Economic Global Governance

Question 1

International monetary fund

Answer 1

Created as part of the 1944 Bretton wood agreement. Focuses on emergency assistance.
Surveillance- reviews a countries national,regional and global economic policies and advices states encouraging policies that foster economic stability
Lending- A member state may request IMF financial assistance if it suffers adebt crisis
Capacity building- IMF experts provide training to member states to help them manage their economy more effectively
-aims to stabilise currencies (making trade affordable)
-suggests policies based on a country’s economic performance and gives out loans to cover debt payments, which come with conditions SAPs
-Overseeing the International monetary system to ensure exchange rates stability
-Focused on supporting developing countries afflicted with debt crisis
-Responsible for managing financial crisis and helping to ensure that national or regional crises do not develop into global crises.
-Providing loans to developing and transitioning countries.

Strength:
-It often provides loans to countries that have no other source of finance
-It provides extensive information on the economic health and stability of member states

Weaknesses:
-Can do more damage than solve problems as the flawed model fails to recognise the possibility of market failure
-Seen as an enemy of democracy and human rights giving support to military dictatorship which are linked to western interests.
-Structural Adjustment Programmes do not take into account entrepreneurial culture and values
-In the wake of the 2007-9 global financial crisis the IMF was criticised for not preventing the crisis and highlighting the instability that led to it.
-Voting power is awarded to the most powerful economic states which pay the most and so have increased decision making powers.

Calls to reform the IMF particularly to strengthen its ability to regulate the global financial system.

Question 2

World Bank

Answer 2

-Provides loans to aid in the reconstruction and development. Increase focus on reducing poverty
-By promoting project in rural development and concentrating on meeting basic needs.
-To improve member state economies and the standard of living of their people.
-Increase the involvement of developing countries in international markets.

2 key Institutions:

International bank for reconstruction and development- Responsible for providing loans to help meet middle income countries development needs
EG provided the bank of India with a loan of over $700 million to develop solar energy project.

International development Association-provides loans to the poorest countries which tend to have very low interest rates.

Strength:
-Recognised as a base for the world’s experts in development economics, working across the world to offer assistance on projects and ensure they are delivered effectively
-Acted as a source of finance to many states as they sought to develop
-Moved away from conditional loans and has become increasingly less demanding on economic reform

Weakness:
-Competing banks such as the AIIB set up by china and the New Development Bank set up by (Brazil, Russia, South africa, India and china)
-Criticised for pushing a neoliberal agenda to aggressively on state e.g argentina resulting in shock therapy in economies across the world.
Imposes a US-centric economic model on states too quickly arguably in the global interest as opposed to the recipient interest.

Question 3

Structural adjustment programs

Answer 3

When the IMF makes a loan to remember country, it is often conditional
Criticisms:
-It makes excessive demands on states and that infringes and state sovereignty.
-Sovereignty is impacted because a state economic policy is no longer decided in the pendently but negotiated and monitored by the IMF.
For example, Before the IMF loaned to Argentina, the government set out plans to increase taxes on wealth and create a new independent body to review the governments budget.

Question 4

Argentina 2019

Answer 4

Argentina received the largest loan in IMF history over $56 billion. Before receiving this Argentina was required to put forward a plan to increase taxes, public spending and create an independent watchdog for budget responsibility.

Impact:
Argentina‘s government continue to raise taxes but in 2019 defaulted on its debt for the ninth time in its history. old billions of dollars to the IMF and international lenders and the COVID-19 pandemic further reduced economic growth

Question 5

The IMF is good for the world economy

Answer 5

-Gives loans to state to help reduce likelihood of falling into economic recession
-Helps prevent economic difficulties in one state from spreading to others
-Provides an independent monitor of state economies helping them to identify threats and opportunities
-Helps states to reform that economies to an economic model that has delivered considerable economic growth in most developed states

Question 6

That IMF is not good for the world economy

Answer 6

The IMF forces states to comply with conditionality in a way that interferes with sovereignty
It is a western dominated economic model
-SAP do not benefit the boost corporate profits and serve interest of developed states.
-It failed to predict and prevent the global financial crisis in 2008 by failing to challenged reckless lending and inadequate regulation of global financial institutions
-It was unable to prevent the spread of the global financial crisis

Question 7

World Bank Projects

Answer 7

Water and Sanitation in India:
Provided millions of dollars to improve access to clean water and sanitation. Long-term project which has helped 36 million people.

