The US and Japan in the Bretton Woods Institutions: Sharing of Contesting Leadership?

Article excerpt

The question of leadership in the Bretton Woods institutions looms large during a period in which the relative position of states is undergoing change, not only in the International Monetary Fund (IMF) and the World Bank but also in the broader international system. Because few expect that leadership by a single nation -- the United States -- will be resuscitated, or that Japan will supplant the United States in this role, the discussion often turns to the prospects for some form of shared leadership. And since the United States and Japan stand at the apex of the world economy, they usually emerge as the most likely candidates for this role. By any standard of diplomacy among self-interested states, the domestic and systemic conditions for successful single-nation leadership are demanding. The requirements for sustained leadership-sharing between two or more nations are in many respects even more demanding. What is more, they lack a base of historical experience. The scale and dynamism of the American and Japanese economies mean that there is considerable risk to the global economic system from conflict in United States-Japan economic relations. A strong case can be made, therefore, that 'effective cooperation between these two giant competitors is essential for global prosperity and stability.'(f.1) Co-operation is less likely in those issue areas where the two countries' interests diverge and which are unmediated by regularized institutional procedures. Conversely, close co-operation and leadership-sharing is more likely in issue areas where their interests converge and where existing institutional settings facilitate collective management of the global economy. We believe that the Bretton Woods institutions provide such a conducive institutional context. Whether Japan and the United States make effective use of this opportunity, however, remains in doubt. In the nominal sense that they are economically the largest and most powerful members with the largest shares of the votes, Japan and the United States can be said to have shared leadership in the IMF and World Bank since Japan assumed the number two position at the World Bank in 1984 and at the IMF in 1990. This article examines how these institutions have accommodated Japan's rise in the world economy and explores the prospects for the two countries engaging in more substantive kinds of leadership-sharing in the Bretton Woods institutions. After examining the concept of leadership-sharing, we describe the institutional context within which leadership might be shared in the Fund and Bank. Of particular interest here are the provisions for weighted voting, special majorities, and the procedures by which members' voting shares are adjusted periodically to reflect changes in relative weights in the world economy. The following section outlines Japan's diplomatic efforts during the 1980s to rectify what it regarded as gross under-representation in both the IMF and the World Bank and graphically depicts the two countries' voting shares from the inception of the two institutions to the last major revisions of voting shares in 1990. We then examine how Japanese and American interests within these institutions have both diverged and converged since 1980, with a focus on the recent 'east Asian miracle' controversy and on asymmetrical interests in supporting the Fund and the Bank. We conclude that leadership-sharing by Japan and the United States remains desirable and feasible, but that it will not be easy to attain. LEADERSHIP-SHARING As Donald Sherk argues, the largest challenge facing the World Bank and the other multilateral development banks (MDBS) in the years ahead is leadership: 'These institutions do not function well in the absence of leadership ... The principal shareholder countries play a critical role in supplying management oversight and policy direction in addition to their capital. Yet leadership appears at the moment to be in short supply.(f.2) Since single-nation leadership -- supplied by either a resurgent United States or an ascendant Japan -- is highly improbable, we think the prospects for increasing the supply are limited to shared leadership. …