitalisms to flourish. Thanks.
Mr. Boughton - Thank you very much, Vikash. Our final speaker before we open it up to your questions is Professor Martha Finnemore.
Ms. Finnemore - Thanks very much. I am very pleased to be here with both other political scientists and with such well experienced academics inside the Fund. For those of us from outside the Fund, this is often a very mysterious place, and I very much enjoyed getting a chance to see something about how the Fund works.
The comments I am going to make today are drawn from a paper I wrote with Peter Evans who is out at UC Berkeley, and we wrote it at the request of the Group of 24 which is the developing countries caucus in the financial institutions. In that paper, we asked the following question: What organizational reforms might increase the influence of developing member countries inside the IMF?
Now, Evans and I are not economists. Evans is a sociologist who has studied development matters for many years. I am a political scientist, and I study organizational behavior. One of the things that you learn very quickly if you study big public bureaucracies is that many of the most powerful features that shape the behavior of these big public institutions are not the obvious aspects of formal structure, like votes, like quotas. Certainly those things matter, and the reforms I am going to talk about today in many ways I think are a nice complement to the kinds of proposals that Vikash just laid out, but equally important is making sure that the organization is set up to allow for effective use of the powers that one has. Often it is the more subtle features of the internal operations of organizations that shape the kind of policies that come out. It is the organizational culture, it is the training, it is the recruitment patterns. It is those kinds of below-the-radar factors that often shape organizational behavior in very powerful ways, and we are going to focus on those in my remarks today and in the paper that we wrote for the G-24, we will focus specifically on issues of staff recruitment, training, and the way staff are deployed in the organization, and make some recommendations for some, we think, quite modest changes, much more modest than the changes you have heard. But that in combination might have some positive effects on the institution, specifically with an eye to expanding the influence of developing member nations inside the organization.
Now, the two obstacles that we identify for expanding what we are calling the voice of the south, for those of you who have ever read Albert Hirschmann, you'll recognize his voice in organizational and political life. We wanted to expand the organizational voice in the Fund of the south, and we identify two obstacles to that. One is the large asymmetries in workload inside the organization. This is very clear, for example, on the Executive Board. When you compare the situations of EDs from single member constituencies with those of the African EDs, you can see the differences in work flow in some very striking ways. A single member constituency, obviously, has, one ED representing one state. That state has no IMF programs to monitor or worry about, and they have an extensive flow of expertise back home in their capital, generating ideas, policy proposals, and backing them up in a variety of ways. I understand that sometimes this is not such a seamless relationship with the back home countries, but there is more expertise and fire power in those kinds of offices, and they have access to resources that others might not.
Compare that to the situation of these African EDs. There are two of them, and each represents over 20 countries. That is almost a quarter of the Fund's members are represented by only two EDs. The majority of these countries do have Fund programs, often programs of several types. Each of them represents ten or more HIPC Initiative countries, almost all of those are PRGF eligible. The work flow in these offices is just breathtaking. I found it so. So that is one way in which there are inequities in the system. You can see something similarly in the allocations of area department staff. This is done in a pretty egalitarian way in one sense that the different departments get similar kinds of staff, and that sounds nice, except that again the organization's workload isn't spread out in a nice, even kind of way. The area departments with the heaviest workload get roughly the same kind of staffing levels as area departments where the IMF is not monitoring lots of programs. The equatorial Africa department gets similar kind of staff, eight economists, to the North American department or the maritime Europe division where you are not going to get IMF programs anytime soon I suspect.
The other big obstacle we identified and wanted to address to expanding the south's voice is something we call broadening the intellectual portfolio of the Fund. The Fund represents an extraordinary pool of expertise. It is hard to think of an international organization that collects this caliber of staff anywhere on the planet. It is able to attract the best and the brightest in the way that most public bureaucracies could only dream of doing. Compared to most public bureaucracies, the Fund is remarkably homogeneous in terms of intellectual training and background. Yes, there is a lot of passport diversity, and when you go to the Fund's diversity office, that is what they collect data on. They know where people are nationals of, and they can tell you that, but when you start scratching the surface and say, yes, but where were they trained, the answer turns out to be that there are about ten universities in the United States and the United Kingdom that supply the overwhelming majority of the staff. So while there may be passport diversity, it is not so clear there is intellectual diversity in the Fund, or at least you would want to make that case. Before I studied the Fund I studied the Pentagon, and I can tell you, there is more intellectual diversity in the Pentagon than there is in the Fund. One does not usually think of the Pentagon as being a super diverse kind of organization. Now, this intellectual homogeneity, though, is a mixed bag. I want to be careful how I present this. This is one of the huge strengths of the organization. It allows it to be cohesive, it allows it to speak with something approximating a single voice to the outside world, it allows it to craft very technical programs in a very coherent kind of way, and deal in a coherent way with the multiplicity of member states they need to speak with. The other side of that, though, is that there is a danger that this constricts innovation, it means there are fewer kinds of ideas, fewer kinds of knowledge, fewer, smaller ranges of experience represented in the groups of people who are actually doing much of the work of the Fund.
