Module 2: Shaping the Economic Environment

Question 1

What are the IMF’s (International Monetary Fund) Major Functions, Goals, and Conditionality’s

Answer 1

Two organizations were created from the Bretton woods Meeting: The International Monetary Fund (IMF) and the International Bank for reconstruction and Development (IBRD) that later became the World Bank. Created in 1944

Question 2

What are the criticisms on the IMF (International Monetary Fund)

Answer 2

a. Imbalance of voting power – poorer countries are underrepresented. IMF policies are significantly impacted by rich counties.
b. Conditionality causes the citizens of the borrowing country to pay a heavy price in the short-run. Requiring borrowing countries to make structural adjustment such as privatization or deregulation can make conditions worse in a struggling country.
c. IMF’s projects might hurt environmental quality.
d. Exploitation of natural resources. Countries struggling to pay back the loans can damage natural resources in order to get adequate capital to pay the loan back.

Question 3

What are the World Bank’s Major Functions

Answer 3

Function: Promote economic and social progress in developing countries by helping raise productivity so their lives may live better

Question 4

What are the World Bank’s Criticisms

Answer 4

a. Imbalance in the leadership – Voting shares are determined based on the size and “openness” of the countries, the power is the United States, European countries, and Japan.
b. Enforced conditionality causes harm to developing countries. Privatization of Healthcare
c. Environmental damage caused by funded projects – World Bank does not consider how funding projects will adversely affect the environment

Question 5

What are the WTO (World Trade Organization function

Answer 5

Est. 1995
Lower trade barriers
Expanded through successive negotiations called “rounds”
Reduce tariffs

Question 6

What are the WTO (World Trade Organization criticisms

Answer 6

Transparency requirement hurts national sovereignty/ must summit changes to WTO and WTO will release trade to the rest of the countries.
Trade rules protect developed countries more than developing countries
The MFN (Status) rule gives multinational companies an unfair advantage
Agriculture product subsidy hurt developing countries – related to the Doha round
Developing counties state that maintaining labor standards acts as to a “barrier to free trade” for countries whose competitive advantage is cheap labor