Global Governance: Economic Flashcards
What 2 events symbolised the need for economic global governance?
- The 2008 recession required states, specifically the G7, to act quickly in reflating their economies
- COVID saw development and poverty progress reverse for the first time in 20 years
What were the aims of the Bretton Woods Conferences?
Following WWII, in 1944, the 44 Aliied nations aimed to:
- Create rules for international economic matters
- Stabilise world currencies
- Prevent another Great Depression
- Bolster Capitalism in the face of communism
What are the 3 institutions created at the Bretton Woods Conference (1944)?
- The International Monetary Fund
- The International Bank for Reconstruction and Development, later the World Bank
- The General Agreement on Tariffs and Trade, later the World Trade Organisation
What have the focusses of economic global governance been on recently?
- Poverty and development, in response to backslides in 2008 and 2020
- Promoting free trade, in response to post-2008 increasing protectionism
- The possibility of creating more singular currencies like euro
- Creating forums for international dialogue to solve crises
What was the original role of the IMF? Why did this change?
Amidst economic fluctutaions, the IMF oversaw a system of fixed exchange rates tied to the US dollare which was tied to the price of gold. However, when Nixon decoupled the dollar from gold in 1971, seeking greater flexibility in their economic policy, their role had to change.
What is the new role of the IMF?
- To provide conditional loans to states that are, or are likely to soon be, sufferring from debt crises
- To surveil and predict the economic outlook of the world as well as possible risks and reaknesses
- To advise (especially developing) states on how to best build their economies
Who is the current managing director of the IMF?
Kristalina Georgieva
What was the role of the IMF in the Brexit referendum?
The Leave campaign criticised them for a report published the week before saying that Brexit would reduce the UK’s GDP by 5.5%, dropping us into recession. Remainers argued that a key role of the IMF is to make forecasts to help citizens and states make informed decisions.
Why is the role of the IMF in crises so important?
Excluding the effect of a debt crises on standard of living, an interdependent economy (combined with regionalism) means that the IMF works to keep other states from being sucked into recession alogside.
Aside from 2008, what financial crises has the IMF helped in? How much was given?
- The Asian Financial Crisis (1997): $36bn given to Indonesia, Korea, and Thailand
- Emergency lending to Brazil (1998) and Argentine (2000)
- The Eurozone Crisis (2008-)
What are SAPs and what are some of the possible conditions?
IMF loans often come with conditions that aim to economically reform the country and help them overcome the cause of the crises. Conditions may include:
- Cutting public spending and raising taxes
- Privatisation
- Reducing public wages or state pensions
What is the argument for SAPs?
States that require loans accept that they have managed their economies irresponsibly and forgo a level of authority in favour of experts - Greece’s debt crisis was partially due to its government hiding their debts and their exorbitant public spending funded by borrowing (Debt-to-GDP at 100% most years)
What are the arguments against SAPs?
These reforms often hit those already heavily affected by debt crisis:
- Privatisation causes corporate profit which is not shared
- Countries that undergo reform often experience prosperity but high inequality - Greece has become more unequal between middle and working classes (IFS)
- Low public spending inhibits social mobility which would lessen debt
How does surveillance and monitoring make the IMF beneficial?
The IMF acts as experts that are able to analyse trends and forecast crises to prepare states - the IMF forecasted an economic downturn due to the ‘great lockdown’, this resulted in economic policy such as Sunak’s furlough scheme (paying 80% of wages)
- They’re under serious scrutiny for it and how ideological their reports are - not predicting the 2008 recession as the US’s housing bubble aligned with their ideology
How does lending make the IMF beneficial?
SAPs help countries get out of debt crises and reforms are necessary to keep the country out of debt - $300bn was given to Greece alongside conditions of spending cuts in contrast to their high spending previously
- These programmes often benefit the wealthiest in the country, with little benefit elsewhere, and are steeped in classical liberal dogma - Greek 50:1 inequality has only increased since 2009 showing the widening gap between the lower and middle classes; austerity measures were even harser for the Syriza Greek government, seen as vindictive
How does advising make the IMF beneficial?
The IMF are economic experts that can advise countries on how to create prosperity - they have established Regional Training Centres in Africa to help build economic expertise in Sub-Saharan Africa; published a report on effects of Brexit on UK economy 5 days before the referendum
- Infringing on state sovereignty - conditional loans often enforce liberal-minded austerity (Greece); Leavers argued that the IMF was interfering in a decision left to the British people by reporting that Brexit would decrease GDP by 5.5% and cause a recession
What was the founding objective of the World Bank and how has this changed?
