chapter 4: economic global governance Flashcards
(61 cards)
Bretton Woods: What were the main aims of the Bretton Woods Conference?
1) Create an agreed system of rules or international economic matters, including world trade.
2) Stabilise world currencies & reduce wide fluctuations in the value of currencies.
3) Prevent the repeat of the Great Depression.
4) Bolster capitalism against the rise of communism in the USSR.
Bretton Woods: What did the conference establish? What are their functions?
-IMF: Established the US dollar as the basis against which all the states’ currencies would be valued, thereby stabilising world currencies from major fluctuations in their value.
-World Bank: Originally know as International Bank for Reconstruction and Development, which aims to provide a poolof investment for middle income states.
-WTO: Originally GATT, an international forum through which states can make trade deals, and international rules on trade.
Bretton Woods: How has it changed in focus?
-Poverty/Development: International coordination with the UN + increased spending on development through MDGs and SDGs.
-Free Trade: Increase in multilateral free-trade agreements, most notably with the Single Market of the EU (but also NAFTA, + TTP).
-Single Currency: Economic debate over single currency, particularly in the Eurozone. The Euro is now the currency of 20/27 EU states.
-Forums: Provides a forum for discussion and decisions-making to enable states to resolve international economic crises. As seen during 2008 financial crash, IGOs needed a forum through which they could resolve the challenge (particularly IMF)
Bretton Woods: What are the main actors involved in economic global governance?
-IGOs: World Bank, IMF, UN.
-Informal intergovernmental forum: G20, G7.
-MNCs
-Multilateral forums: World Economic Forum, combines world leaders, IGOS, business leaders etc.
IMF: What does neoclassical economic theory argue?
-The most effective way of achieving development of achieveing development is by a nation-state adopting free-market reforms and engaing in global free trade.
-Reducing tariffs, remving state control etc, encourages private enterprise, and global development/prosperity.
IMF: What does World systems theory argue?
-World system theory argued that free trade & free markets enable powerful core states to exploit less developed peripheral states.
-By encouraging peripheral states in the developing world to open up their markets, and commit to free trae, core states in the Global North are able to take advantage of them by making them dependent on cheap, maunfactured goods and mass-produced food.
IMF: What was the main role of the IMF, before 1971?
-Encourage stability in world exchange rate, stabilising devalued currencies.
-It oversaw a system of fixed exchange rates, linked to the US dollar, which was fixed to the price of gold.
-States would know how much a state was worht and could make investments with a greater degree of stability.
IMF: How has its role changed? What are its modern functions?
-Fixed exchange rate broke apart in 1971, when Nicon abandoned the fixed link between the value of the US dollar.
-IMF provides economic stability by giving financial support/loans to states likely to suffer from economic crash. -It focuses on the developing world, but also makes loans to the developed (in 1976, the UK borrowed $3.9bn) & Greece, Portugal & Spain have massively benefitted.
-Monitors the economic outlook of the world economy, forecasting potential threats (though generally quite poorly).
-Advises member countries on how to manage their economies, particularly developing states
IMF: Detail its structue & some controversy surrounding it
-Has 190 members, excluding only small states, like Monaco, and North Korea.
-The current leader is Kristalina Georgieva.
-There has been controversy surrounding the role & powers of the IMF’s leader, as some argue they have had too strong a hand in state’s internal politics.
-Christine Lagarde faced backlash for publishing a report suggesting that Brexit would increase inflation, which mainly felt had undue influence on the 2016 referendum.
IMF: What decides how much money a country pays to the IMF? How much money does it have available? Why has it received criticisms for this?
-Payments reflect country’s relative positions and wealth within the world economy.
-The USA is the largest contributor, accounting for 17%.
-Has $165bn of lending to 83 countries, including $16bn to low income countries.
-After 2008 crash, the IMF increased the amount of funds available for lending.
-Has been criticised, as voting power is weighted in accordance with how much states contribute financially, and therefore the most economically powerful states have the most power in decision-making (however, many would suggest that this is very legitimate, as states should have control over where the money that they contribute goes).
IMF: What are SAPs? What sort of conditions does this entail?
-Structural Adjustments Programmes.
-These are the conditions that the IMF attaches to the loans it gives. These are done to ensure states undertake economic reform, to overcome the problems that led to them making the request.
-Includes things like: cutting public spending & raising taxes, privatisation, reducing public sector wages or state pensions.
-When Argentina received a loan in 2019, it made committments to increase taxes on the wealthy, and to create a new independent body to review the government’s budget/make forecasts.
IMF: What are some criticisms of SAPs?
-Makes excessive demands on states that infringes on sovereignty, imposing a neoliberal model of economic policy, in line with the Washington Consensus.
-In the most extreme way, it denies state sovereignty, and ensures that economic policy is no longer decided by the state, but by the IMF.
-Also, privatisation increases corporate profit w/o sharing it in wider society.
-Most conditions increased prosperity, but also increased inequality, disproportionately benefitting the rich. Tax rises, for example, tend to only really impact the poor.
-Opening markets to foreign investors can expose fragile economies to the effects of a foreign economic crisis.
