The Political Economy of the UN Security Council

1. The Political Economy of theUN Security Council Presentation by James Raymond Vreeland Georgetown University Co-authors: Axel Dreher & Jan-Egbert Sturm (ETH)

2. UNSC IMF/WB project in Ghana IMF World Bank

3. The question: • To gain leverage over one international institution can a country use its power in another international institution?

4. Yes. Why? • The US and other powerful countries, who virtually control the IMF & World Bank, care about how the UNSC votes.

5. Plan • What is the UNSC? • What is the IMF/World Bank? • Why are they used to influence the UNSC & how? • Evidence • Anecdotes • Large-n • The book project

6. What is the UNSC? • 5 permanent members with veto power • 10 elected members (2 year term - limited) • Nominated by regional caucus, elected by GA • Africa (3), Asia (2), Latin America (2), Eastern Europe (1), Western Europe+ (2) • Decisions (open ballot) require 9 votes (5+4) • UNSC votes on • UN military action against aggressors • Economic sanctions & arms embargoes • Elected members of the UNSC potentially will vote on matters of extreme international importance.

7. Accountability, the UNSC,& the Paradox of Stability Accountability Probability of reelection Criteria are too high! Criteria are too low!

8. Importance of UNSC temporary members to the US • Kuziemko & Werker 2006: • average US aid increases 54% • average UNDP aid increases 7% • Particularly through UNICEF where the US provides their largest-share contributions

9. Why bribe/reward votes? • Voting power? • Unlikely- O’Neill (1996) shows total voting power of non-permanent members is <2%. • Supermajority? • Vote-buying literature shows that over-sized coalitions tend to be established. • Pursuing unilateral action is more expensive than buying insurance votes. • Legitimacy • There is a premium for getting (near) unanimous votes to win domestic public support (Voeten). • Chapman & Reiter (2004) find UNSC support significantly increases the rally behind the president by as many as 9 points in presidential approval & the effect is unique among international institutions other actions by the UN or regional security organizations do not significantly affect rallies. • Regional influence • Informational role of committees • Legitimacy in the region may come from access

10. Enter the IMF & the World Bank

11. Key point about the IMF & World Bank • Involved with developing countries through “programs”: loans+conditions. • Influence over decisions pegged to economic size. • Growing evidence that the major shareholders use their influence for political reasons (e.g. Stone, Reynaud, Momani, Kilby). • Especially when they agree (Copelovitch).

12. IFI arrangements are ajoint decision • Recipient governments negotiate with the IFIs – business as usual – but when on the UNSC can negotiate for better terms. • Why use IFIs to influence the UNSC? • Political benefits (for both actors) • “DIRTY WORK” (Vaubel) • Leverage benefits (conditionality & loan disbursements) • Cost benefits

13. Mechanism • The goal of the major shareholders of the IMF: • Get countries under a program – in case important votes come up. • Godfather-esque: “Some day, and that day may never come, I'll call upon you to do a service for me. But uh, until that day, accept this justice as a gift on my daughter’s wedding day.” • http://www.youtube.com/watch?v=BIMx_giMeNA

14. Evidence • Some anecdotes*** • Systematic evidence

15. Gulf War Examples • Zimbabwe – UNSC member 1991-92 • 1992 – 1st IMF arrangement in a decade • Votes for 2 resolutions against Iraq • Then abstains… • And Zimbabwe was threatened with new IMF conditions • Subsequently votes for 11 resolutions condemning Iraq.

16. 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…

17. Counter examples?

18. Gulf War Examples • Cuba – UNSC member 1990-1 • Consistently opposed Iraq resolutions • IMF arrangement? • Left the IMF in 1964 – not an IMF member • (Why? Claimed the IMF was a tool of the US)

20. Gulf War Examples • Yemen – UNSC member 1990-1 • Voted against Desert Storm – a U.S. representative was overheard declaring to the Yemeni ambassador that it was “the most expensive vote you have ever cast.” • The US cut hundreds of millions of dollars in aid • (No IMF arrangement)

21. A more historical example? • Tanzania: 1961-1974 no IMF, no UNSC • 1975 • UNSC member • First IMF arrangement – exceedingly weak conditionality (credit ceiling)

