The Political Economy of theThe Political Economy of theUN Security CouncilUN Security Council

Presentation byPresentation byJames Raymond VreelandJames Raymond Vreeland

Georgetown UniversityGeorgetown UniversityCo-authors: Axel Dreher & Jan-Egbert Sturm (ETH)Co-authors: Axel Dreher & Jan-Egbert Sturm (ETH)

UNSC

IMF World Bank

IMF/WB project in Ghana

The question:The question:

To gain leverage over one To gain leverage over one international institution can a international institution can a country use its power in another country use its power in another international institution?international institution?

Yes.Yes.

Why?Why?

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

PlanPlan

What is the UNSC?What is the UNSC?

What is the IMF/World Bank?What is the IMF/World Bank?

Why are they used to influence the UNSC & how?Why are they used to influence the UNSC & how?

EvidenceEvidence– AnecdotesAnecdotes– Large-nLarge-n

The book projectThe book project

What is the UNSC?What is the UNSC?

5 permanent members with veto power5 permanent members with veto power

10 elected members (2 year term - limited)10 elected members (2 year term - limited)– Nominated by regional caucus, elected by GANominated by regional caucus, elected by GA– Africa (3), Asia (2), Latin America (2), Eastern Europe (1), Africa (3), Asia (2), Latin America (2), Eastern Europe (1),

Western Europe+ (2)Western Europe+ (2)

Decisions (open ballot) require 9 votes (5+4)Decisions (open ballot) require 9 votes (5+4)

UNSC votes on UNSC votes on – UN UN military actionmilitary action against aggressors against aggressors– Economic sanctions & arms embargoesEconomic sanctions & arms embargoes

Elected members of the UNSC potentially will vote Elected members of the UNSC potentially will vote on matters of extreme international importance.on matters of extreme international importance.

Accountability, the UNSC,Accountability, the UNSC,& the Paradox of Stability& the Paradox of Stability

Probability of reelection

Accountability

Criteria are too high!

Criteria are too low!

Importance of Importance of UNSC temporary members to the USUNSC temporary members to the US

Kuziemko & Werker 2006:Kuziemko & Werker 2006:

– average US aid increases 54%average US aid increases 54%

– average UNDP aid increases 7%average UNDP aid increases 7%

Particularly through UNICEF where the US Particularly through UNICEF where the US provides their largest-share contributionsprovides their largest-share contributions

Why bribe/reward votes?Why bribe/reward votes?

Voting power? Voting power? – Unlikely- O’Neill (1996) shows Unlikely- O’Neill (1996) shows totaltotal voting power of non-permanent voting power of non-permanent

members is <2%.members is <2%.

Supermajority?Supermajority?– Vote-buying literature shows that over-sized coalitions tend to be Vote-buying literature shows that over-sized coalitions tend to be

established.established.

– Pursuing unilateral action is more expensive than buying insurance Pursuing unilateral action is more expensive than buying insurance votes.votes.

LegitimacyLegitimacy

– There is a premium for getting (near) unanimous votes to win domestic There is a premium for getting (near) unanimous votes to win domestic public support (Voeten).public support (Voeten).

– Chapman & Reiter (2004) find UNSC support significantly increases the Chapman & Reiter (2004) find UNSC support significantly increases the rally behind the president by as many as rally behind the president by as many as 9 points in presidential 9 points in presidential approval approval & the effect is & the effect is unique among international institutionsunique among international institutions other other actions by the UN or regional security organizations do not significantly actions by the UN or regional security organizations do not significantly affect rallies.affect rallies.

Regional influenceRegional influence

– Informational role of committeesInformational role of committees

– Legitimacy in the region may come from accessLegitimacy in the region may come from access

Enter Enter the IMF & the World Bankthe IMF & the World Bank

Key point about the IMF & World BankKey point about the IMF & World Bank

Involved with developing countries through Involved with developing countries through “programs”: loans+conditions.“programs”: loans+conditions.

Influence over decisions pegged to economic Influence over decisions pegged to economic size.size.

Growing evidence that the major Growing evidence that the major shareholders use their influence for political shareholders use their influence for political reasons (e.g. Stone, Reynaud, Momani, reasons (e.g. Stone, Reynaud, Momani, Kilby).Kilby).

Especially when they agree (Copelovitch).Especially when they agree (Copelovitch).

