Intelligence Report: IMF, World Bank May Have Less Influence by 2025

The study notes that countries like China and Russia have pursued economic growth without democracy.

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As the nation tries to understand the depth of the current global financial crisis, the U.S. intelligence community is contributing its own critique of international economic institutions as part of a larger analysis of where the world is headed in the coming years, known as the Global Trends 2025 report.

The National Intelligence Council, which works under the director of national intelligence and produced the report, cited "waning efficacy and appropriateness of the international institutions that were put in place after World War II."

The NIC suggests that some of the "aging" central pillars of the international financial system, including the World Trade Organization, the World Bank, and the International Monetary Fund, have a "waning ability" to address new transnational challenges.

Indeed, one of the key future uncertainties the report highlighted was "whether global powers work with multilateral institutions to adapt their structure and performance to the transformed geopolitical landscape."

For instance, the NIC anticipates the continued allure for developing nations of the "state capitalism model," defined as "a system of economic management that gives a prominent role to the state," as practiced by Russia and China. The report also points to other nations—rising powers like South Korea, Taiwan, and Singapore—that used some variant on the state capitalism model to develop their economies.

State capitalism, the unclassified intelligence report suggests, might be the most significant structural challenge to the broad theory of reforms encouraged for struggling economies by international organizations like the World Bank and the IMF—namely, "stabilize, privatize, and liberalize."

"We're holding out at least the potential for there to be an alternative to the western democratic model," Thomas Fingar, the deputy director of national intelligence for analysis and chairman of the NIC, said during a speech.

"Much of the world that sort of became democratic in the last 15 years has gone through more pain than gain. They've made adjustments away from populist regimes, away from socialist regimes, away from one-party-dominated systems, and are still waiting for the payoff," he said. "The global financial situation is likely to exacerbate that."

State capitalism could prove an enticing alternative, particularly for states where stable economic growth would mean a chance to increase authoritarianism.

"Many interpret China's rise and Russia's resurgence as a use of market mechanisms, state capitalism as a way to reinforce authoritarian tendencies and to have performance-based legitimacy," Fingar said. "As long as the system is delivering the goods and services, people are satisfied. They're not making demands on the system. There's not the need for the safety valve of political participation and expression."

And as some countries, like China, get wealthier, they may become even less willing to be swayed by these international organizations. The NIC notes that sovereign wealth funds (including China's) have already provided more funding to developing countries than the IMF and the World Bank combined. Whatever the future holds for international organizations, the current international status quo is in store for a shake-up. "The international system—as constructed following the Second World War," the report says, "will be almost unrecognizable by 2025."