global: economic governance

Question 1

What is Rostow’s theory of economic growth?

Answer 1

Rostow was a US political advisor who developed Modernisation Theory in 1960 to justify US spending on economic investments in developing countries.

· The plan was for the World Bank to build infrastructure for energy and trade in developing countries that were at risk of falling to communism, such as Vietnam.

· Rostow proposed a 5 stage model of economic modernisation that all states would progress through, if they followed the conditions imposed by the World Bank in exchange for aid - free market economics and democracy.

· The idea was that people in these states would reject communism when they saw the benefits of trade, development and democracy.
the five stages are - traditional society eg niger, preconditions for take off eg ethopia, take off eg india, drive to maturity eg china, high mass consumption eg usa

Question 2

what is the structural theory of development?

Answer 2

Raul Prebisch, mid 20th century Argentinian policymaker.

· They need to industrialise by rejecting…

· Instead they must use…

· The problem with this…

Question 3

what is the world systems theory?

Answer 3

Wallerstein was a German-American academic, inspired by Marxism and dependency theory.

š He agreed with dependency theory that Europeans created dependency and that inequalities are structural and perpetuated by global capitalism. But he updated dependency theory to account for recent rapid developments in emerging economies.

World Systems Theory – Overview

The world system is…

There is also a third category…

This group of states produces…

whilst providing…

States can move between groups…

Capitalist elites in every tier exploit cheap labour where they can.

Question 4

what is the neoclassical development theory?

Answer 4

In the late 1970s, a counter-revolution in the US and UK asserted dominance over both modernisation and structuralist ideas.

š Neoliberalism rejected structural theory…

š It also rejected modernization theory…

š It aimed to…

Question 5

what is the washington consensus?

Answer 5

Reagan’s neoliberal ideas were enthusiastically adopted by the Washington-based IMF and World Bank.

š Many African and Latin American states had borrowed heavily from US banks, encouraged by low interest rates in the early 1970s. After the oil shocks and inflation of 1973-6, US interest rates shot up, making debt payments unmanageable. A debt crisis emerged and debtor states turned to the WB & IMF for bailout loans.

š Strict conditions called structural adjustment programmes (SAPs) were imposed on these loans.

Structural Adjustment Programmes

Neoliberal policies imposed by SAPs required:

š Reduce tax rates on businesses

š Deregulate financial markets to boost FDI

š Deregulate labour markets (hiring and firing made easy)

š Develop an export-led economy

š Remove protectionist trade barriers

š Reduce public spending on services and welfare (austerity)

Question 6

strengths of membership of the IMF?

Answer 6

190 members - widespread membership allows for developing countries to receive (in theory) effective financial assistance

Question 7

weaknesses of membership of the IMF?

Answer 7

countries taking loans from IMF are subject to conditions - these often involve implementing neoliberal economic policy, regardless of the standing of whichever government is in power. often does more harm than good, bolivia and tanzania being examples.

Question 8

strengths of decision making of the IMF?

Answer 8

has given out hundreds of loans - no obligation from any country to accept.

Question 9

weaknesses of decision making of the IMF?

Question 10

strengths of effectiveness of the IMF?

Answer 10

saved greece from bankruptcy with a 110 billion euro loan and imposed austerity. shows that in the right conditions SAPs have potential to be effective

Question 11

weaknesses of effectiveness of the IMF?

Answer 11

disastrous SAP in bolivia - left the country arguably worse off than before. water project ended up giving parts of the country 4 hours access to water per day. mass protests called the “water wars” ensued.

Question 12

strengths of membership of the g7?

Answer 12

consists of developed western powers , which tend to share a broad political outlook, supporting democracy and capitalism. these broad shared goals make reaching final decisions much easier.

Question 13

weaknesses of membership of the g7?

Answer 13

accused of being outdated - does not include emerging powers such as China and India. this makes the body increasingly irrelevant in a changing world. no formal mechanism to apply/join making this problem worse

Question 14

strengths of decision making of the g7?

Answer 14

no formal rules/charter on how decisions are come to - this can lead to quicker decisions than organisations like the IMF which may take many months to reach a final agreement.

Question 15

weaknesses of decision making of the g7?