IFI arrangements are aIFI arrangements are ajoint decisionjoint decision

Recipient governments negotiate with the IFIs – Recipient governments negotiate with the IFIs – business as usual – but when on the UNSC can business as usual – but when on the UNSC can negotiate for better terms.negotiate for better terms.

Why use IFIs to influence the UNSC?Why use IFIs to influence the UNSC?

– Political benefitsPolitical benefits (for both actors) (for both actors)

““DIRTY WORK” (Vaubel)DIRTY WORK” (Vaubel)

– Leverage benefitsLeverage benefits (conditionality & loan (conditionality & loan disbursements)disbursements)

– Cost benefitsCost benefits

The goal of the major shareholders of the IMF:The goal of the major shareholders of the IMF:

– Get countries under a program – Get countries under a program – in case in case important votes come upimportant votes come up..

Godfather-esque: “Some day, and that day Godfather-esque: “Some day, and that day may never come, I'll call upon you to do a may never come, I'll call upon you to do a service for me. But uh, until that day, accept service for me. But uh, until that day, accept this justice as a gift on my daughter’s wedding this justice as a gift on my daughter’s wedding day.”day.”http://www.youtube.com/watch?v=BIMx_giMeNAhttp://www.youtube.com/watch?v=BIMx_giMeNA

MechanismMechanism

EvidenceEvidence

Some anecdotes***Some anecdotes***

Systematic evidenceSystematic evidence

Gulf War ExamplesGulf War Examples

Zimbabwe – UNSC member 1991-92Zimbabwe – UNSC member 1991-92

– 1992 – 11992 – 1stst IMF arrangement in a decade IMF arrangement in a decade

– Votes for 2 resolutions against IraqVotes for 2 resolutions against Iraq

– Then abstains… Then abstains…

– And Zimbabwe was threatened with And Zimbabwe was threatened with new IMF new IMF conditionsconditions

– Subsequently votes for 11 resolutions Subsequently votes for 11 resolutions condemning Iraq.condemning Iraq.

Gulf War ExamplesGulf War Examples

Ecuador – UNSC member 1991-92Ecuador – UNSC member 1991-92– IMF arrangement in 1991IMF arrangement in 1991– Of course Ecuador is a regular IMF customer: 1961, Of course Ecuador is a regular IMF customer: 1961,

1962, 1963, 1964, 1965, 1966, 1969, 1970, 1972, 1962, 1963, 1964, 1965, 1966, 1969, 1970, 1972, 1983, 1985, 1986, 1988, 1983, 1985, 1986, 1988, 19911991, 1994, 2000, 1994, 2000

– Voted for all but 2 Iraq resolutionsVoted for all but 2 Iraq resolutions

Note Ecuador’s IMF participation pattern aboveNote Ecuador’s IMF participation pattern above

Countries participate in IMF programs about 25% of the Countries participate in IMF programs about 25% of the time (including ALL countries).time (including ALL countries).

Typical pattern: 5 years in, 5 years out, 5 years in, etc…Typical pattern: 5 years in, 5 years out, 5 years in, etc…

Counter examples?Counter examples?

Gulf War ExamplesGulf War Examples

Cuba – UNSC member 1990-1Cuba – UNSC member 1990-1

– Consistently opposed Iraq resolutionsConsistently opposed Iraq resolutions

– IMF arrangement?IMF arrangement?

– Left the IMF in 1964 – not an IMF memberLeft the IMF in 1964 – not an IMF member

– ((Why?Why? Claimed the IMF was a tool of the US) Claimed the IMF was a tool of the US)

Cuba before & after 1961

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Non-member Member Non-member Member

n=11 n=4 n=29 n=1

Cuba pre-1961 Cuba post-1961

IMF

par

tici

pat

ion

Gulf War ExamplesGulf War Examples

Yemen – UNSC member 1990-1Yemen – UNSC member 1990-1

– Voted against Desert Storm – a U.S. Voted against Desert Storm – a U.S. representative was overheard declaring to the representative was overheard declaring to the Yemeni ambassador that it was Yemeni ambassador that it was

““the most expensive vote you have ever cast.”the most expensive vote you have ever cast.”

– The US cut hundreds of millions of dollars in aidThe US cut hundreds of millions of dollars in aid

– (No IMF arrangement)(No IMF arrangement)

A more historical example?A more historical example?