The World Bank was created to provide loans to help reconstruction of middle-income countries in the aftermath of WWII. Although meeting development needs of middle-income countries is still a function, it has shifted largely to giving grants to developing countries.
What are the 2 key institutions of the World Bank?
- The IBRD: gives loans (some of which have conditions) to middle-income nations for development
- The IDA: gives grants or loans with low interest to developing countries
How much does the World Bank deploy yearly?
$50bn
How many projects has the World Bank been involved in since its founding?
12,000
What did the World Bank do in India?
Provided $3.4bn to improve access to clean drinking water, part of a long-term project that has helped 36mn people
What did the World Bank do in Afghanistan?
Has invested $4.7bn in grants and loans since 2002
How is the US dominant in the World Bank?
As the highest funder, the US has the largest weighted vote at 16%, the US then effectively has a veto as any project requires an 85% majority. Additionally, every president since its creation has been American, currently Ajay Banga.
What is the Asian Infrastructure Investment Bank?
The AIIB was set up in 2016 as an alternative to the World Bank; unlike the World Bank, the US is not a member and China holds the most votes at 25%. It also mostly gives loans and focusses on economic benefit to Asia, havig loaned $40bn and it’s biggest beneficiary being India at $9.5bn.
What is the New Development Bank?
The New Development Bank was set up in 2015 by the West-opposed BRICS alliance; unlike the World Bank the US is not a member and each of BRICS gets an equal vote. It has financed 92 projects worth $33bn.
What is the effect of new development banks on the World Bank?
The AIIB and the NDB provide competition for the US-dominated World Bank to provide better grants to stop anti-West banks gaining allies, possibly encouraging development.
How has the World Bank been criticised for its effects on indigenous people?
Its large-scale $60bn to give transport, electricity and water to some of the poorest countries in the world has displaced and left homeless more than 3.4bn people.
Give three differences between the IMF and World Bank.
IMF V World Bank
- Focus on economic growth V focus on ending extreme poverty
- Emergency assistance through loans V Development through grants
- Provides technical assistance on macro-economics V provides technical assistance on developmental nees
Give 2 criticisms of the World Bank.
- Completely dominated by the US
- Its focus on development has hurt people lost along the way
By 1995, what was the effect of GATT?
Since its 42 founders in 1947, it had grown to over 100 states and had reduced tariffs on goods amounting to $300bn.
How is the WTO different to GATT?
Whereas GATT was a treaty agreeing to a set of international trade rules; the WTO was a forum for dispute resolution.
Outside of the WTO, how can states reduce tariffs?
States can enter into free trade agreements allowing for completely untaxed movement of goods (such as the EU) or agree specific tariffs and movement (such as the EU-UK Trade and Cooperation Agreement)
How is the WTO superior to specific or regional trade agreements?
Reach, 166 countries are now in the WTO which means any change to WTO trading rules affects nearly every state in the world.
What are the roles of the WTO?
- Acts as a forum for dispute resolution, to avoid trade wars
- Checks states are following trade agreements
- Produces research on global trade and economic policy
Who has waited the longest to join the WTO?
Algeria - 40 years and still no membership
What are the two aspects of WTO membership?
- Rights: such as to expect WTO rules to be followed
- Obligations: such as to follow WTO rules
What is the problem with WTO decision-making?
It’s long, the Ministerial Conference only meets every 2 years and any agreement requires complete consensus which can make any decisive change nearly impossible
What were the rules of GATT?
45,000 tariffs were removed which impacted $10bn worth of international trade.
What were the successes of the Kennedy Round (1967)?
Additional tariffs worth $40bn were removed. This round was important due to the expansion of discussion to states ‘dumping’ products cheaply in other states to dominate their market.
What was the success of the Uruguay Round?
One of the largest WTO agreements, with 123 countries involved, formally created the WTO and focussed on reducing agricultural subsidies, though the EU’s CAP was unaffected.
What was the premise of the Doha Round?
A Ministerial conference to help developing countries access global markets, specifically for agricultural products of which accounts for 40% of GDP in many poor countries World Bank. This would have involved government subsidies.
Why did neither side like the Doha Round proposals?
- Developed states (the EU and US) don’t like the proposal that they should reduce their agricultural subsidies by 75% and 66% respectively
- Developing states see this as wildly hypocritical as developed states engage in protectionism and expect them to open up completely
What has sidelined the WTO recently?
Trump’s trade war with China has hampered international enthusiasm for free trade, imposing 25% tariffs on all steel and aluminium imports into the US. As well as this, the 2008 recession has lead to greater questioning of the benefit of interconnectedness and protectionism.
What is the G7?
A informal yearly forum of like-minded liberal industrialised economies: Canada, France, the UK, Germany, Japan, the US and Italy
Who is the only state to be kicked out of the G7/8?