IMF: Why was the Greek economy unstable before the crisis even began?
-The country had accumulated large debts due to high public spending and low GDP growth.
-Hence, Greece was unable to make repayments of its debts when the crisis broke out.
IMF: How did the IMF help Greece? Was it effective?
-In 2010, they gave the first package of the €110bn.
-In return, they demanded that Greece implement austerity, & Troika (IMF, European Commission, and the European Central Bank) negotiated a 50% redution on the amount Greece owed to banks.
-By 2014, with 2 bailouts, the deepening economic recession meant an anti-austerity party won a snap election.
-Generally, quite ineffective. It did little to lessen Greece’s failing economy, and simply provoked outrage from the people, leading to the election of anti-austerity party.
IMF: What were the consequences of the IMFs involvement in Greece?
-Election led to attempts to renegotiate the conditions, as the IMF was impeding on state sovereignty.
-The Gov held a referendum, debating the adoption of the renegotiated package. This was rejected 61% to 39%.
-In 2015, they failed to make a payment to the IMF, and banks closed + there were fears that Greece would leave the Eurozone.
-Cash withdrawals were limited to €60 a day, and a new bailout had to be agreed later in the year.
IMF: What are some successes?
-IMF emergency loans are vital in restoring confidence in a member state facing a balance of payments crisis.
-IMF loans to EU states, like Greece, Ireland, and Portugal during the Eurozone crisis were vital in restoring confidence in the eurozone.
-From the start of the global financial crisis until 2019, IMF provided $325bn in loans to restore confidence in the global economy.
-Developing countries like India have committed to reform, and have been able to take advantage of globalisation. In 2019, their economy grew by 7.3%.
-The Asian financial crisi (1997-8), did not spread, because states were quickly saved from backrupcy by the IMF.
IMF: What are some failures?
-Continually fails in its workd on surveillance. It did not warn member states that their deficits were too high, making them vulnerable to global financial shock.
-IMF has a ‘one fits all’ kind of policy. The approach of economic liberalism doesn’t take into account the diverse needs of nation-states.
-2008 crash could’ve been prevented, had the IMF been better at its surveillance work.
-Public spending cuts and free-market reforms, required by SAPs, are very controversial.
-Countries are also increasingly looking for loans that are nt conditional, with Pakistan turning to Saudi in 2018.
-Legitimacy of the IMF in the developing world has been undermined by the fact that every single leader has been European.
World Bank: What were its founding objectives?
-Act as source of loans for reconstruction & development.
-Help rebuild key infrastructure, like roads, and electricity.
-Originally it, like the IMF, used SAPs. However, with the poorest countries, they have moved away from providing loans, and instead gives grants for specific projects.
World Bank: What are the two main institutions in the World Bank?
-International Bank for Reconstruction & Development: Provides loans to help meet middle-income countries’ development needs. They provided the State Bank of INdia with a loan fo $700m to develop solar energy projects.
-International Development Association: Provides loans to the poorest countries. These loans tend to have very low interest rates (sometime none at all).
World Bank: How does it provide help?
-Provides loans, technical & financial assistance to support reconstruction & development.
-It deploys >$50bn in various types of assistance, w/ 12,000 projects worldwide.
-Provides technical advice to states with the advice focusing on human & social development.
-Funds specific medium to long-term development projects.
-Carries out analytical work on development matters, which is made freely available to states & NGOs working on development.
World Bank: What are two World Bank Projects?
-Water & Sanitation Project in India, where WB provided them with $3.4bn to improve access to clean water & sanitation. This has been a long-term project since 2000 & has helped around 36m people.
-Reconstruction in Afghanistan, where, since 2002, the World Bank has invested >$4.7bn for development and reconstruction.
World Bank: In what ways is the World Bank effective?
-Recognised as a base for world’s experts in development economics. They offer technical advice & assisstance to ensure project are delivered effectively.
-Acted as a source of finance to many states as they started to develop. South Korea received neraly $15bn from WB, and is now a leading donor to poorer states.
-There are 189 World Bank member states, which asserts its scope of influence.
World Bank: What are some criticisms of the WB?
-There are competing development banks. Asia Infrastructure and Investment Bank, created by China in 2016, has 103 members, and the New Development Bank was established in 2015 by the BRICS. The World Bank is therefore becoming less powerful.
-Its previous use of SAPs has, just as the IMF did, received criticism. It is suggested that these create ‘shock therapy’ economies, that have had a US economic model imposed on them.
-It is overwhelmingly dominated by the US, who carried 16% of the voting power (in accordance with the amount that they contribute). Every President has been a US citizen.
World Bank: Give some of its successes.
-World Bank has been repsonsible for major infrastructure projects in the developing worls. 2011-8, IDA finances the immunisation of 274m children, and provided better access to clean water for 86m.
-Projects focus on lending directly to local communities (CDCs), and from 2010-2015, the IDA completed 90 projects, responsible 164,000 local projects, reaching 176m people.
-Gender equality strategy means it encourages female education & opportunities. In sub-Saharan Africa, girls attending primary school rose from 76.1% in 2000 to 95% in 2017.