Tanzania: 1961-1974 no IMF, no UNSCTanzania: 1961-1974 no IMF, no UNSC

– 19751975

UNSC memberUNSC member

First IMF arrangement – exceedingly weak First IMF arrangement – exceedingly weak conditionality (credit ceiling)conditionality (credit ceiling)

IMF reply in the IMF reply in the Washington PostWashington Post (November 1, 2006):(November 1, 2006):

An IMF spokesman said “the [Tanzania] An IMF spokesman said “the [Tanzania] evidence is evidence is anecdotalanecdotal and and circumstantialcircumstantial.”.”

To convince people, we need To convince people, we need

– many more anecdotesmany more anecdotes

– statistical evidence showing that the anecdotes statistical evidence showing that the anecdotes are not just coincidence (luck, idiosyncratic)are not just coincidence (luck, idiosyncratic)

What do we observe systematically?What do we observe systematically?

191 countries*191 countries*(“World” minus the 5 permanent UNSC members)(“World” minus the 5 permanent UNSC members)Years: 1951 or Independence –through– 2004Years: 1951 or Independence –through– 2004A total of 7,606 country-year observationsA total of 7,606 country-year observations

Dependent variable:Dependent variable:– IMF participation (SBA, EFF, SAF, ESAF/PRGF)IMF participation (SBA, EFF, SAF, ESAF/PRGF)– 26.7%26.7%

Principal independent variable:Principal independent variable:– UNSC memberUNSC member– 6.3%6.3%

Figure 1: Participation in IMF programsby rotating membership on the UN Security Council

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

Non-members Members

mean=0.26 mean=0.33

std dev.=0.44 std dev.=0.47

(n=7129) (n=477)

UN Security Council Membership Status

% o

f ob

s. p

artic

ipat

ing

in I

MF

pro

gram

s

Figure 3: Participation in IMF programsby UN Security Council Membership and Region

0.00

0.10

0.20

0.30

0.40

0.50

0.60N

on-

mem

ber

Mem

ber

Non

-m

embe

r

Mem

ber

Non

-m

embe

r

Mem

ber

Non

-m

embe

r

Mem

ber

Non

-m

embe

r

Mem

ber

Non

-m

embe

r

Mem

ber

n=1669 n=95 n=1119 n=47 n=1254 n=100 n=591 n=36 n=814 n=51 n=998 n=108

Africa Asia & S.Pacific

LA & Carib. E. Europe Middle East &N. Africa

IndustrializedCountries

UN Security Council Membership Status and Region

% o

f obs

. par

ticip

atin

g in

IMF

pro

gram

s

A potential endogeneity problem?A potential endogeneity problem?

If selection onto the UNSC is non-random, If selection onto the UNSC is non-random, some outside factor could cause both UNSC some outside factor could cause both UNSC membership & participation in IMF/World Bank programsmembership & participation in IMF/World Bank programs

Election to the UNSC is idiosyncratic with respect to Election to the UNSC is idiosyncratic with respect to most determinants of IMF participationmost determinants of IMF participation– The most robust predictor: Past experience (negative The most robust predictor: Past experience (negative

effect)effect)– Also: Country size – population, GDP (positive effect)Also: Country size – population, GDP (positive effect)– Contributions to the UN also matter (positive effect)Contributions to the UN also matter (positive effect)– Largely a normative story!Largely a normative story!

Estimated effectEstimated effect

Systematic evidenceSystematic evidence1.1. Five statistical models:Five statistical models:

1.1. Pooled LogitPooled Logit2.2. Fixed country effects Fixed country effects 3.3. Fixed regional effects Fixed regional effects 4.4. Fixed country & year effectsFixed country & year effects5.5. Fixed regional & year effectsFixed regional & year effects6.6. Conditional Logit with regional dummies and Conditional Logit with regional dummies and

temporal splinestemporal splines7.7. Simultaneously cluster the covariance matrix by Simultaneously cluster the covariance matrix by

country and by yearcountry and by year

Control variables:Control variables:– Selection of variables follows Sturm, Berger, de Selection of variables follows Sturm, Berger, de

Haan (2005)Haan (2005)– Additional variables following previous literatureAdditional variables following previous literature

Table 1: The effect of UNSC on IMF participation

 Pooled Logit

Pooled Logit with Regional Effects

Year Fixed

Effects

Country Fixed

Effects

Conditional Logit with Temporal Splines

UNSC 0.34** 0.50** 0.57** 0.24** 0.30**

Robust SE

(0.10) (0.11) (0.10) (0.12) (0.15)