Russia was given the boot in 2014 following the annexation of Crimea
What are the differences between the G7 and other forums?
- No formal rules
- Can invite or remove any state, IGO or NGO
- No budget or supporting secretariat, it relies on the action of individual states
- No defining objectives; simply a gathering of states to address global economic developments
What was discussed and were the outcomes of the G7 in 2021?
- COVID-19 pandemic and economic response: commitment to donating 1bn vaccines by mid-2022 and a global minimum corporate tax rate of 15%
- Climate change: reaffirming 1.5C target and comitted to net-zero by 2050
- Democracy and rule of law: reaffirmed respect fo democracy, rule of law and human rights and comitted $2.75bn to the Global Partnership for Education
What were some key successes of the G7?
- 2008: helped organise members to avoid deepening recession with Obama’s $800tn stimulus and Japan’s $25tn yen recovery plan
- COVID response: commited members to donating 1bn vaccines by mid-2022 and a global minimum corporate tax rate of 15% to help post-COVID recovery
- The Plaza Accords (1985): agreed to depreciate the US$ (by 40%) to increase trade competition and decrease trade deficitis
What are the main strengths of the G7?
- Little impact on state sovereignty mean that states are more likely to do what they agree with
- Informality allows them to quickly focus on pressing matters, like COVID
- Small number of ideologically similar states provides more decisive action and less gridlock; compare to the Doha Rounds
Why is the exclusion of economic powers from the G7 a problem?
It makes their activties ineffective: China is the second largest economy and largest exporter and if you want to deal with climate change, China and India are responsible for 1/3 and 8% of CO2 emissions
How is the ideological similarity of the G7 a problem?
It means that division can rip it apart and gridlock it or reduce its functions: Trump’s presidency was the first time a member did not give support to the closing statement due to differences on climate change, many calling it the ‘G6+1’; no attempt was made to use the G7 to negotiate or persuade Russia, only to punish.
How is the informality of the G7 a problem?
It becomes difficult to hold members accountable: in 2021, the G7 pledged to stop funding overseas coal projects but Japan continues to do so in Indonesia and Bangladesh; less than half of the promised vaccines have been delievered
What is the key difference between the G7 and G20?
The membership of the G20 is much wider and more diverse, including the BRICS and countries in Africa, Asia and South America. This covers 66% of the global population, more than 80% of GWP, and 75% of world trade
Aside from states, who is invited to the G20 summits?
Multiple IGOs are permenant guest invitees, allowing the G20 to work with groups like the AU and ASEAN as well as gain support from global institutions like the IMF and the UN.
How is the ideological diversity of the G20 beneficial?
It can act as a forum for dispute resolution to have more efficent actions; a key issue with climate change action is the dispute between the burden on developing and developed states, which the G7 doesnot address (also expelling Russia).
How does the widening of G20 agenda act as a benefit?
the informal forum carries all the same benefits but now addresses wider problems than economics, such as ensuring that wealthier states and IGOs prevent and more tightly regulate bank accounts that fund terrorists.
What is the issue with ideological diversity in the G20?
Some ahve criticised their communiques for being ‘watered-down’ as all the divided states must agree over any decisions; this is an issue with debates with a clear ‘us-vs-them’ dynamic like that of developing and developed states in the climate change debate.
What was the cause of the 2008 recession?
US banks were providing large loans with little-to-no proof that they could be repaid, this caused many banks to run out of money and close as well as housing prices and consumer confidence to fall. All of this caused global trade to decline.
What was the role of global governance preceding the 2008 recession?
IGOs are seen as having failed to predict the ‘great recession’ as the IMF, who is tasked with surveillance, relied too heavily on states’ self-asessments and the quality of liberal ‘laissez-faire’ economics. They even predicted that ‘world growth would continue to be strong’ until April 2007.
What is the role of states in the 2008 recession?
Global economic balance has also been blamed: China held a large currency surplus ($1.9tn at the time) and institutions which could lend to the US easily, this caused a high deficit that created a housing bubble where prices rose; when the bubble popped, people couldn’t afford mortgages that were now more expensive than the house.
What was the role of the G20 in the aftermath of the 2008 recession?
The 2009 London summit saw states inject $5tn into their banking systems to avoid total collapse, as well as some countries nationalise banks that were ‘too big to fail’ such as RBS in the UK and Fannie Mae in the US.
What was the role of the IMF and World Bank in the aftermath of the 2008 recession?
The IMF lent $700bn to heavily affected states like Greece and Spain and later supported tougher regulation of banks, which states agreed to. The World Bank tripled its lending and focussed on midle-income countries to avoide prolonged recession.
