Global Governance: Economics

The International Monetary Fund

  • As of 2017, 189 nation states are a member of the IMF 
  • The IMF is one of the main pillars of the Bretton Woods System 
  • The IMF encourages financial stability in three manin ways 

1.  Monitors the economic health and stability of its members and warns agaisnt policies that it considers to be damamging to that economy - known as surveillance = they advised Mexico that it is too dependant on oil revenue and should diversify to cushion its economy

2. offers technical advice to countries on how best maximise their economic potential = Peru has been advisded on how to improve its methods of tax collection

3. It can act as a lender in the last resort- if a member is facing a balance of payments crisis it can request an emergancy loan which would stabilise its currency and save the country from bankruptcy ensuring the problem does not spread to a global economic crisis - they are conditional on the country undergoing SAPS 

IMF SUCCESSES 

  • global free trade encourages economic stability and development 
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The International Monetary Fund

  • global free trade is encouraged by discouraging the adoption of tariffs to maximise global wealth
  • free market reforms make states more able to take advantage of the opportunities of globalisation
  • has encouraged debt relief for many developing countries that are introducing free market reforms = Chad were granted $1.1 billion
  • last resort lender = global stability, greater confidence, reducing the risk of collective panic thus reducing the provokation of a global depression 
  • India = has been able to diversify their economy away from agriculture because of IMF inspired reforms 
  • IMF SAPs in Africa have encourged diversity into world markets thus boosting growth rates 
  • 1997 South Korea = $55 billion aid package rescued them 
  • 2008 Financial Crisis = provided aid to vunerable countries such as Hungary, Romania and Ukraine 
  • 2009+ Euro Sovereigh Debt crisis = extensive loans to Greece and other vunerable countries such as Portugal, Italy and Spain = averting a pan-european economic crisis 
  • 2008-2016 = $700 billion to member countries in order to maintain trust in the global economy 
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The International Monetary Fund

CRITICISMS OF THE IMF 

  • only represetns the neo-liberal western orientared approach to economic development = Jeffrey Sachs has criticised the one size fits all approach 
  • SAPs have been accused of undermining already fragile economice, so that free market 'shock therapy' actually ends up killing the patient 
  • SAPs all been accused of underminig sovereignty since desparate states (greece) have no other alternative but to accept the conditions of their loans 
  • President by convention is always European (Christine Lagarde) 
  • Also the US hold 16.74% of votes and only 85% is required to change items - basically giving the US veto powers 
  • Accused of failing at the task of surveillance because it was taken suprise by the 2008 financial crisis and the euro sovereign debt crisis 
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The World Bank

  • This is the other main pillar of the Bretton Woods System
  • It has a focus on long term development = The International Bank for Reconstruction and Development as well as the International Development Agency
  • Especially since the 1990s loans have had extentive conditions under SAPs 
  • neo liberals - the developing workd can achieve long term prosperity through embracing globalisation 

SUCCESSES OF THE WORLD BANK 

  • Diversification encourages developing countries to take advantage of the global economy which has helped reduce the North-South Divide 
  • Taken the lead in debt relief for developing countries with the Highly Indebted Poor Countries Iniative 
  • not only the money bank but also the knowledge bank and has had an increasing focus on human development not just economic - gender equality, fighting AIDS, climate change 
  • 'country ownership' giving loan recipents greater say over how the loan is spent 
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The World Bank

CRITICISMS OF THE WORLD BANK 

  • The impostition of free markets on the developing world is not necessarily the best way of achieving economic growth 
  • Immanuel Wallerstein's World Systems Theory = the washington consenus maintained developing countres in a peripheral status - the developed world dumps them with mass produced on them ensuring dependancy 
  • global competition undermines traditional industries and small scale farming resulting in unemployment and increasing social problems 
  • SAPs often require develping countries to dramatically cut public spending which can have a devestaing impact on already impoverished people
  • Conditionality infringes on the sovereign right of nation states to determine their own economic policies 
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The World Trade Organisation

  • The WTO was established in 1995, alongside the IMF and World Bank = the Bretton Woods system of global economic governance
  • The WTO aims to expand global trade by encouraging the reduction of tariff and subsidies = they set the rules of trade between members 
  • The WTO also handals trade disputes between countries
  • They had 164 memners as of 2017 with China in 2001 and Russia in 2012 

SUCCESSES OF THE WTO

  • helped to dramatically expand global trade which has created greater global prosperity and reduce global poverty (at $18.8 trillion as of 2013) 
  • resolved a number of trade disputes encouraging a 'rules based' approach to global conflict
  • despite of the 2008 crisis no member resorted to tariff protectionism which would have extended the recession 
  • democratic peace thesis = free trade reduces the risk of conflict 
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The World Trade Organisation