Africa   0.19** 0.18    

Robust SE   (0.09) 0.13    

Asia   -0.59** -0.55**    

Robust SE   (0.10) 0.15    

M.E./N.Af   -1.17** -1.10**    

Robust SE   (0.12) 0.16    

LA   0.35** 0.47**    

Robust SE   (0.09) 0.19    

Industrial   -2.67** -2.59**    

Robust SE   (0.18) 0.29    

Constant -1.03** -0.74**      

Robust SE (0.03) (0.08)      

# of obs. 7,606 7,606 7,532 5,694 5,694

# of groups     53 137 137

With 95% confidence, we can sayWith 95% confidence, we can sayUNSC membership increases UNSC membership increases

rates of IMF participation rates of IMF participation between 7% and 52%.between 7% and 52%.

Table 3: Controlling for Additional Predictors of IMF Participation

  Pooled LogitCountry Fixed

EffectsRegional Fixed

EffectsYear Fixed

EffectsTemporal Splines

UNSC 0.59** 0.83** 0.56** 0.51** 0.64**

(Robust std error) (0.24) (0.29) (0.26) (0.22) (0.29)

Foreign Reserves -0.15** -0.005 -0.13** -0.13** -0.04

(Robust std error) (0.03) (0.07) (0.03) (0.03) (0.08)

Debt Service 0.02** 0.02 0.03** 0.03** 0.02**

(Robust std error) (0.01) (0.01) (0.01) (0.01) (0.01)

Investment -0.06** -0.08* -0.05** -0.04** -0.05

(Robust std error) (0.01) (0.05) (0.01) (0.01) (0.04)

Past Participation 2.47** 2.42** 2.45** 2.27** 2.00*

(Robust std error) (0.26) (0.45) (0.27) (0.34) (1.13)

Lagged Election -0.02 -0.06 -0.07 -0.11 -0.11

(Robust std error) (0.16) (0.18) (0.16) (0.17) (0.21)

Budget Surplus 0.01 0.06** 0.01 -0.003 0.06**

(Robust std error) (0.02) (0.03) (0.02) (0.02) (0.03)

Inflation -0.0002** -0.0003 -0.0002* -0.0003** -0.0001

(Robust std error) (0.0001) (0.0002) (0.0001) (0.0001) (0.0002)

Current Account -0.01 -0.001 0.01 0.01 -0.002

(Robust std error) (0.01) (0.02) (0.01) (0.01) (0.02)

BOP -3.89* 0.19 -2.89 -2.09 0.05

(Robust std error) (2.07) (3.17) (2.09) (2.07) (3.22)

GDP/capita (1995 PPP) -0.00003 -0.001** -0.0001* -0.0001** -0.001**

(Robust std error) (0.00003) (0.0002) (0.00004) (0.00004) (0.0002)

Growth -0.001 -0.003 -0.003 -0.002 -0.004

(Robust std error) (0.005) (0.02) (0.004) (0.004) (0.02)

Regime 0.04 0.32 0.18 0.18 0.26

(Robust std error) (0.19) (0.39) (0.20) (0.18) (0.41)

log(checks) 0.08 0.13 0.16 0.07 0.06

(Robust std error) (0.14) (0.25) (0.14) (0.10) (0.24)

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

Further checks:Further checks:

Trends over time Trends over time

Pre/Post Cold WarPre/Post Cold War

Extreme Bounds AnalysisExtreme Bounds Analysis

Number of policy conditionsNumber of policy conditions

Public wages & salariesPublic wages & salaries– (with Irfan Nooruddin – Ohio State)(with Irfan Nooruddin – Ohio State)

(Loan size)(Loan size)

Figure 1: Participation in IMF programs by non-permanent UN Security Council Membership over time

0%

10%

20%

30%

40%

50%

Non-members

Members Other years 4 yearsbefore

3 yearsbefore

2 yearsbefore

1 year before 1st yearmember

2nd yearmember

1 year after 2 years after

mean=0.28 mean=0.34 mean=0.28 mean=0.28 mean=0.31 mean=0.33 mean=0.32 mean=0.35 mean=0.34 mean=0.30 mean=0.28

st.dev.=0.45 st.dev.=0.48 st.dev.=0.45 st.dev.=0.45 st.dev.=0.46 st.dev.=0.47 st.dev.=0.47 st.dev.=0.48 st.dev.=0.48 st.dev.=0.46 st.dev.=0.45

(n=6684) (n=462) (n=5405) (n=178) (n=196) (n=215) (n=236) (n=236) (n=225) (n=234) (n=221)

UN Security Council Membership Status

% o

f ob

s. p

arti

cipa

ting

in I

MF

pro

gram

s

The horizontal line shows the average IMF participation rate across our entire sample. The dots reflect the results where only low and lower-middle income countries are included.

