Economic Governance + Poverty Flashcards
Economic Globalisation + Global Governance
economic globalisation isn’t new - it’s the increased links between states’ economies via free trade, increasingly mobile populations, technological ease of business, and the global power of MNCs - often said to be making the North richer at the expense of the South. the US + UK led setting up liberal economic governance institutions like the IMF, WTO + World Bank in 1944 to prevent the kind of global economic shocks that contributed to nationalism and instability in the 1930s. the Washington Consensus that Western states decided on is based on free trade, low public spending, deregulating financial markets, privatisation and openness to foreign direct investment, and has become the predominant economic model among states.
Is economic global governance under threat?
primarily the developing world faces issues surrounding globalisation + poverty, whereas Western developed economies have benefitted disproportionately. the election of Trump and Brexit can be partly explained as backlash against Western developed economies now struggling with low wages, high inflation, pressures of immigration, + jobs moving to cheaper labour markets, meaning there is now the arguments that globalisation is driving and deepening poverty in both the developed and developing world. possible responses include tightening foreign aid budgets, greater protectionism, stricter controls on immigration, and withdrawal from liberal institutions such as the EU and TTP, the latter threatening economic global governance.
The state of global poverty and inequality
overall, poverty has been reduced during the time when economic global governance institutions have existed, according to the World Bank the number of people living on less than $1.25 /day reduced from 1.9 billion in 1980 to 702 million in 2016. however reducing poverty hasn’t been uniform across states, China + India developing rapidly while sub-Saharan Africa progresses slowly as still has large populations in poverty. global inequality (gap between the richest and poorest in the global economy) has risen drastically in this period, as well as inequality in individual states (China’s poorest 25% own 1% of the wealth). reducing global poverty has happened as the richest states and individuals have become richer.
What has the IMF done?
it doesn’t have reducing global poverty as a key objective, focusing on economic forecasting, risk analysis and providing loans, which could help reduce poverty if successful. however it did fail to predict the 2008 crisis which cased considerable damage to the world economy and caused recession in the developed and developing world. one of the main causes, excessive and reckless lending leading to a banking crisis, was a global problem lacking a global regulatory response. it has also been key in enforcing the Washington Consensus on developing states, SAPs providing loans requiring states to reform their economies, which have been criticised as getting poor states into more debt and breaching sovereignty.
What has the World Bank done?
it has the most explicit responsibilities for poverty reduction of Bretton Woods IGOs, providing direct grants (not loans) to developing states (avoiding international debt). however funds available to the WTO are relatively small.
What has the WTO done?
it focuses on expanding global free trade and reducing barriers to trade. it has been notably slow (the last 20yrs in complete gridlock) in welcoming the membership of developing states. its Doha development round aimed at extending free trade to the developing world hasn’t made any conclusive progress since it began in 2001, reflecting protectionism by developed states fearing the impact of cheaper agricultural imports. critics say it has become exclusive and protects the interests of richer developed states.
What has the G7/G20 done?
G7 + G20 most often protect the interest of developed states over addressing the interests of poorer states. there is nothing to stop the forums tackling world poverty if the members choose to do so. in 2005 Blair held a G8 summit agreeing the wealthiest economies would commit 0.7% GDP to foreign aid and debt relief, but as with most informal and non-treaty based organisations, implementation of non-binding promises was inconsistent. also, agreements like this have been the exception, not the rule.
What has the UN/MDGs done?
MDGs have had the greatest impact of recent efforts at reducing poverty, being the first collective effort to do so. they have provided plans for states and IGOs (e.g. primary education, maternal health), and UN reports that since introduced in 2000, extreme poverty had reduced by 1/2 since 1990. progress hasn’t been uniform, sub-Saharan Africa lagging behind when MDGs concluded in 2015, and rapid economic development in China, largely unconnected to MDGs (instead from domestic reforms), was responsible for a large portion of reduction in global poverty. UN Secretary-General Ban Ki-moon acknowledged in 2015 that global inequality remained a serious challenge. many MDGs are being taken forward as SDGs. a target-based approach by the UN has successfully mobilised and shared responsibilities for reducing world poverty among states, IGOs and NGOs.
What has made a difference?
global poverty has decreased as global inequality has increased. it is unclear whether it has been due to econ globalisation, technology, MNCs, spread of Washington Consensus, spread of democracy, or global governance institutions. given that funds for economic IGOs are dwarfed by international trade and remittances (money from migrants to family abroad) by billions, it is unlikely IGOs have made a decisive difference. economic IGOs have possibly made the most impact out of different actors, states and MNCs also playing a role, but liberal IGOs being the most effective when states can’t help themselves, intervening in global crises (G20decided to bail out banks in 2009) and when individual economies come close to collapse (Argentina and Greece). economic global governance is limited in power in a world order governed by states. it is significant, but only one actor in a wider, more organic process of economic change.