What is extreme poverty?
Any person who is living on less than $2.15 a day; UN estimates this covers 700 millioon people, 80% of which live in South Asia and Subsaharan Africa.
What is relative poverty?
Whether people have the necessary funds to access the average standard of living i their society, often calculated by earning less than 60% of median income.
What is multi-dimensional poverty?
Whether people have access to certain basic standards of living like clean water and education, often calculated based on the UN’s Human Development Index.
Give the course of absolute poverty over the past 25 years.
- 2000-15: rapid decline from 16%-10%
- 2015-20: slower decline from 10-9%
- 2020-: COVID saw an increase for the first time in 20 years, pushing 80mn in and levels back to 2017
What is the relationship between human rights and development?
There is an increasing link between the two, with the SDG having the goal of ‘peace, justice, and strong institutions’. Indian economist Sen argues that “development requires the major removal of all sources of unfreedom” such as tyranny.
What is the ‘orthodox’ view of development?
Favoured by classical and neo-classical development theorists, this view sees development purely in terms of economic growth and prosperty, measured in GDP. Critics argue that this ignore the inequality in a society; however, they argue that prosperity will trickle down.
What is the ‘alternative’ view of development?
The view taken by sustainable development and the SDGs, focusses on multi-dimensional poverty such as access to education and life expectancy, measured by the UN’s HDI. Economist Sen argues that democracy and rights are an important part of development.
What is the realist view on global development?
States should focus on their own economies and people before giving to others and should only do so if it benefits themselves, such as China’s Belt and Road Initiative.
What is the liberal view on global development?
States should use their power to aid other states in bettering their standard of living, IGOs also play a significant role in coordination such as the MDGs and SDGs. They also take the Sen view that democracy and rights are part of development.
Outline the theory of the ‘North-South Divide’.
The 1980 Brandt Report argues that there is a divide in development between the Global North and South, dubbed the Brandt Line.
What’s the difference between industrialisation in the North and South?
States in the South have rapidly industrialised but continue to experience high levels of absolute poverty; India has shifted to manufacturing but 129mn still remain in absolute poverty (10%).
How do IGOs support the idea of a North-South divide?
Northern states dominate IGOs built to help Southern statea and are guided by relaist state egoism and liberal dogma; US has veto in World Bank and UNSC. Also see, the failure of the Doha Rounds.
How does interational trade support the idea of a North-South divide?
Many Southern states have less power in trade deals or are entirely excluded from IGOs like the WTO which puts them at a disadvantage due to tariffs and protectionism. Northern states are also more likely to protect their primary sectors with subsidies that puts Souther states, that rely on agriculture, at a disadvantage.
How does China refute the idea of a North-South Divide?
China, supposedly a developing state, is the second largest economy (18tn GDP) in the world and largest exporter, also going on to invest in other Southern states, like pakistan and Sri Lanka, in the Belt and Road Initiative.
How do IGOs refute the idea of a North-South Divide?
Southern states are gaining more power in IGOs and being accepted into the club of the powerful, like the creation of the G20 and its importance in 2008. They are also creating their own IGOs that wield power, like the AU’s involvement in protecting workers’ rights in Africa.
How do investment banks refute the idea of a North-South Divide?
Southern states have begun creating their own development banks where they have power; the AIIB focusses on investment to the benefit of Asia and the NDB’s creator’s and major voteholders are 4/5 Southern States.
What is the relationship between poverty and conflict?
IGOs have a tricky situation as coflict creates poverty and poverty creates conflict so to completely solve one, one must solve the other which isn’t their purview. The UN estimates that 80% of Somalia is vulnerable, exacerbated by terrorist group, Al-Shabaab.
What are the 4 main theories about the cause and resolution of poverty?
- Classical
- Neoliberal/neo-classical
- Dependancy theory
- World Systems Theory
Outline Dependency theory
Colonialism has placed underdeveloped states at a economic disadvantage due to their lack of political sovereignty and stable internal market. Under the liberal dogma, these states are encouraged to open up to foreign trading as a means of increasing their standard of living. They are only able to sell cheap labour and raw materials which the powerful, often post-colonial, states turn into expensive products and sell back to them, perpetuating poverty and inhibiting them from developing.
Give 2 examples of Dependency theory.
- Western corporations, such as H&M, often employ South Asian sweatshops and pay very little with low safety regulations (Rana Plaza)
- Chinese investment in Zambia has kept countries strictly dependent on their loans ($7.5tn) and allowed them to extract copper and cobalt to create technology
Give a criticism of dependency theory.