Question 8

World Trade Organisation

Answer 8

1947 the GATT was signed by 23 founding nations with the aim to agree a set of international trade rivals where tariffs and goods would be reduced.

Primary goal is to reduce barriers on trade in both goods and services by reducing and removing tariffs imposed by states on imports from other states.

Non-discrimination: state should treat their trading partners equally and fairly

More open: There is commitment free trade and progressively lowering tariffs

Predictable and transparent: state should not raise trade barriers without warning

More competitive: states should not interfere in order to give themselves unfair competition edge

More benefits for less developed countries : to catch up and transition to becoming full participants in international trade

Protection of the environment: environmental protection must be respected both nationally and internationally

Question 9

G7

Answer 9

The seven wealthiest economies
-Has no formal rules
-Has no budget
-If it’s members want to take action that cost money, the individual member states pay for it
-Decisions are not legally binding and rely on the individual of the participating states to deliver commitment they have made
-No defined objectives

Question 10

Criticisms of the G7

Answer 10

-It’s membership is an outdated version of the worlds economic power. The worlds second largest economic power China is excluded and rising powers such as Brazil in India are also excluded.
-Made up of states that normally agree with each other expelling Russia confirms this.
-Scope for the G7 to achieve major breakthrough is limited. There is a sense that the G7 response to events rather than shapes them.
-Flexibility and informal approach makes it difficult to hold its members account for commitments made at the summit

Question 11

Strengths of the G7

Answer 11

-For realists it has little impact on state sovereignty the forum never forces states to do anything they do not agree with
-Informality allows its members to focus on issues of importance and respond to major issues of the moment.
-Smaller number of member states prevents gridlock in decision-making to WTO which has a fog larger membership and has been unable to agree a new trade deal since 2001

Question 12

G20

Answer 12

-Membership represents established and emerging economies which accounts for almost 2/3 of the worlds population
-All of the Bretton woods institutions attend along with the EU and the UN
Meetings take place annually with a rotating president
-The agenda for G20 meetings has become increasingly broad extending beyond purely economic matters. Climate change and global terrorism have featured on recent agendas.

Question 13

Criticisms of G20

Answer 13

-Been criticised for prioritising the needs of member states and defending interests global capitalism
-While it’s diversity is a strength divisions in the G20 particularly clashes between US and its allies and Russia and China have become more tense in recent years
-Critics argue the G20 is just slightly less exclusive but still an exclusive version of the G7 with no transparent criteria for membership
-States cannot be held accountable for decisions or actions they agree at the G20 summits

Question 14

Realism and economic development

Answer 14

-State should focus on their own economic development first and spend government money on the needs of their own citizens
-States only help other states to develop if this helps to protect or advance their own interests.
-Aid is likely to make recipient nations dependent on funds and skills from other states
-Debt relief encourages states to continue to mismanage their economy

Question 15

Liberalism and economic development

Answer 15

-Developed states have a responsibility to help less developed states as it is in the global interest for less developed states to be helped
-IGO have a key roll to play in coordinating efforts of the international community through MDGs
-Aid can be used to empower developing states for examples through initiatives
-Depth relief gives states the opportunity to invest in their own development rather than repaying loans

Question 16

Global inequality and the North south divide

Answer 16

-North America, Europe Russia, and Australasia as the developed global north
-Africa, South America and South Asia the less developed global south

-MNC based in the north are seem to be exploiting states in global south for natural resources and cheap labour profits are returned to and benefit the north rather than being shared with the south
-States in the global north had used colonialism as a means of dominating global south and even after the colonialisation were continuing to exert economic and political power
-States in the North created the Bretton Woods institution for their own benefit and continue dominating decision-making Solutions proposed by IMF to help economies in the global south are based on neoliberal economic model which serves the interest of the global north. Wealthiest states in the north continues to have more decisive power over IMF loans and the conditions attached.
-A lack of industrialisation and reliance on agriculture exports were not creating wealth for the south. Global south countries and their exports were not yet part of the global free trade agreements meaning that there was not a level playing field for the countries in the south and protectionism in the global north was making market access difficult.

