The old is dying and the new is being born.
Branko Milanović is an economist specialised in development and inequality. His new book, The Visions of inequality, was published October 10, 2023.
Cross-posed from Branko Milanović’s blog Global Inequality and More 3.0
The article was published (with small editorial changes) in China Daily, December 10, 2025.
International Monetary Fund (IMF) – CC Wikimedia
During the past several decades the world has undergone a dramatic transformation in the distribution of economic activity, and less dramatically, in the distribution of political power between the countries. The rise of Asia, and China in particular, has shifted the center of economic growth towards East and South Asia. By 2015, total GDP of China, according to the World Bank’s World Development Indicators (version October 2025) and measured in dollars of equal purchasing power, had overtaken the total GDP of the United States. Today, China produces about 20 percent of global output of goods and services and the United States 15 percent. (This is incidentally, the highest share of the two top economies since the early 1950s, when the IMF and World Bank data have been compiled.) Similar shifts –again calculated using the same database—have been present in the case of other Asian economies. By the mid-1980s, the UK and India both produced about 3 percent of global output. Today, India’s share is 8 percent, that of the United Kingdom 2 percent. The shares of Indonesia and the Netherlands have moved from being equal around 1980 (1.2 percent of global output) to Indonesia’s being today more than three times as large.
If one takes the three most populous Asian countries (India, China and Indonesia) they account for about 3.1 billion people or almost 40 percent of the world population. Their combined share in world output is 30 percent. Their total exports are $4.6 trillion (at market exchange rates) out of $25 trillion of global exports, that is 19 percent (World Development Indicators). Yet the three countries have less than 10 percent of voting rights at the IMF where the last such apportioning of voting rights took place in 2008. If we include other large Asian countries like Pakistan, Bangladesh and Vietnam, the disproportion between Asia’s economic importance and its representation at the level of multilateral economic organizations is yawning. This is not a new point: it has been debated for years with some, very modest, success in addressing it.
At some level, the IMF and World Bank voting shares do not matter very much. What matters is to have a blocking power which requires 15 percent of shares and that only the US currently has. Realignment of the IMF shares with the actual economic power would possibly take away the veto power from the United States, and perhaps more importantly, make it easier for a coalition of countries from the Global South to jointly exercise such veto.
But a more important issue is the decision to either fundamentally reform the existing, or to create new, international economic organizations that might better reflect current economic power and economic policies that have been proven successful. The latter is not merely a matter of voting rights; it is a question of soft power in economic thinking.
China and BRICS have made some early steps in the direction of creating new institutions, notably by founding the New Development Bank (by all BRICS countries) and the Asian Infrastructure Investment Bank. Yet both are at the very early stages with limited global resonance. China and the global South lack experience in the creation of such institutions. As Mark Mazower’s book Governing the World shows, all international institutions, from the Postal Union established in the second half of the 19th century to the International Labor Organization (ILO) founded after World War I and the World Bank and the IMF in 1944, have been created by Western powers. At the Bretton Woods conference In 1944 despite nominal participations of many countries (e.g. Egypt, Iraq and India under the effective or formal British control), China (represented by a government that controlled only a part of the country), the decision-making power rested squarely with the United States and the UK. The issue facing BRICS countries today is how to “learn” the art of crafting international organizations such that they acknowledge the new economic and political realities while giving sufficient voice both to the Western power, whose role is not the same as it was eighty years ago, and to many smaller nations. Particularly important is better inclusion and greater voice for African countries that, in terms of their populations, are the only expanding part of the world.
There is also another task which is most relevant for China. Readjustment of the global economic power means also that economically the most successful countries in the past half-century had been Asian. The question is how to transmit the knowledge about what works in economic development to other countries that are poorer and by per capita income much behind China. China’s path to an upper-middle income country has been in many ways specific and reflective of particular domestic circumstances: from the ability to decentralize decision-making and thus check what works in practice, to an important role of the state in some sectors, to the ability to implement key economic decision by a strong executive, or to conduct comprehensive anti-corruption campaigns. These are not features that can be easily replicated elsewhere. It is important to try to distill what are the features of China’s economic policies that could be applied elsewhere and where they would hopefully produce similar results in terms of economic growth.
This is not an easy task. Not only does it require figuring out what were the key drivers of China’s growth, but selecting those that are more general in nature. Despite many simplifying or exaggerated claims on behalf of the Washington Consensus, the precepts provided by it were clear and so general (and abstract) that they could be applied as much in a poor county like Mali and a rich country like South Korea. An unreasonable emphasis on some principles (privatization of most activities including those with significant externalities and monopoly power, or elimination of capital controls) was a drawback of the Washington Consensus, but its general nature was its advantage. It is incumbent on China and economists who study the Chinese experience to come up with a similar list of economic desiderata that would much better reflect what policies work in the twenty-first century than the Washington consensus that was originally defined in the 1980s in response to the Latin American paymment crisis.
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