The theory fails to explain how some previously-colonised states have industrialised and gained great power - Zimbabwe partnered with Debswana diamond company to capitalise on their wealth of diamonds and then diversified and is no longer dependent on foreign aid
Outline Wallerstein’s World Systems theory.
Marxist Wallerstein builds on Dependency theory, arguing that global capitalism creates three kinds of states: core states, periphery states, and semi-periphery states
Outline Wallerstein’s ‘core states’ and give an example
Wealthy, highly industrialised states with a large number of MNCs, dominating domestically and internationally and producing manufactured goods for high wages
- American companies like Exxon extract and refine natural resources from periphery states (oil from Angola, where they have a 20% share) to be used in the US
Outline Wallerstein’s ‘periphery states’ and give an example
Poor unindustrialised states with a wealth of natural resources that conly only sell raw materials to core states, inhibiting them from gaining an internal market with little abilty to regulate without scaring foreign companies away
- American companies like Apple and Dell extract rich cobalt using low-paid, often child, labour then make expensive cellphones (iphone 15 costs £800)
What are the key differences between Dependency theory and World Systems Theory?
- Dependency theory was created in decolonising Latin America so focusses on the effect of colonialism and argues that the system prohibits development.
- World Systems theory was created amongst popularity for liberal economics so focusses on general Marixts ideas but also argues that the system in restictive, not prohibitive
Give a criticism of World Systems Theory.
It struggles with application, it describes a system of exploitation but fails to provide any solutions, or policy, to help aside from an unfeasible revolution against the capitalist system.
Outline classical development theory.
Adam Smith argued that the best way to promote prosperity is to adopt a ‘laissez-faire’ approach and allow the market to regulate itself, whilst focussing on increasing production of labour, specifically division of labour.
What is neo-classical development theory?
The ideology taken by classical liberals and neoliberals of the New Right like Thatcher and Reagen, also known as the Washington Consensus:
- Low govenment spending
- Low personal and corporate tax
- Deregulation
- Private ownership
- FDI
- Free trade
They argue that, these elements can attract MNCs to a developing country to increase earning.
Outline the use of liberal ideas by Vietnam to develop.
The 1986 Doi Moi reforms opened the country up FDI and global trade, especially in areas like electronics where it partnered with Samsung and Intel, as well as the use of trade agreements like the CPTPP. Overall, poverty has fallen by 55% since 1990.
Give a criticism of liberal theories of development.
Many argue that there is a role of the state in development, also known as the ‘post-Washington Consensus’ or the ‘Development State’. Asian countries have invested massively in their infrastructure, China being heavily criticised by Trump for its electic vehicle subsidies; however, these countries have found prominence, being known as the ‘tiger states’.
What was the role of the post-Washington Consensus in Brazillian development?
State-owned corporations like Petrobras and Embraer (oil and aviation repectively) were central to their reduction of poverty to 5% from 25% in 1980.
What were the key successes of the Millenium Development Goals?
From 2000-2015:
- Extreme poverty halved to 8.5mn
- Increased primary school enrolment to 91%
- Child mortality rate more than halved to 43 deaths ber 1,000 births
- Maternal mortality almost halved
What were the main caution notes of the Millenium Devlopment Goals?
- Most development took place in China, largely seperate to the work of the MDGs, infant mortality rate went from 30 to 5 and absolute poverty reduced by 80%
- Did not halve hunger
- Ban Ki-moon warned of persisting global inequality, top 1% owen 40% of wealth (IMF)
What is the main tenet of the sustainable development goals?
The development needs of today should not risk the environment of tomorrow, with goals 7, 11-15 all relating to facets of climate change: clean energy, marine and terrestrial life, and reponsible comsumption and production. INcreasingly important as we pass the Paris 2015 goals of a 1.5C temp rise.
What has significantly hindered the SDGs?
According to their 2024 report, COVID saw:
- An increase in absolute poverty for the first time in 20 years, 80mn more
- 70-161mn more are in hunger
- human rights abuses, exploitation and violence against vulnerable groups has also increased
What is the advantage of NGOs in economic global governance?
NGOs are many (globally there is millions and 5,000 have special consultative status with the UN) and provide a wide amount of expertise and research as well as monitoring: the Clean Clothes Campaign and the International Labour Forum have fought for better working conditions and wages which was especially effective following the Rana Plaza disaster.
What is the ICRC?
The International Comittee of the Red Cross works in 100 countries, particularly countries in conflict like Syria, with an annual expenditure of $200bn to provide medical care and food and help displaced people.
What is Save the Children?
Working in over 100 countries for roughly £250mn a year, they focus on education, food and medicine for vulnerable children, especially in sub-Saharan Africa.
