WB and IMF Flashcards
global economic governance
goal at the beginning + now
1940s: economic consequences war in Europe
since decolonization: addressing the socio-economic disparities between North and South to stabalize the global economic order
institutions global economic governance
WB
IMF
WTO/GATT
UN conference on trade and development (UNCTAD)
and so on
current trends in the global economic governance
- informal governance (G7, G20 etc.)
- changing role of the US as promotor of Global economic governance (can the US still be a hegemon + how will the system change)
- emerging powers: BRICS / regional development banks
Bretton Woods Conference 1944
mostly dominated by the West -> western economic thinking
goals:
- reconstruct war-torn Europe
- prevent or at least mitigate an economic crisis like in the 1930s
both the IMF and WB have their origins here: conference-> Articles of Agreement of each institution
how are the WB and IMF related to the UN?
they are specialized agencies
- even more autonomous than some/most of the other specialized agencies
International Bank for Reconstruction and Development
IBRD
objective: poverty reduction and economic development
189 member states
World Bank group
- IBRD: International Bank for reconstruction and development
- International Development Agency (IDA)
- International Finance Corporation
- Multilateral Investment Guarantee Agency
- International Centre for Settlement of Investment Disputes
*IDA and IBRD core lending institutions to states
What does the WB do?
- 40s and 50s: IBRD rebuilding Europe and Asia
- after 60s: focus on developing countries (IDA)
- after 1990: facilitate economic transition in Eastern Europe + post-conflict reconstruction
- as of 2000: contribute to achieving the Millennium Development Goals (2000-2015) + Sustainable Development Goals (2015-)
lending, investments, research, economic advice
In what way does WB lending undermine sovereignty?
to get money from the WB, states have to comply to some sort of reforms
WB and Covid-19: Financing vaccination
WB found that the pandemic and fighting the pandemic is immediately connected with inequality + all focuses of the WB
goal: help countries finance/acquire vaccines
IBRD + IDA made 5-7 Billion $ available for vaccines (large amount over little time)
shows that mandates overlap, while it focuses on economic development, this spreads into other areas
World Bank Structure (IBRD structure)
Board of Governors
- plenary organ: 189 members (each state has a representative ‘‘governor’’ and an ‘‘alter governor’’
- highest decision making body (membership, capital stock, distribution of net income)
- annual meetings
Board of Executive Directors
- meets more frequently
- decisions about lending proposals
- sets bank policies + interprets Articles of Agreement
- 25 members (6 largest stakeholders automatic seat (US, Japan, Germany, UK, France)
- operate by consensus
World Bank Group President (Ajay Banga)
- informal agreement that the head of the WB is always American (+ of the IMF is always European)
- head of the secretariat
- president of the IBRD and IDA at the same time
secretariat (large and growing)
independent evaluation group
- internal monitoring mechanisms that looks at how WB programs are designed in general
Inspection Panel:
- groups and non-state actors can submit complaints
- comparatively new (created after complaints about human rights violations)
- important monitoring mechanism that provides transparency
- other banks also implemented such mechanisms, it became the norm
International Finance Corporation
5
1956
part of the WB
184 member states
supports companies in developing countries
private sector funding
IDA
1962
173 member states
gives credits to the ~80 lowest income countries (GDP below $1.1 capita, if it grows above it goes to the IBRD)
has more favorable conditions than the IBRD; no interest and more long term
Multilateral Investment Guarantee Agency
1988
156 members
part of the WB
insurances against non-commercial, political risk for private investors (to promote economic investments in developing countries)
International Centre for Settlement of Investment Disputes (ICSID)
1966
part of the WB group
161 participating states
mediation and arbitration of investment conflicts between member states and private investors from other countries
cases can only be discussed on a voluntary basis
German case: Germany didn’t invest in nuclear power plants anymore -> company sued Germany for the change in policy -> company won, Germany had to pay settlement
default
failure to pay international debts
main goal IMF and WB
to prevent the situation in which the economic problems of one country lead to generalized crisis in the international system
WB v. IMF
WB: longer term loans for economic development, uses money of members as collateral to borrow
IMF: short term loans to resolve balance-of payments problems, uses money from its Fund
IMF original goals
coordinating exchange rates among countries (became obsolete as the market became freer: floating currency)
control the pool of foreign currency that countries could borrow to stabilize extreme balance-of-payments deficits
headquarters IMF and WB
Washington DC
mandate WB
to reduce poverty by lending the money of the rich countries to the poor countries for specific development projects, and by providing technical assistance to poor countries
obligations to the WB and IMF
- general obligations (e.g. paying to the common pool of resources)
- specific terms of a loan (e.g. policy changes)
WB money
initial subscription: members need to pay 20% of the value of a country’s shares must be paid up front in gold or in US dollars upon joining
(makes the WB sensitive to US currency)
WB doesn’t lend the subscriptions of member states, it uses them as collateral
- WB is a reliable partner (low risk of default) -> can borrow cheaper than other actors
WB enforcement
no enforcement mechanism whatsoever, can only threat to cut off future lending, which influences credit-worthiness in the eyes of other possible investors