What could you do? We have a variety of proposals in the paper. Let me just talk about a few of the more obvious ones. One of the obvious ones from my previous remarks would to be split the African ED constituencies in two. You wouldn't even have to give them more votes. Although I am happy to have them get more votes, too. But even with simply having smaller constituencies so you only had ten or so countries, those EDs could more effectively represent and deal with activities back in their national capitals than they can with 20 or more countries. At a minimum, one could give more staff to these EDs to deal with the workload that comes through their office. Another recommendation we make is rebalancing the resource allocation among the area departments to reflect the workload that is actually done in the organization as opposed to treating all areas as somehow equally engaged in the kinds of programs the Fund monitors and implements.
A third recommendation we make, we talk about in much more detail in the paper than I will here, and that is something we talk about as diversifying the experience of staff in the Fund, and specifically we talk about increasing the use of lateral entry into the Fund as a way of dealing, diversifying the range of experience and expertise inside the Fund, and again I want to be careful here. I think one could do this without compromising the quality and the meritocracy at the Fund. There are extremely well trained people in the finance ministries and central banks of many of the developing member countries, but those people often are not represented on the staff who craft many of the policies here in Washington, and the career incentives are not there for people, even nationals of that country to go back and spend time doing what one of our EDs called working the coal face, that was his term, actually dealing with the recalcitrant institutions, political and economic institutions in the south that stymie so many of the programs that the organization is trying to implement.
The last thing we talk about or that I will talk about today is making use of subcontracting research, but doing it with southern researchers instead of people like me and Evans. Why me and Evans are writing this paper is a little mysterious to me. Why wouldn't one hire someone from the south to write this paper is a question right there. Making greater use of expertise in the south would have several positive effects. It would complement the technocratic knowledge here with local knowledge about the details of institutions in the Fund in ways that would be useful. It is not that that knowledge does not exist, but going out and interviewing people on a mission is different than having people who are living the experience involved. It would foster the growth of in-country expertise if these countries are really going to take ownership, the Fund needs to continue its ongoing mission of fostering expertise in those countries so that the interlocutors are good partners in managing these programs, and it fights brain drain. It gives people a reason to stay where they are instead of coming to work in Washington.
None of the proposals that Evans and I make are radical and none of them will solve the kinds of problems that we identify at the outset. The advantage, I think, that the proposals we are making have is several fold. First, they are consistent with the kinds of reform efforts that are already underway in the Fund. The Fund recognizes all these things are problems. They are working on them. We offer these as some additional tools, things one could do to address problems we all know are out there in addition, they help us on several other fronts. They would increase the capacity of EDs representing south countries, especially in Africa, they would expand the extent of developing country perspectives and the way those perspectives can be incorporated into Fund policy, and potentially increase the sense of ownership one would like to foster in those countries, and increase the pool of resident expertise in the south, making interactions with the Fund even more of a two-way street. Thanks very much.
Mr. Boughton - Thank you very much, Martha, and thanks to all of our panelists for their initial presentations. We have run perhaps a few minutes longer than we had intended, but we have left some time, and I hope that some of you in the audience will stimulate our thinking further on this. Is there someone who would like to start? Yes, the gentleman over here on my right.
Question from the Audience - My name is Ransford Palmer, I am from Howard University, and I would like to address my question to Mr. Clark. I believe I heard you say that decision-makers should not be held accountable for their decisions, and I am wondering how that would fit into the argument that the Fund itself should be more accountable to its members. I hope I heard you correctly.