World Bank evidenceWorld Bank evidence

Average # of World Bank projectsAverage # of World Bank projects

0.0

0.5

1.0

1.5

2.0

2.5

avg=1.29

std=1.95

avg=2.13

std=2.93

avg=1.28 avg=1.30

std=1.96 std=1.93

avg=2.15 avg=2.10

std=2.96 std=2.92

avg=2.06 avg=2.19

std=2.75 std=3.11

n=176 n=181

Non-

n=5333 n=357

member Member

Total sample

avg=1.29

std=1.95

n=5333

Non-member

1st.yearmember

2nd yearmember

Over time

n=2638 n=183 n=2695 n=174

Non-member

Member Non-member

Member

During the cold war After the cold war

Regional differences?Regional differences?

0

1

2

3

4

5

6

7

8

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

Member Non-member

Member Non-member

Member Non-member

Member Non-member

Member Non-member

Member Non-member

Member

South Asia East Asia Latin AmericaCaribbean

Middle East/North Africa.

Sub-SaharanAfrica

Eastern Europe Western Europe

SummarySummaryInternational institutions do represent their most powerful International institutions do represent their most powerful members & to see the extent of control one must look across members & to see the extent of control one must look across institutions.institutions.

UNSC members are about 20% more likely to receive IMF UNSC members are about 20% more likely to receive IMF programs than non-members.programs than non-members.

Fewer conditions.Fewer conditions.

Loan size appears unaffected.Loan size appears unaffected.

We find similar results with respect to the We find similar results with respect to the World BankWorld Bank..

– Non-members receive about 1.5 new Bank projects per year, Non-members receive about 1.5 new Bank projects per year, UNSC members get almost 3.UNSC members get almost 3.

– Using a battery of different statistical models and control Using a battery of different statistical models and control variables, we find UNSC membership robustly increases the variables, we find UNSC membership robustly increases the number of new Bank projects by about 10%.number of new Bank projects by about 10%.

Implications for governance reform of the IMF:Implications for governance reform of the IMF:Q # 1Q # 1: Is this a bad thing?: Is this a bad thing?

Q # 2Q # 2: Is it in the US interest to change things?: Is it in the US interest to change things?

Perhaps not – Short-run political gains.Perhaps not – Short-run political gains.

Long-run economic development?Long-run economic development?

• Elected to the UNSC 6 timesElected to the UNSC 6 times

• 15 IMF arrangements since 195815 IMF arrangements since 1958

• 32 out of 48 years (66% of the time)32 out of 48 years (66% of the time)

A SolutionA Solution

Insulate the IMF Executive Board from politics Insulate the IMF Executive Board from politics

Like independent central banksLike independent central banks

The IMF directors should be appointed for long The IMF directors should be appointed for long termsterms

Represent the long-run interests of their home Represent the long-run interests of their home countries.countries.

Recall Keynes: Appoint Cautious Recall Keynes: Appoint Cautious ((IndependentIndependent) Central Bankers) Central Bankers

In the meantime:In the meantime:

The actual governance reform of the IMFThe actual governance reform of the IMF

Increase the voting power of:Increase the voting power of:– China, South Korea, Brazil, Mexico and TurkeyChina, South Korea, Brazil, Mexico and Turkey

How will this address the political How will this address the political manipulation of the IMF?manipulation of the IMF?

It won’t.It won’t.““It is the It is the correctcorrect thing to do, but probably won’t make thing to do, but probably won’t make

much difference.”much difference.”[personal conversation with [personal conversation with Pres. Henrique Cardoso, BrazilPres. Henrique Cardoso, Brazil & &

Pres. Ernesto Zedillo, Mexico]Pres. Ernesto Zedillo, Mexico]

Snapshot of the book project:Snapshot of the book project:The Political Economy of the UN Security CouncilThe 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?

Thank youThank you 글로벌 글로벌 KU KU 프론티어 스피릿 프론티어 스피릿 !!!!!!