Economic Global Governance: Failing? Flashcards
arguments suggesting that economic global governance is failing when it is needed most
IMF
World Bank
G7/8
arguments suggesting that economic global governance is NOT failing when it is needed most
IMF
World Bank
G7/8
IMF
economic globalisation encourages poverty and inequality rather than resolving it
for example, the 1988 annual meetings of the IMF and World Bank were met with huge protests in West Berlin that attracted international support
these movements point to the Structural Adjustment Programmes (SAPs) given out by the IMF and the World Bank, which are loans with conditions attached
such loans require developing countries to undertake policy objectives such as privatisation, deregulation and opening up their markets to the world
however, rather than encouraging economic growth, anti-globalisation movements argue that these loans create a poverty cycle by encouraging developing economies to open up their markets to exploitation by much larger economies and TNCs, leading local businesses and infant industries to be at best side-lined and at worst completely destroyed
they also encourage developing countries to produce cash-crops such as coffee and cocoa, which leaves them vulnerable to exploitation by TNCs who control the production, manufacturing and distribution of such products
this can be seen in the way in which Ghanaian rice farmers, the Jamaican peasantry and the Senegal groundnut industry have all been ruined by cheap foreign imports
cash crop production also reduces the amount of land under cultivation to meet domestic food needs, which can lead to a continuing cycle of famine and poverty
in this respect, the IMF and World Bank seem to relegate countries to peripheral status so that they never achieve a proto-industrial stage of development, which reinforces the North-South divide
IMF
the orthodox approach, inspired by thinkers such as Adam Smith and David Ricardo, in turn inspired and is underpinned by the conditionality attached to SAPs
it provides much of the thinking behind SAPs, believing that the best way to promote development in underdeveloped states is to introduce economic liberalism
this may involve countries freeing up their markets, privatising state owned industries and focusing on producing products in which they have a comparative advantage
the SAPs offered by the IMF and World Bank are therefore beneficial and are the best way to encourage growth
SAP requirements for Greece – Reduce public spending on government wages and welfare benefits the Greek system of state pensions was costing 17.5% of Greece’s GDP
The Greek government was required to make €1 billion of savings through pension reforms alone
The Greek parliament voted in 2016 to approve reforms to income tax and general state pension schemes
Greases governing anti-austerity party, Syriza, Proposed the reforms in the face of public protests pensions have been cut many times and are now estimated to be worth 25 to 55% less but at the beginning of the debt crisis
the IMF maintains the stability of the international financial system by monitoring the system of exchange rates and international payments that allows countries and their citizens to do business with each other. It also monitors the economic health and stability of its member states and warns against policies which it considers could be damaging to the economy – this is known as surveillance. For instance, the IMF has advised Mexico that it is too dependent on oil revenue and that it should therefore diversify and in 2015 it warned African countries that they would need to reduce public spending to compensate for reduced Chinese growth rates. It also offers technical advice to countries on how best to maximise their economic potential, as it has been doing for Peru by advising on methods of tax collection and public spending. But perhaps the most effective role of the IMF is acting as a lender of last resort. After the 2008 global financial crisis, African countries were greatly impacted as the demand for imported goods from Africa declined and international growth rates slowed. In response, the IMF proactively made billions of dollars available to places like Ghana at extremely low interest rates and with this support, Ghana’s growth rate increased to over 9% in 2011 and it remains one of Africa’s frontier emerging markets
World Bank
many suggest that the World Bank hurts the poor rather than helps them
according to a 2015 investigative report, nearly 3.5 million people have been displaced over the last decade to make room for World Bank funded projects
in the event of such projects, the World Bank has rules to ensure that families are not forced from their homes without warning and that they are safely resettled elsewhere
however, on many occasions, the World Bank has reportedly failed to live up to the standards
for instance, in 2007, the World Bank loaned nearly $17 million to Kenya’s National Forest Service for a conservation project, but Kenyan authorities reportedly used the money to forcefully evict thousands of indigenous people who had been living in the project area