Mr. Clark - That's not what I intended to say. What I think I said was the decision-makers should be accountable for the decisions, and they should be accountable for the material that is available to them as they take into account in their decisions, and there should be complete transparency in what goes into the decision making process and what comes out, but the actual consensus building process that has been described by Mr. Van Houtven in his pamphlet does require some points in the process where people can float ideas, advance propositions, and then retreat from them without publicly losing face, and we do not want to snuff out those particular informal parts of the decision making process. It is a balance to be made there, that is all I am saying. There was just a hint in Mr. Van Houtven's pamphlet where he notes that there has been an increasing number of informal executive head meetings, and I do not know if that is too many or not. I do know in going through the resolution of the Mexican crisis when I was in the Fund, it was crucial to have the Managing Director get the Executive Directors together in a couple of informal meetings, have a lunch where one could float these ideas and kick things around. That was, I think you will recall, Leo, that was just crucial to getting a consensus proposal in the end. The decisions, however, they absolutely have to be accountable for.
Mr. Boughton - Yes, ma'am?
Question from the Audience - I am Ann Hudock from World Learning, we are an NGO here in Washington. My question is for Professor Finnemore. I wondered if in looking at ways to increase the voice of the south in international financial institutions, particularly the Fund, if you had looked at all at the PRSP process which for all its flaws and weaknesses some of us believe offers a great opportunity to do exactly that, and I wondered if that was something you had come across and if you could say a few words about that.
Ms. Finnemore - This I think would bear some more research. I have only anecdotal evidence about this. I talked to a lot of people who were involved in the process, I mean Fund staff people, and got some different views about how they thought it was working. One of the questions is how exactly do these Poverty Reduction Strategy Papers get written, and there turns out to be variation both over time and across space in this. Some member governments are looking to Fund staff to write those, and often that is what happens. Sometimes not. Sometimes you get people who really do take ownership. There is variation in how this works. The Fund people are trying to persuade the members often to become more involved and are finding it difficult. The only way I know to think about that is to work on this building local capacity and interest because until members become firmly convinced that this is a place they have to focus lots and lots of attention, you are not going to get good involvement in those kinds of processes.
Mr. Boughton - If I may just add a note from inside the building to what Martha has just said, there is a gap in terms of both internal and external culture here. For many years, as the Fund has been heavily involved in lending particularly to low-income countries that have limited capacity to implement policy reforms and draft documents in a way that might meet the standards of international audiences and so on, there is a fine line between trying to go in and just efficiently get the job done and trying to build the capacity so that the countries will have the ability to do the job themselves on a more continuing basis, and I think in the past perhaps too often the emphasis has just been on getting the job done, and what that has led to is a culture in which the Fund has often just simply gone in and drafted documents and not sufficiently encouraged open processes of participation in low-income countries. There is a major effort underway right now from inside the IMF to change that culture, and it requires changes both on our part and on the part of borrowing countries. We are at a fairly early stage of doing that, but, first of all, I would hope we will see some important announcements on that in the very near future. Second of all, I think over the next few years we will be seeing some major changes in that regard. At least I hope so.
Yes, this lady in the third row.
Question from the Audience - Hi, my name is Kathy Houghton. My question is about whether anybody has considered the possibility of outside review, and not of IMF projects through, you know, World Bank procedures, and not of staff issues through an internal tribunal because we know that international institutions have diplomatic immunity, but of whether or not the Fund is following its mandate as it takes its decisions on issues like promoting sharing the benefits of an open world economy.
Mr. Boughton - The World Bank some years ago established an office of project evaluation, and the IMF just I believe two years ago or quite recently in any case established an office known as the Independent Evaluation Office or the IEO, which is headed up by a former Indian Finance Secretary, Montek Ahluwalia. He has a staff of people some of whom were recruited from inside, some of whom were recruited from outside whose job is to be a critic of what we are doing and to look very closely. They have produced their first report, which is on prolonged use of Fund resources, asking the question, what are we doing wrong where the outcome is that countries come to the Fund again and again and again to borrow when we are supposed to be a short-term lender, and the Executive Board is about to discuss that document, and that is something that is going to be in the news quite a bit in coming weeks. It is something where we got off to a slow start. But it is getting done. It is certainly something we are thinking pretty heavily about.
Question from the Audience - My name is Alessandro Rebucci, I am a member of staff. I think one can see how increasing developing countries power may be desirable from an egalitarian point of view, and I am quite sympathetic with that perspective. However, I was wondering whether our panelists see ways in which increasing power to developing countries or borrower countries would lead to efficiency gains, would lead to a somewhat better international financial institution. While I am very much sympathetic with the first argument, I think the second argument would be much more powerful in order to gather the necessary political support for such a change.