22. 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 showing that the anecdotes are not just coincidence (luck, idiosyncratic)

23. What do we observe systematically? • 191 countries* • (“World” minus the 5 permanent UNSC members) • Years: 1951 or Independence –through– 2004 • A total of 7,606 country-year observations • Dependent variable: • IMF participation (SBA, EFF, SAF, ESAF/PRGF) • 26.7% • Principal independent variable: • UNSC member • 6.3%

26. A potential endogeneity problem? • If selection onto the UNSC is non-random, some outside factor could cause both UNSC membership & participation in IMF/World Bank programs • Election to the UNSC is idiosyncratic with respect to most determinants of IMF participation • The most robust predictor: Past experience (negative effect) • Also: Country size – population, GDP (positive effect) • Contributions to the UN also matter (positive effect) • Largely a normative story!

27. Estimated effect

28. Systematic evidence • Five statistical models: • Pooled Logit • Fixed country effects • Fixed regional effects • Fixed country & year effects • Fixed regional & year effects • Conditional Logit with regional dummies and temporal splines • Simultaneously cluster the covariance matrix by country and by year • Control variables: • Selection of variables follows Sturm, Berger, de Haan (2005) • Additional variables following previous literature

30. With 95% confidence, we can say UNSC membership increases rates of IMF participation between 7% and 52%.

32. See page 19 ofDreher, Axel, Jan-Egbert Sturm, and James Raymond Vreeland, 2006, Does membership on the UN Security Council influence IMF decisions? Evidence from panel data, KOF Working Paper 151, ETH Zurich.

33. Further checks: • Trends over time  • Pre/Post Cold War • Extreme Bounds Analysis • Number of policy conditions • Public wages & salaries • (with Irfan Nooruddin – Ohio State) • (Loan size)

35. World Bank evidence

36. avg=1.29 avg=2.13 avg=1.29 avg=2.06 avg=2.19 avg=1.28 avg=2.15 avg=1.30 avg=2.10 std=1.95 std=2.93 std=1.95 std=2.75 std=3.11 std=1.96 std=2.96 std=1.93 std=2.92 n=5333 n=357 n=5333 n=176 n=181 n=2638 n=183 n=2695 n=174 Non- Member Non- 1st.year 2nd year Non- Member Non- Member member member member member member member Total sample Over time During the cold war After the cold war Average # of World Bank projects 2.5 2.0 1.5 1.0 0.5 0.0

37. Regional differences? 8 7 6 5 4 3 2 1 0 n=263 n=23 n=602 n=14 n=1010 n=75 n=411 n=30 n=1503 n=93 n=490 n=22 n=1054 n=100 Non- Member Non- Member Non- Member Non- Member Non- Member Non- Member Non- Member member member member member member member member South Asia East Asia Latin America Middle East Sub-Saharan Eastern Europe Western Europe Caribbean /North Africa. Africa

38. Summary • International institutions do represent their most powerful members & to see the extent of control one must look across institutions. • UNSC members are about 20% more likely to receive IMF programs than non-members. • Fewer conditions. • Loan size appears unaffected. • We find similar results with respect to the World Bank. • Non-members receive about 1.5 new Bank projects per year, UNSC members get almost 3. • Using a battery of different statistical models and control variables, we find UNSC membership robustly increases the number of new Bank projects by about 10%.

39. 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)

40. A Solution • Insulate the IMF Executive Board from politics • Like independent central banks • The IMF directors should be appointed for long terms • Represent the long-run interests of their home countries. • Recall Keynes: Appoint Cautious (Independent) Central Bankers

41. 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]

42. Snapshot of the book project:The Political Economy of the UN Security Council • Chapter 1: Who gets elected? • Chapter 2: Is there favoritism? • IMF • World Bank • International trade • Foreign aid • Chapter 3: Buying votes • Do loan disbursements follow voting patterns? • What happens when great powers disagree? • Chapter 4: The effectiveness of UNSC action • Cases • Generating counterfactuals: UNGA voting patterns • Chapter 5: The effectiveness of aid to UNSC members • Does aid foster growth or prop up rent-seeking governments • Chapter 6: Reforming international institutions?

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