the smaller value of the coefficients of the trade share variable and, more substantially, by
the coefficients of the financial exposure variable
Conclusions and policy implications
The United States and the European Union have together an overwhelming influence on
the lending decisions of both the World Bank and the International Monetary Fund. They
jointly “run” these IFIs, even though, relatively speaking, the United States has a more
general influence.
The United States may have a primacy, but not a monopoly over the running of the two
institutions. Despite its large voting share and a disproportionate representation in the
staff of the two institutions, this country must add its influence to that of others; it must
forge alliances with other members, such as the Europeans and Japan, if it wants to play a
decisive role in the institutions. In critical areas, these alliances need a progressively
larger reach. This explains perhaps past US insistence to strengthen the G7 and recent
attempts made to create new broader groups - like the G20- that include the largest
emerging countries, in addition to the most established ones.
Even if short of the absolute primacy, the role played by the United States in both
institutions can be seen to conjure up images of domination, particularly as European
countries are often divided on key policy issues and exceedingly focused on their
individual commercial interests. Their overall ability to impact on the lending decisions
of the Bank and the Fund is relatively modest when compared to the United States. The
role of Japan is even smaller and more regional, being largely confined to decisions
concerning Asia.
We have not investigated in this paper why the United States holds such a
disproportionate influence on the activity of the IFI’s. One palatable conjecture is that
influence on IFI decisions may be largely dependent on capital shares of member
countries. If so, one implication would be that countries that wish to play a larger role in
them have a way of doing so by securing for themselves larger voting powers. China, and
to a lesser extent Brazil and India, have much smaller capital shares than they should.
The interesting question is why they have not pushed in a more determined way to
acquire it. At least China and India also have sufficient means to do so individually.
Asia, the fastest growing area of the world for several decades, and the region towards
which the baricenter of world production is rapidly moving, seems currently very
attracted by the idea of setting up a regional IMF (Bergsten, 1998; Wolf, 2004), largely
on the basis of the enormous foreign exchange reserves it has now accumulated and the
need to put them to some “good use”. One could argue that a more effective way of
achieving greater regional security and gaining influence on world financial decisions
might be to enlarge substantially its share of the capital and related voting powers inside
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