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- Created on: 28-11-18 21:52
THE IMF (International monetarial fund)
- Roles/Functions - (When founded) Main function~ Encourage stability in world exchange rates. E.g 1930s Great Depression, Devalued currency =Great uncertainty and economic recession.
- The IMF monitors the system of exchange rates allowing countries to do business with each other.
- Effective - IMF oversaw system of fixed exchange rates, linked with US dollar, fixing the price of gold, brought increased stability (states ability to make investments), preventing further fluctuations in the values of currencies.
- Ineffective/ Criticism - 1971 Nixon abandones fixed link (if the value of a dollar rises, all currencies tied rise accordingly) between dollar and gold (for greater flexibility over value of their currency), causing fixed system to break.
- Second Role - After the founding purpose collapsed ~ 1970s, the IMF's role changed to the provision of economic stability. E.g. financial support to states likely to suffer from debt crises.
- E.g 1976 - UK borrowed $3.9 million after struggling with deep financial crisis.
- Third Role - Monitors the outlook of the world economy and individual member countries. Acts to prevent financial crisis, yet failed to forsee global financial crisis in 2007-09, or prevent.
- Fourth Role - Advise memeber countries on how best to manage their economies - particularly less developed member countries with lacking technical expertise.
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THE IMF (International monetary fund)
- Members pay subscription in relation to the size of their economies, this also applies to loans - borrowers include Portugal and Greece
- Structure of the IMF - 189 member countries, includes majority of world states - only North Korea is not a member country.
- Managing Dictator - (as of 2017) former French Minister, Christine Lagarde. She makes constant interventions and commentary on the whole global economy. E.g. 2016 BREXIT referendum, Lagarde and IMG provoked critism for Leave campaign just a week before the refurendum,claiming Bresit would see a reduce of 5.5% in UK's GDP.
- Critism - Unnecessary interference - decision should be left to the British people. Dominated by the US, leading organisation architect - Yet has nearly 17% of the vote meaning they can be the deciding veto in a decision being passed.
- Funding - Main source of financial resources come from Fund by member countries, representing their wealth and position in the global economy. Response to 2008 financial crisis, increased funds available for lending.
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- Role/ Key Functions - (founding objective) Focus on the reconstruction of states who's economies were destroyed in the Second World War.
- In 2016, it provided $63 billion in low-interest loans and grants to 275 projects in developing countries. Key aim of IMF is to keep suffering economies affloat with the provision of loans, includign Cyprus and Ireland after the global financial crash.
- The Marshall Plan (as seen in NATO) - The US government funded the reconstruction of war-damaged, western Europe.
- Second Role - With the economic recovery of Western Europe, World Bank shifted focus to developing countries outside of Europe (1980s), prioritising human and social development (as opposed to economic reform) - creating the possibility of disposable incomes - can be spent in the domestic economy and improve economic development
- Institutions - International Bank for reconstruction and development - Provides loans and assistance such as conditionality and structural adjustment programmes.
- Allocates $20 billion of loans annualy, reducing poverty linked with the Millenium development goals (now, Sustainable development goals) boost shared prosperity .
- Effective - provides technical assistance to states, advice on human and social development. This contrast the IMF as their technical assistance is focuses on economic growth and management of public finances.
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- Effective - Carries out the anylitical work on development matters - made available to states and NGOs working on development.
- Structure - 187 member states and membership of IMF and World Bank is linked, with states having to be members of the IMF before accepted into the WB.
- Employs 10,000 people in 120 countries.
- Voting power is weighted(like with IMF)according to amount of state contributes to bank. E.g US has 16% vp,no other state has more than 5%.
- Programmes have contributed to the success of millenium goals to reduce world poverty, alfos prevents the creation of additional pressure of debt on poorer states - with direct grants.
- Critisms - members contrinutions are overshadowed by private investors - has ammounted to as much as US$900 million for China and India in 2011, World Bank's resources reached only $8billion in the same year.
- Imbalance in voting powers, outdated in the current global economy, with rising powers including Brazil, China and India (have only a third of the US' voting powers)
- Incourages poor countries to produce crops like cocoa and coffee so they are dependent on developed markets and are vulnerable when dealing with transnational corporations
- Many loans have gone to corrupt regimes, money is either squandered or straight in supporters pockets.
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World Trade Organisation
- Replaced the GATT, with a wider focus regarding trade.
- Role/Functions - Reduce barriers on trade in both goods and services such as tariffs - although states can already enter into agreements with one and another, the WTO offers the opportuninty to put together comprehensive trade agreement.
- They also, check states are following trade agreements, produce research on global trade, and resolve trade disputes between states.
- Structure - WTO has 164 member countries (less than IMF and world bank). Member states account for 97% of world trade, the process of joining can take years - E.g. Algeria applied in 1987 and has still not become a full member. Iraq, Libya, Somalia, and Sudan all in the process of joining.
- Membership includes rights (to export to other countries)
- Obligations (limit restrictions on imports)
- Institutions- Ministerial Conference - single undertakings (negotiated prior by members of QUAD) should be accepted or rejected in full by members
- Principles - Non-discrimination, states should treat trading partners equally and fairly, not discriminate against each other. More opem, commitment to free trade to lower trade barriers
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World Trade Organisation
- Strength- more democratic - decisions are made by simple majorities, with 2/3 of members being developing states and rules and regulations are written by member state (mostly democracies), giving more influence to developing states than the IMF and WB
- GATT and WTO have been successful in reducing tariff barriers - 1947 average tarif on imported goods was 40% of the value, by 2000, this fell to 3%= cheaper trade and more disposable income available to be spent goods, stimulating economic growth as with the WB
- Criticisms - Failure of Doha Round to reach agreement raised scrutiny of the WTO's effectiveness, powerful nations like the USA and the EU block less developed nations, seeing the WTO become gridlocked.
