For Rising Powers, Money is the Path to Influence in Postwar International Institutions

Whether and how rising powers will find greater influence in postwar international institutions serves as a central question in contemporary international politics. Formal reform efforts, for example, to reallocate influence through the International Monetary Fund’s (IMF) quota system, have proven difficult and yielded modest results. Campaigns to expand the UN Security Council to grant permanent membership to the world’s largest democracy (India), or a state from the African continent, appear even less likely to be successful. Indeed, Western states have been reluctant to cede power in the United Nations System, the World Bank, and the IMF, leaving the central institutions of the liberal international order unresponsive to changes in the balance of power.

If rising powers seek greater influence through formal reform of the UN and Bretton Woods institutions, more frustration is the likely result. Failure has its own benefits; the inability to accommodate rising states provides justification for China and others to create their own institutions. But if rising powers genuinely desire greater influence at the UN and the Bank, the path of least resistance is straightforward: they need to increase their financial contributions to these institutions. Important changes in how the UN and Bank are financed make the old adage that “money buys influence” more true now than ever before.

Since 1990, the financing of the UN and World Bank has evolved dramatically. In the early years both institutions relied primarily on funds provided by states as an obligation of membership. Budgetary priorities at the UN, or projects at the Bank, were approved by their respective governing bodies. As the UN role in economic and social development expanded, new programs became reliant on voluntary resources, but even then, rules prohibited donors from placing earmarks on their contributions, that is, from restricting how the funds they supplied could be used. Over the years, UN programs revised rules to permit earmarks, and in the 1990s the practice of earmarking contributions increased rapidly. By 2012, earmarked resources accounted for 40 percent of the contributions to the World Bank and 70 percent of the contributions to United Nations agencies.

Permissive earmark rules empower donors to dictate a project- and/or country- specific purpose for their funds. In 2013, 92 percent of earmarked contributions to the UN were from a single donor and project-specific. In other words, the donor was identifying specific programs, countries, and projects that UN agencies like the UN Development Program, or World Health Organization, implement on their behalf. As the Danish aid agency (DANIDA) has recognized, earmarked resources are essentially “bilateral assistance through multilateral organizations.” The practice effectively allows the donor to provide contributions that look multilateral without abdicating control over how they are used.

The practice of earmarking contributions provides an opportunity to rising powers: it grants immediate influence within postwar institutions without the need of approval from Western states. It earns goodwill from international bureaucrats that are constantly engaged in resource mobilization efforts. And, unlike other types of financial contributions, it allows a specific program or project to be associated with the donor, providing beneficial publicity. Further, the timing for such contributions could hardly be better. With the Trump administration’s threats to cut funding to international institutions being realized, considerable soft power stands to be earned by those who fill the void.

As I have written elsewhere, the reliance of the UN and World Bank on earmarked funding comes with a number of draw backs. Multilateral process is severely undermined, and policymakers caution that it makes aid distribution less need-based and more akin to a popularity contest. Yet for those with the necessary resources, the path to greater influence is clear, and the message from international institutions is straightforward: show me the money.

For a special issue entitled “Resourcing International Organizations” including Erin R. Graham’s article, please click.