CRITICISMS OF THE WTO 

  • soley concerned with expanding gloabl trade and it does not address related probelms such as the impact on workers' rights, child labour, environmental degredation or sustainability 
  • powerful lobby groups from the developed world exert too much influence at the WTO headquaters in Geneva 
  • WTO undermines potential growth - shown by the Doha Trade Round (2001-) whcih has been ineffective because developing countries are not prepared to open their economies to the global market
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The G7/8 and the G20

  • These enbable the leaders of the most powerful economies to meet on a regular basis amd discuss global issues
  • The G7 is restricted to those in the Global North (western world) whereas the G20 is both the North and South 

SUCCESSES OF THE G7 AND G20

  • A regular point of contact encourages global trust and cooperation 
  • enable member states to co-ordinate action on 'collective dilemmas' such as the global economy, climate change, terrorism and weapons of mass destruction
  • 2009 = members of the G20 memorably agreed not to respond to the global economic crisis by adopting protectionist strategies 

CRITICISMS OF THE G7 AND G20

  • G7 reinforces the north-south divide and being unneccesary since the creation of the G20
  • membership is seen as arbitrary as Argentina is a member but not Spain (bigger economy)
  • exclusive membership undermines the inclusivity of global governance 
  • lack of binding agreements - only issue declartions and so is expensive 'talk shops'
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Does global economic governance deal with poverty

THE NORTH-SOUTH DIVIDE 

  • Established in the Brandt Reports in 1980 and 1983 and highlights the social and economic devisions between the developed and developing worlds 
  • The north dominates investement, enterprise, and innovation 
  • TNCs are generally based in the North 
  • Overseas aid goes from the North to the South 
  • Foreign direct investement goes from the North to South 
  • Governments in the north are more likely to be democratic and respect human rights while the south is more likely to be corrupt 
  • Governments in the North are more stable and civil disorder is more likely in the South 

The term is often said to be anachronistic and stereotypical since the convergence of the two

NEO-CLASSICAL DEVELOPMENT THEORY 

  • The main principle of economic global governance 
  • Adam Smith = free markets and free trade provide the invisble hand that benefits everyone 
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Does global economic governance deal with poverty

  • Government intervention undermines the naturally occuring growth 
  • Bretton Woods institutions act as organs of global governance 
  • These collectively encourgae the adoption of free market principles 
  • Often called the Washington consensus or economic globalisation 

DEPENDANCY AND WORLD SYSTEMS THEORY 

  • Hans Singer and Raul Prebisch = developing countries can escape dependancy only by protecting themselves from their cheap exports 
  • Immanuel Wallerstein = economic liberalism is used by the develped workd to maintain neo-colonial dominance of peripheral states: 

1. free trade means developing states are dumped with free exports creating dependancy 

2. core states use this opening of markets to expoit cheap labour 

3. raw materials are exploited by the core states futher entrenching economic dominance 

4. economic globalistions keeps the South in a subordinate role in the economy 

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Does global economic governance deal with poverty

STRUCTURAL THEORY 

  • that the developing world protects itself from exploitation and builds up its economic potential to a level where it can compete more fairly with the developed world 
  • Developing states should provide tariff protection and subsides for their infant indutries so they develop at a fair level to be able to compete 

ORTHODOX AND ALTERNATIVE MEASUREMENTS OF POVERTY 

  • ORTHODOX = decrease poverty by increasing the wage earning potential of the people in the developing world 
  • World Bank Poverty = living on less than $1.90 a day = focus on raising standards of living 
  • ALTERNATIVE MEASUREMENTS =  human happiness is not soley based on material well-being - focus on non-economic improvements: economic development is compatible with human rights; living and working conditons are protected; industrialisation does not threaten the envirnonment; women's rights are protected
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Reform of global economic governance?

1. IMF shoudl be able to regulate some of the international capital movements so global financial crisis is not repeated 

2. Global South to have greater voting influence with the Bretton Woods Insitutions 

3. Bretton Woods should not be confined to the global North

4. can free markets damage development? 

5. Bretton Woods should focus on other forms of development 

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Role of NGOs

1. the Red Cross ]

2. Oxfam 

3. Christian Aid 

4. the Gates Foundation

5. the Carter Foundation 

However, these have been criticised for discouraging entrpreneurship, initiative and good governance and instead encourage corruptio and unhelpful streotypes 

White Saviour Complex in the developing World = good intentions might yet perpetuate the problem

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