ECONOMIC GLOBAL GOVERNANCE

Question 1

Origins and purpose of the BRETTON WOODS CONFERENCE.

Answer 1

• 1944, WW2 Allies
• stabilisation of world currencies
• capitalism the dominant ideology
• prevent economic depressions
  > Institutions and Forums of EGG that manage the world economy.

Question 2

The International Monetary Fund (IMF)
> the 3 primary functions today.
> overall role in EGG.

Answer 2

• SURVEILLANCE, reviewing country’s policies, + monitoring global/regional developments.
• LENDING, members can request financial assistance due to suffering or being prone to debt crises.
• CAPACITY BUILDING, experts can provide technical assistance to members on how to best manage their economy.

> to foster global monetary cooperation, securing economic growth and financial stability.

Question 3

The IMF - Funding and Resources
> where and who?

Answer 3

• Acquires resources and money from its 190 member states.
  > These quotas reflect the relative position of the state’s wealth.
  > Voting Power is weighted by how much a state contributes financially, economically powerful states make more decisions.
  : The USA makes up 1/5 of voting power.

Question 4

The IMF - Structural Adjustment Programmes (SAPs)
> what and why?

Answer 4

• Loans given out by the IMF are CONDITIONAL, they come with strings attached.
  > These are reforms that the government must make.
  : privatisation of industries, deregulation, raising taxes, cutting government spending, reducing public sector wages etc.
  > Argument that states who get themselves into financial difficulty need an incentive to stop it from happening again, and therefore shouldn’t receive unconditional loans.

Question 5

The IMF - Criticisms
> SAPs, Voting power etc

Answer 5

• IMF is undemocratic, as richer, western states make most of the decisions by having more voting power.
• Economic reforms, like privatisation, see an increase in corporate profits, but are not shared amongst the people.
• Even though states may see prosperity, wealth inequality and child poverty increases, SAPs benefit the richest only.
• Imposing SAPs upon states can be viewed as impacting a state’s sovereignty, structural measures may clash with the government’s wishes.
• Enforcement of neo-liberal policies linked to the Washington Consensus may be problematic, as it may leave poorer developing countries worse off, by shrinking public sectors and benefiting TNCs.

Question 6

The IMF - Role in the Greek Debt Crisis
> pros and cons?

Answer 6

PROS
- IMF was able to provide Greece with some of the biggest loans that they have ever provided.
- Despite the election of the anti-austerity party in 2014, Greece was still able to secure a new bailout deal from the IMF in 2015.

CONS
- Imposing austerity measures, like higher taxes and lower wages, angered the Greek public massively, and they voted in the anti-austerity Syriza Party in 2014.
- IMF’s role clashed with Greek sovereignty, the structural measures were at odds with the wishes of the democratically-elected government.

Question 7

The World Bank
> 4 primary functions
> overall role in EGG?

Answer 7

• LOANS to support reconstruction and development (~$50 billion each year)
• REDUCING POVERTY, ending poverty under the Millennium Development Goals and boost shared prosperity.
• TECHNICAL ASSISTANCE to states, focusing on human and social development.
• ANALYTICAL WORK, made available to NGOs, adding to global research.

> international development organisation, to help states without the financial capital.

Question 8

The World Bank - Funding and Resources
> where and who?

Answer 8

• Acquires resources and money from its 189 member states.
  > similar to the IMF, voting power is weighted by the amount states contribute.
  : The US has 16% voting power, no other state has more than 5%.

> The President of the World Bank can be appointed by the US President, and is usually a US citizen, currently that is David Malpass.

Question 9

The World Bank - Criticisms
> SAPs and competition etc

Answer 9

• Similar to the IMF, the World Bank attaches SAPs to their loans, which come with conditions that the receiving state must follow.
  > This has pushed the neo-liberal agenda on states, which opposes the recipient state’s interests, due to the consequences aforementioned in IMF.
• The fact that the US President is able to nominate the President of the World Bank may lead us to argue that the WB is just a branch of US policy.
• Competing development banks are on the rise, such as the Asia Infrastructure and Investment Bank, set up by China.

Question 10

Distinguish between the IMF and the World Bank
> main differences

Answer 10

The IMF:
- global and national economic growth.
- emergency assistance in debt crises.
- technical assistance on macro-economic policy.
- loans to help with debt to private banks.

The World Bank:
- ending poverty and focusing on sustainable development.
- grants for long term development projects.
- technical assistance for development needs like health + education.
- loans for development which are moving away from specific conditions.

Question 11

DEVELOPMENT
Explain what Classical Development Theory is:

Answer 11

• promotion of free markets and free trade encourages global prosperity, the market can and should regulate itself.
• as the reduction of trade barriers encourages greater global trade and wealth.
• this global competition drives down prices of food and consumer items.
• increasing production and stimulating the economy will alleviate poverty.
• trade way out of poverty.
• theory by Adam Smith.
• Thomas Friedman, classical economic theory, economic globalisation has increased convergence between the north and south.

Question 12

DEVELOPMENT
Explain what Neo-Liberal Theory is:

Answer 12

• Washington Consensus
• privatisation, deregulation, and low government spending will reform an economy and help alleviate poverty.
• higher wealth at the top will trickle down, as capitalism generates wealth which can then be distributed.
• main principles of institutions of the Bretton Woods conference.
• low tax, free trade, foreign investment.

Question 13

DEVELOPMENT
Explain what Dependency Theory is:

Answer 13

• Marxist model.
• Our system of trade and development is structured to exploit and embed inequality, which in turn causes poverty.
• the capitalist trading structure includes the global north vs the global south.
• developed nation’s wealth is based upon labour and resources from the developing world, derived from colonialism.

Question 14

DEVELOPMENT
Explain what World System’s Theory is:

Answer 14

• Wallerstein
• World system is organised into core states, semi-periphery states, and periphery states.
• creates levels of dependence and exploitation.
• difficult for states to move between these groups, but it is a changeable structure.
• economic globalisation is a form on neocolonialism as it keeps periphery states permanently reliant on core states.

Question 15

ORTHODOX vs ALTERNATIVE model of development:

Answer 15

ORTHODOX
= neo-liberal and classical viewpoint that views development as purely driving economic growth, to stimulate the economy and generate revenue.
= favoured by the IMF.

ALTERNATIVE
= emphasis on human development and well-being, considering a broad range of factors like income, life expectancy, and education.
(HDI)
= SDGs, taking risks away from future generations are the key focus of the UN development work.