TPT July 2010

G lobal M arketplace The Washington-based World Bank was instituted after World War II to advance money to low- to middle-income nations at modest interest rates to spur economic development and fight poverty. Since June 2008 its chief economist has been Justin Yifu Lin, a Chinese national on leave from an economics professorship at Peking University, who plays a key role in shaping the economic research agenda of the institution. In a sense, the 25 April announcement of China’s higher profile at the World Bank merely took official notice of the obvious. With an economy by gross domestic output second only to that of the US, China bulks larger on the international economic scene all the time. It is a leading member of the G20 group of developing nations, representing some 60% of the world’s population. The bloc has become more influential in setting global policy than the G8 group of foreign ministers from developed capitalist countries. China’s finance minister Xie Xuren indicated that he sees the move to amplify Beijing’s voice within the World Bank as an important step forward – but he clearly looks for more. Mr Xie said in a statement, “The future shareholding principles should continue to be based on economic weight and aim to achieve the ultimate goal of equitable voting power.” Change in voting rights is also afoot at the International Monetary Fund The World Bank is not the only august international institution to turn its attention to redistribution of internal voting power. The wealthiest nations have made policy at the International Monetary Fund since its founding in 1944, and the original quota-based voting apparatus has

not changed much over the decades. Now the IMF, thrust into new prominence by global economic turmoil, is looking within and mulling a voting shift to reflect the rapid growth of economies in Asia, Latin America and elsewhere. Also Washington-based and 186 members strong, the IMF shares with the World Bank a primary function to provide low-cost loans to countries in financial crisis. But critics have charged that, too often, this was tough love of the bullying kind. IMF loans were generally conditioned on deep spending cuts and/or currency devaluations, when borrowers might have had other ideas of how to work themselves out of their troubles. While officials from smaller nations want more input into decision- making at the IMF, they do not want to shake an organisation with tremendous capacity for rescue. Recently the IMF has extended loans of $2 billion to Latvia and $16bn to Hungary, and has brokered aid for Pakistan, Iceland and Ukraine. Coming up is an expected contribution of as much as $20bn to the relief package for Greece. But the pressure for more equitable voting power within the IMF has been building. In Spring 2008 the governing board approved a plan for substantial changes in the system. On 24 April of this year, officials of nations including the US urged consideration of a proposal that would redistribute 5% of IMF voting power from the wealthiest countries toward emerging economies – like those of Brazil, Russia, India and China – and developing nations. “The goal is to achieve legitimate representation based on countries’ economic weight in the world,” US Treasury Secretary Timothy F Geithner said in a statement. “The current quota formula, however, falls short of this objective.”

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J uly 2010

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