role of the world bank Flashcards
What is the role of the World Bank
Aid long term economic development and reduce poverty by making technical and financial support available
What are the 5 parts of the World Bank made up of
1) International Bank for Recosntruction and Development (IBRD)
2) International Development Association (IDA)
3) International Finance Coporation (IFC)
4) Multilater Invesmtnet Guranatee Agency (MIGA)
5) ICSID provides invesment dispute and arbitration
What is the International Bank for Reconstruction and Development’s (IBRD) purpose
Lends to MIC and Creditworthy LIC; 189 members
What does the International Development Association (IDA) do
Offers interest free loans and grants to the world’s poorest countries
What does the International Finance Corporation (IFC) do
Finances investment, capital, mobilisation and gives advisory services to businesses and governments in economically developing countries
What does the Multilateral Investment Guarantee Agency (MIGA) do
Promotes FDI in economically developing countries
What is the International Centre for Settle of Investment DIsputes (ICISD)
Provides investment dispute and arbitration
What do NGOs do
they can provide direct assistance to countries in the form of project work, for example Oxfam or CAFOD.
This can range from education to wells to healthcare
and can either be emergency or long term.
● On top of this, they can act as pressure groups to lobby governments to adopt more pro-development strategies.
What is the problem with NGOs
many see them as having an anti-capitalist agenda which blames
problems on the World Bank, the IMF and the WTO.
This causes divisions in the development project and is also an issue since past experience suggests global capitalism is the best system for development.
A problem of NGOs is that it is believed that they alone can never solve the problem , it is the government who has to fix the issues.
Policy response in the UK to the Great Depression
- Contractionay Fiscal Policy
cut public sector wages and unemployment benefit by 10% and raised income tax from 22.5% to 25%; reduces AD - UK forced to leave gold standard, caused value of £ to fall by 25%,
- There was recovery in London and the South East but Wales, the north and Scotland
did not reach full employment until 1941.
What was the US policy response to the Great Depression
Expansionary Keynsian fiscal policy response
- New Deal which promised public sector investment, work schemes for the unemployed and fiscal stimulus.
- The USA reached full employment in 1943
How did the 2008 Global Financial Crisis influence public expenditure
- Huge increases for welfare payments + Bailouts
- but induced 2010 austerity to rweduce debt
Why did lower interest rates may not boost growth in 2008
- Banks didn’t have money to lend.
- Confidence was very low, due to the banking crisis
- Time lags. Cutting interest rates can** take up to 18 months to have an
effect** e.g. people on fixed rate mortgages don’t notice straightaway. - Fiscal policy was tight, with governments pursuing austerity measures to
reduce budget deficits. - Cost push inflation from the 2008 oil price rise made some Central Banks
concerned about inflationary pressures.
What happened in liquidity trap of 2009-15
there was a large increase of 7% in M0 but it could not stop the decline in M4
e.g. at start of the credit crunch, there waas a sharp rise in the UK saving ratio from 4.2% in 2008 q1 to 7.4% 2010 q2
Inelastic demand for investment (MEC) so firms are not tempted by lower interest rates
What caused the Great Recession of 2008-13
- Housing Bubble; prices faster than inflation and incomes; countries like Ireland and Spain experienced booms
- Also a rise in oil prices that caused cost-push inflation, made Central Bank reluctant to cut interest rates
- Fall in housing price may many cut back on spending as they couldn’t rely on mortgaging to gain equity withdrawal
- Euro Crisis 2010-12 a rise in bonds yield partly due to recession let to a period of austerity