Ms. Finnemore - I can tell you there is a theory that says why efficiency and equity should waltz merrily together here, and we can talk perhaps about whether you think this theory holds any water. The argument would be, and I think the logic behind this entire push in the IFIs towards ownership and participation and all those things is precisely an effectiveness argument, it is an argument that says we have these countries who come back and who come back and who come back, what do we do? The answer is you bring them inside and you somehow get them involved, taking ownership of the program, involved telling you how better to design them in ways that will meet the realities on the ground in these countries, and in the end one is supposed to come out with a better program.
I find this very interesting because I do not - for precisely the reason you are posing, I do not know if it is true, and if it is not true, why? This is the academic in me speaking. So I am really curious. You probably have an opinion or you wouldn't have posed the question. Is it true? I do not know. But I understand that to be the theory. Am I right about that?
Mr. Clark - Just to narrowly constrain the question to efficiency of decision making, one of my propositions is that you will have a most efficient decision making process if the members feel that their relative power is reflected in their voting power. Otherwise, there are all kinds of procedural matters that will come into play, and my proposition is that the more powerful members will not devote the energy, necessity will not devote the interest into that institution, they will think of other ways to achieve their objectives through other smaller institutions. So from just getting a quick decision, I think that a weighted system that reflects the power is the most efficient decision making system. Whether that produces the most efficient economic outcome in development and international finance is another question.
Mr. Boughton - Thank you. Next question, then? Yes, in the back row.
Question from the Audience - Jim Corr, staff. This is for Mr. Clark. I wonder if he would comment on the advantages and disadvantages of the constituency system and maybe to make it more particular, how well can an Executive Director from a large industrial country represent the interests of a small island economy?
Mr. Clark - Do I also detect an Irish accent in the questioner?
Question from the Audience - No, slightly off.
Mr. Clark - Because that Executive Director represents Ireland as well as Canada and the countries. First of all, I think it is a wonderful constituency, a combination of both a developed and a G-7 country, a European country and developing countries in the Caribbean, and I was impressed by Leo Van Houtven's point in his pamphlet that those constituencies, particularly the ones in which Canada and Italy are a part of have a role in the Fund which is a bit of a bridging role between those two, and I think looking back on the role I tried to play, I think that is accurate. I have found over the years in talking about this with the authorities in the island countries, they were happy, some even delighted to be in that constituency. There has never been any expressed desire to have other than a country dominated, or a country in the G-7 to be part of that, so I think it works quite well, and Leo is right, it is one of those groups of Executive Directors who can be reformist in their leanings.
Mr. Boughton - A question from the gentleman in the first row.
Question from the Audience - Paul Tennessee from the World Confederation of Labor. I have two questions. In the UN we have the G-77 which gives a voice to the south. Here we have the G-24. To what extent does the G-24 enhance the voice of the south?
My second question is, now that the IMF/World Bank has reduced the meetings, the annuals to a weekend, does not that reduce the voice of the south, at least having meetings to talk about their business?
Mr. Van Houtven - On your second question, the shortening of the annual meetings is due to the special circumstances that you are familiar with. We are certainly all hopeful that in the coming years a more normal pattern of annual meetings can take place. It is, indeed, important that governors of the Fund, from small and large countries, from any and all, have periodically an opportunity to address their concerns about the institution and the mandate that it has in a public forum.
Now, you know that in addition to the annual meetings, we have the periodic meetings at ministerial level of the IMFC. That is not the same thing. It does not have the same public forum element as the annual meeting. Nevertheless, they are six-monthly gatherings of most of the decision-makers, most of the governors, and they have and take the opportunity to make their views known. So we must make the best at this point in time of the difficult circumstances in which we find ourselves and strive to be able to revert to a more normal pattern in the future.
Now, on the G-24 itself, it does not have a direct voice in the institution. The G-7 does not have a direct voice in the institution, either. It is not in the Board, the G-7 is not in the Board, the G-24 is not in the Board, but both are forums of groups of member countries which coordinate their views and which attempt to bring together positions and views in the group of countries that they represent. Thank you.
Mr. Boughton - The clock in the back of the room now reads 4:00, and I think that we could probably continue discussing these issues for quite a long time, but should probably bring it to a halt while we are at the peak of interest here, so with that I would like to once again thank our panelists for taking the time to come and address these issues and thank everybody in the audience for your participation as well. Thank you.
Forum Facilitator - This was a delightful session, and you-the audience-helped make it so. Thanks very much for coming.