between 2007 and 2014 up to 1000 indigenous homes had been ransacked or burned
furthermore, the Bank encourages unsustainable development. Marshland has been drained, hillsides terraced and trees felled to grow crops for export, lowering biodiversity and increasing the risk of landslides and flooding which can be especially hard for developing countries to deal with. The World Bank acknowledges these problems but has yet to make any changes so continues to face severe criticism
World Bank
the World Bank’s purpose is essentially redistributive in that it aims to reduce global poverty
In 2016 it provided over $63 billion in low interest loans 0 to live interest credits and grants to 275 projects in developing post-conflict fragile and middle income states
In developing countries it has funded improvements to agriculture roads and transport links
The aim of these projects is to reduce the proportion of the income that is it is it spend on food so that they have more disposable income to spend in the domestic economy thus stimulating economic growth And development
The World Bank is also a source of expertise on economic and social development
The World Bank has cancelled a $90 million loan to Uganda’s health service as a result of President Museveni criminalisation of homosexuality illustrating the World Bank is growing focus on human rights
In India the World Bank is focusing on encouraging enrolment in school by the Rurel population and marginalise groups
As a result of a World Bank initiative 80% of girls now attend primary school in Yemen
In Bosnia the World Bank has established an active youth program to provide young people with training and opportunity especially vital as a youth unemployment is 57% in this still vulnerable postwar state
G7/8
the G7/8 is also often criticised for being ineffective, especially in tackling global issues such as poverty
anti-globalisation protesters criticise the G7 for its apparent inability to effectively deal with poverty, inequality and climate change
it has cancelled much of the debt of developing countries but the gap continues to widen between them and the developed world
furthermore, despite sanctions and public condemnation by the G7, Russia continues to undermine the sovereignty of Ukraine and seems unconcerned about its exclusion from the group, probably because it continues to enjoy membership of the G20 which is now generally thought to be a more important and effective international forum
the G7’s statements also have no binding power – leaders discuss a range of issues but the resulting communiqués are merely statements of intent and so have no real power
for example, the recent commitment to decarbonisation in 2015 has no authority and so critics have argued that the G7 is little more than an expensive talk shop that fails to reach tangible solutions to real world issues
sometimes the organisation does not even talk about important issues, as in 2015 when no specific policies were agreed on vital issues such as how to confront ISISI or the Greek debt crisis. Obama simply called for members to show sufficient flexibility with Greece and no specific policy was agreed on ISIS. This all illustrates the ineffectiveness of organisations like the G7/8
the G7 can be criticised for having become irrelevant, it started as a ‘rich countries club’ to promote neoliberal economic policy, arguably to the detriment of developing countries and economies, but has declined in relevance
G7/8 + G20
the G7/8 is an effective forum for discussion
it provides a forum where states can discuss common concerns openly and honestly in a way they could not do in other forums such as the UN
the groups are also small enough for intimate discussions between leaders and finance ministers which makes it easier to reach agreement
in particular, the G7 represent states with similar political and economic systems (liberal democratic capitalist economies) which facilitates consensus, whereas organisations such as the IMF have hundreds of members from extremely different cultures which often makes consensus and genuine discussion difficult to achieve
the G7 and G20 does not seem to face this problem to the same extent, often enabling them to agree on new policy initiatives relatively quickly. For example, the G7/8 meeting at Gleneagles in 2005 saw a $50 billion aid boost and debt cancellation deal agreed for the poorest countries.
in 1999, the G7 cancelled $100 billion of bilateral and multilateral debt. It also went several steps further by doubling its aid to Africa and cancelling all the debts of 19 countries owed to the IMF and World Bank
as mentioned above, at Gleneagles in 2005, the G7 agreed to write off $40 billion of debt and contribute 0.7% of GDP to overseas development. Then, in London in 2013, the world’s first global dementia conference was held in order to generate a more global response to the growing problem
the G20’s response to the 2008 global financial crisis
