When the modern international financial system (IFS) was created during World War II, it was designed largely, but not exclusively, by a few advanced and industrialized economies. Developing countries participated in and contributed marginally to the proceedings. Subsequently, especially in the 1960s, the dominant rich countries decided that running the system and shaping its evolution should be their responsibility alone. It then fell to the developing countries to try to regain a voice and to claw back a measure of influence. It has not been easy, and the successes have been few and mostly around the edges. Whether the IFS is guided by a small group of countries or is shaped by a more diverse and inclusive group is a matter of global importance. Although small and poor countries — while large in number — account for only a small portion of total cross-border financial flows, they have a strong stake in the outcome. In the aggregate, that stake has a potentially large global effect. If the system is unstable or volatile, or if financial flows contribute to the concentration of wealth in a few countries, or if small countries lack the ability to attract financial inflows to finance economic development, then the overall health of the world economy will be negatively impacted. Conceptually, a small self-selected steering committee could guide the system in a way that protects the interests of small and poor countries as well as their own. Nonetheless, a more inclusive process would make a globally beneficial outcome far more likely. This paper examines that process by which the developing countries have come together as a group to try to influence the evolution of the financial system. It then reviews some of the successes of that effort. The effort to regain and preserve influence and the reasons that it became increasingly difficult are then examined. The paper concludes with some reflections on the challenges going forward.
Southern Accents: The Voice of Developing Countries in International Financial Governance
CIGI Paper No. 141