- Negotioation have improved customs procedure but reductions on agriculture remain an obstacle.
- Decision making priorititses speed over democracy another example of inadaquate democracy it is also again dominated by the US, who set agenda on single undertakings, fails to give weight to the problems in developing countries
- Too powerful? can compel sovereign states to change regulations if they declare them violating
- Lacks external accountability and hearings on trade are closed to the public - raises the question of the level of impartial judgements.
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- SAPS - exercise demands on states and infinge on their sovereignty, impose western driven ideo of economiv management. It is argued that states should not be given unconditional loans, and SAPs work as an incentive to prevent economic difficulty.
- Contreversy - IMF and World Bank no longer use the term, but instead 'Poverty reduction strategies'.
- Example - Pakistan - removed tax breakes created progress, but the IMF asses the revenue collection and claimed it was still below the potential (2016) and Pakistan recieved several lonals, despite not making any progress on privatisation - requirments claim the national airline and 67 other state-owned companies be privatised to accumulate for losses.
- Criticisms - Reforms like Privatisation improve corporate profits, not neccessarily shared with wider society.
- Some developing countrie see an increase in equality and child poverty at the expense of prosperity, programmes are unproportianally benefiting the richest.
- Tax tises hit the poorest the hardest, indirect taxation is inavoidable when purchasing 'goods'.
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- Informal forum founded in 1975 after adhoc meeting in Paris with the six wealthiest economies - at the time. (France, US, UK, Italy, Germany and Japan)
- No formal application for membership. Canada joined 1976, Russia accepted (became G8) yet was suspended in 2014 after the annexation of Crimea.- Represent 50% of net global wealth
- 'Like-mided western allies', G7/8 is often viewed as a steering wheel for the west, the group meets annually to monitor the world economy, different from IGOs as it can invite any members IGOs etc to meeting, and choose to remove any - more flexible membership.
- No Budget, if a member wants to take action that costs money, that will be funded by the state itself.
- Decisions aren't binding and relies on will of the participating states, primarily just a forum.
- Presidency is on a rotationary basis, Russia held it in 2014 - before being cancelled due to opposition from other members - and Japan held the meeting for the sixth time in 2016.
- Impacts - state sovereignty - negligable yet the extent in which decisions are delivered is similarly weak.
- Trade - leaders reafirmed the importance of free trade and their commitment to a multilateral trade system actively promoted negotiations within WTO ares.
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- Strengths - A forum - open and honest, intimate discussions between leaders and finance ministers, easier to reach agreements.
- Numerous interventions in global politics, 1999 - cancelled $100 billion of bilateral and multilateral debt, and by cancelling debts of 19 countroes who owed moneu to the IMF and WB, they were able to double their aid to Africa (2005 @ Gleanagles Summit)
- Placed pressure on Russia to withdraw from Crimea and support Russian separist rebels
- Criticisms - Does not include all of the world's major emerging powers (outdated) China is notably absent. At the time, it formed to promote liberal economic policy, reflecting the richest economies of the 1970s.
- Unwilling to effectively deal with poverty inequality, or climate change. Although they have cancelled the debt of many developing countries, the gap countinues to widen between them e.g. Russia's continued undermining of Ukraine's sovereignty.
- 'like minded allies' it is made up of states that agree with each other, seen when Russia was expelled, no attempt to lead them on a different course.
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- Created in 1999, with its' first summit in 2008, with the intention to expand the G7/8 to include a wider group of industrialised and emerging economies.
- Again, an informal forum for constructive discusiion on the key issues and to promote global stability. All member states have equal representation and presidency is again rotary.
- Represents 2/3 of the world's population, 85% of global GDP and 75% of world trade.
- Key features - represents both established and emerging economies, has key economic IGOs attend all meetings in the G7/8 only the EU is a regular additional member that attends, annualk meeting - where the current presidency state has considerable power, the agenda for the meeting have become increasing broad.
- Changing role - Global financial crisis 2008, G20 led the response to the crisis.
- Effective - balance between traditional and historic economic powers, newly emerging economies - neither too exclusive nor too comprehensive to make decisions.
- Forum for dispute resolution and problem-solving, more states that will disagree with each other so allows for alternative views on issues like climate change.
- Provides the most powerful world economies a dedicated mean of influening IGOs and coordinating action on on economic matters.
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- Strength - Become a more significant body than G7, as those states were hit particularly hard by the global financial crisis, and needed help from developing countries to come out.
- First meeting - aid economic recovery - had a fund of $500 billion to stimulate economic growth, they agreed to expand the IMF's borrowing programme and voting shared adjusted to benefit develioing countries. 2009 - agreed that G20 rake over as main forum for economic co-operation.
- Criticism - Not all of the richest countries are included. similar to g7/8
- Lack of trasparency and accountability - no formal charter and important meeting are held in remote locations as with the G7/8.
- Outcomes are sometimes 'watered down' - large compromise for states to agree so it is hard to hold states to account for decisions made at summits.
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