Question 17

Gap between global north and global south is closing

Answer 17

Many states in the global south have successfully industrialised
China officially in the global south has seen a dramatic increase in its economic growth and set the worlds largest economy by 2025
evidence of more inclusion of states in the global south in economic global covenants and this has improved greatly in terms of increased membership of the WTO and inclusion in G-2

Question 18

Core states

Answer 18

Based in the global north. Highly industrialised economies which multinational corporations are based. Dominate both domestically and globally with high-paying wages. Countries populations are internationally well educated and highly skilled.

Example: the US

Question 19

Periphery states

Answer 19

States are poor and underdeveloped. Many of these are based in the global south. They are yet to industrialise but process natural resources that the course states need.
They lack well developed industries or manufacturing of their own.

Democratic Republic of Congo is one of the poorest countries in the world.
Minerals are extracted using cheap and sometimes child labour from mines in the DRC and exported to countries these minerals are key components in making smart phones and industry which has seen foreign owned MNCs including Apple and Samsung become some of the worlds richest companies.
DRC remains stuck in low wage low technology on reliance on the poorly paid investment of foreign MNCs

Question 20

Semi periphery states

Answer 20

The states for somewhere between pool and core states. Becoming more industrialised but still dominated by the core states

Example: Brazil South Africa newly industrial countries

Question 21

Global governance has helped to reduce global poverty

Answer 21

MDG and SDG have made significant progress with extreme poverty falling by half since the MDG were launched
Economic global governance activity to reduce poverty is now well coordinated with a clear vision of responsibility
-The north south divide has been reducing showing that dependency theory is no longer inevitable and newly emerging economies demonstrate that it is possible for countries to plug into the global economy.

Question 22

Multinational corporations

Answer 22

-The dependency theorists MNC’s are part of the global capitalist model that locks individuals in the state of underdevelopment.
-For neoliberals they should be as free as possible from state intervention to enable them to grow and innovate naturally within a free market.

-MNC have wealth and influence that far exceeds some states giving them considerable bargaining power over states and sometimes for states to change their economic policy to attract foreign inward investments.
-Key problem has been ensuring that MNC are not able to exploit their globalised nature by avoiding paying tax in the states within which they operate
-The G20 and G7 have attempted to take action to reduce tax loopholes but with limited success

Question 23

Does international aid work?

Answer 23

Yes:
-Levels the playing field there are structural biases within the global economy that Favour which countries at the expense of poor ones. Poor countries cannot compete on equal terms so international aid helps to counter these disparities by ensuring accounts of flow of money and resources from the north to the south.

International aid is increasingly targeted on long-term development projects and around capacity building for the future
Effective aid is evident in the fact that crunchies such as China India and Brazil major recipients of aid in the past are now developing strategic aid programs themselves

Emergency relief: the need has grown as humanitarian crisis have become more common Civil Wars and ethnic conflicts, climate change due to global warming.

Question 24

Does international aid work? No.

Answer 24

-Ineffective help for the poor as there is little reliable evidence that it boosts economic growth and contributes to poverty reduction aid may and trench patterns of global inequality rather than challenging them and Strengthen a culture of dependency. The level of aid is insufficient to make a difference to poor countries and poor people.

-Corruption and oppression aid is channel through recipient country governments in power which is often concentrated in the hands of a few and mechanisms of accountability are poor therefore turns to benefit corrupt leaders and elites rather than the people and projects for for which it was intended.
-Aid deepens oppression as autocratic rulers may use aid funds not only to support their own lifestyles but to widen their political control.