Answer 15

most important meetings are closed - means the organisation lacks transparency and as a result is less trusted by other organisations/the public. could be argued the lack of rules or charter on how to make decisions works against the g7.

Question 16

strengths of effectiveness of the g7?

Answer 16

the g7 made huge progress during the covid-19 pandemic. In 2021, in Cornwall, the G7 committed to providing one billion vaccine doses over the next year. towards those in the greatest need. Taken together with the dose equivalent of the G7’s financial contribution of $8.6 billion, this gives a G7 total contribution of over two billion vaccine doses.

Question 17

weaknesses of effectiveness of the g7?

Answer 17

due to informal nature of the alliance, success is highly dependent on the approach of world leaders. for example, Donald Trump was not a fan of the G7 and a very difficult and bad tempered summit in Canada in 2018 saw the US President refuse to agree to a joint communique.

Question 18

strengths of membership of the g20?

Answer 18

membership is quite diverse - much more so than the g7. the g20 includes all of the g7, Australia, emerging great powers eg china, developing economies eg Indonesia, dictatorships eg Saudi Arabia/Russia and democracies eg Japan. most continents are represented. this allows for a broader range of opinions, and decisions made will likely be more beneficial to a greater portion of the population.

Question 19

weaknesses of membership of the g20?

Answer 19

accused of being out of date, similar to the g7. it doesn’t include Swizerland, Netherlands and Spain, all 3 of which are excluded yet are larger economies than Argentina or South Africa which are both in the g20. no formal mechanism to apply/join making this problem worse

Question 20

strengths of decision making of the g20?

Answer 20

no formal rules/charter on how decisions are come to - this can lead to quicker decisions than organisations like the IMF which may take many months to reach a final agreement.

Question 21

weaknesses of decision making of the g20?

Answer 21

like the g7, many important meetings are private, causing distrust. the highly widespread membership of the group often means that decisions cannot be reached because of conflicting interests. often this leads to agreements being fudged/compromised on, to the benefit of no one.

Question 22

strengths of effectiveness of the g20?

Answer 22

The first ever G20 leaders meeting takes place in Washington in 2008, to discuss a response to the Financial crisis. The most important summit was in London in 2009. The G20 leaders reached an agreement which, in principle, provides US$1.1 trillion to various programs designed to improve international finance, credit, trade, and overall economic stability and recovery. This included a $500 billion increase in the resources pledged by members to the New Arrangements to Borrow, a facility for the IMF to lend money to struggling economies. This summit was widely credited with saving the world from depression.

Question 23

weaknesses of effectiveness of the g20

Answer 23

The 2021 summit in Rome was widely criticised as failing to grapple with COVID and its consequences. The G20 set up a Health and Finance Minister Task force but there was no new money involved.

Xi Jinping did not attend the G20 summit in India in 2023. Putin also did not attend, leading many to question the continued relevance of the body.

Question 24

strengths of membership of the WTO?

Answer 24

membership very widespread; 164 members. allows the organisation to be beneficial to less developed countries

Question 25

weaknesses of membership of the WTO?

Answer 25

dominance of the quad; this includes USA, Canada, Japan and the EU. Informal group but acts collectively. has been accused of blocking fairer trade practices and members of the quad subsidise agriculture leading to an inbuilt disadvantage for poorer countries.
algeria applied to join in 1987 and is still not a full member

Question 26

strengths of decision making of the WTO?

Answer 26

agreement to reform in 2018 - signs of revival of quick and effective decision making

Question 27

weaknesses of decision making of the WTO?

Answer 27

the DOHA development round of talks has been going on since 2001 and was effectively abandoned in 2015 with only a couple of changes agreed.

Question 28

strengths of effectiveness of the WTO?

Answer 28

signs of increasing effectiveness - first ministerial conference in 5 years, discussion of potential reforms including changes to the rule of self-designation as a developing country, entitling said country to special privileges. no decisions made yet

Question 29

weaknesses of effectiveness of the WTO?

Answer 29

in jan 2018, donald trump began setting tariffs and other barriers on china with the goal of forcing it to concede to US accusations of unfair trade practices and intellectual property theft. the WTO was powerless to do anything about this.