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Introduction to International Organisations > WB and IMF > Flashcards

WB and IMF Flashcards

1
Q

global economic governance
goal at the beginning + now

A

1940s: economic consequences war in Europe

since decolonization: addressing the socio-economic disparities between North and South to stabalize the global economic order

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2
Q

institutions global economic governance

A

WB
IMF
WTO/GATT
UN conference on trade and development (UNCTAD)
and so on

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3
Q

current trends in the global economic governance

A
  • 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
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4
Q

Bretton Woods Conference 1944

A

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

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5
Q

how are the WB and IMF related to the UN?

A

they are specialized agencies
- even more autonomous than some/most of the other specialized agencies

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6
Q

International Bank for Reconstruction and Development

A

IBRD

objective: poverty reduction and economic development

189 member states

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7
Q

World Bank group

A
  • 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

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8
Q

What does the WB do?

A
  • 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

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9
Q

In what way does WB lending undermine sovereignty?

A

to get money from the WB, states have to comply to some sort of reforms

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10
Q

WB and Covid-19: Financing vaccination

A

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

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11
Q

World Bank Structure (IBRD structure)

A

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

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12
Q

International Finance Corporation
5

A

1956

part of the WB

184 member states

supports companies in developing countries

private sector funding

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12
Q

IDA

A

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

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13
Q

Multilateral Investment Guarantee Agency

A

1988

156 members

part of the WB

insurances against non-commercial, political risk for private investors (to promote economic investments in developing countries)

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14
Q

International Centre for Settlement of Investment Disputes (ICSID)

A

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

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15
Q

default

A

failure to pay international debts

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16
Q

main goal IMF and WB

A

to prevent the situation in which the economic problems of one country lead to generalized crisis in the international system

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17
Q

WB v. IMF

A

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

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18
Q

IMF original goals

A

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

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19
Q

headquarters IMF and WB

A

Washington DC

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20
Q

mandate WB

A

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

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21
Q

obligations to the WB and IMF

A
  • general obligations (e.g. paying to the common pool of resources)
  • specific terms of a loan (e.g. policy changes)
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22
Q

WB money

A

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

23
Q

WB enforcement

A

no enforcement mechanism whatsoever, can only threat to cut off future lending, which influences credit-worthiness in the eyes of other possible investors

24
Q

in what way can the power relationship between borrower and lender become inverted?

A
  • half-funded project doesn’t help anyone and doesn’t get money back
  • borrower may have a powerful patron at the WB making it unlikely that future loans really are dependent on past performance
  • if someone lends a lot from the bank, it becomes the problem of the bank instead of the borrower
25
Q

WB sensitivity to corruption

A

WB often looks away -> money doesn’t go to the projects, but to elites

criminal depth = money never reached the public treasury of the country and yet it is treated as part of the debt owed by the state and its taxpayers
- can/should be treated as losses of the Bank rather than of the borrowing country
(relieves population from the burden of which they never received benefit + moral accountability at the WB and borrowers instead of elite v. public + incentive for the Bank to be careful in lending)

26
Q

IMF objective

A

financial stability
- international financial cooperation: ensuring international liquidity/balance for investments
- monetary stability: adjusting to balance of payments difficulties
- prevent crisis

provide emergency lending when so much money leaves a country that it threatens financial and social stability

27
Q

what does the IMF do

A
  • bailout : large scale credit to states in financial insecurity
  • technical assistance
  • monitoring
  • general research: reports
28
Q

the IMF and Covid-19

A

emergency financing
catastrophe containment and relief trust
augmentation under existing programs
new financing arrangements
capacity development

helping states become/stay stable in an uncertain time

28
Q

IMF structure

A

Managing Director
- traditionally always European

IMF secretariat

Executive Board: deciding on IMF loans + core body to make day-to-day decisions
- 24 members (8 permanent)

board of governors (financial ministers or central bankers from member)
- decides on the highest-level policy questions
- delegates power to the executive board

joined IMF-World Bank development committee

independent evaluation office (conditions under which lending can be implemented)

29
Q

decision-making in WB and IMF Board of Directors

A

predominantly by consensus, sometimes formal votes

formal votes
- US has de facto veto power as it has such a big share of votes
- group shares: some countries are grouped in more or less regional groups
- if one group/state gets more shares, another immediately gets less

30
Q

criticism WB/IMF

A

WB/IMF as neoliberal institutions implementing the ‘Washington Consensus’: it forces liberal principles

lack of accountability: organizational culture = homogonous workforce

31
Q

origins/reasons regional development banks

A

dissatisfaction with WB lending among developing countries and scarcity of funding for regional programs

regional development banks offer more favorable conditions

more independent from western influence + more integrated + less political + more low-key

32
Q

EIB

A

European investment bank

33
Q

IMF ratification

A

1945

34
Q

IMF obligations of members

A
  • collaborate with the Fund and other members to assure orderly exchange arrangement
  • avoid manipulating exchange rates
  • surveillance by the IMF: designed to alert the collective as well as the country itself of impending crises
35
Q

what do borrowing countries use their IMF loan for

A

to buy their own currency to drive up its value -> stability

36
Q

IMF ‘‘arrangement’’

A

set of agreed-upon conditions for a specific loan

37
Q

balance-of-payments problem

A

a country is coninually paying moer to foreigners than foreigners are spending

unsustainable in the long run

floating exchange rates -> transactions increase the supply of the local currency and thus drive down its value

38
Q

IMF enforcement

A

loans are often disbursed in instalments: later payments are conditional on good performance

no authority to order states to change their policies
no authority to punish those who fail their commitments

noncompliance is often tolerated: belief that positive effects of the loan outweigh the problems of non-compliance/enforcement

39
Q

case: Argentina

A

borrowed significantly from the IMF and WB (paid the WB back, IMF drama)

IMF funding to adopt a neoliberal economic model -> couldn’t pay back the IMF + national crises

IMF couldn’t force compliance through shaming: reputation was already lost

-> IMF new conditions for repayment -> immediate monetary crises subsided in 2003 -> 2006 repaid last of its debts to the IMF

still drama with private creditors

40
Q

AIIB

A

Asian Infrastructure Investment Bank

seated in Beijing

established under Chinese leadership in 2015 by 57 states (also non-regional and non-state)

41
Q

possible reasons for China to invent the bank

A
  • economic competition China and US (gives China more legitimacy + AIIB more attractive than bilateral investment)
  • dissatisfaction with WB structure
  • reducing bilateral tensions in the region
  • promote ‘silk road economic belt’
  • infrastructure investments in Asia to overcome transport and connectivity barriers for export
42
Q

what is important to keep in mind with China’s influence in the AIIB?

A

we can criticize China for using the AIIB as a tool but then we should also look at the role of US and EU in the World Bank

43
Q

criticism AIIB

A

instrument of China to advance narrow Chinese interests and undermine US influence globally

44
Q

Kaya, Kilby, Kay

A

2021
AIIB as an instrument for Chinese influence? supplementary versus remedial multilateralism

45
Q

why would overt use of the AIIB lead to more costs for China than overt use of the WB lead to for the US?

A

because China already faces heightened scrutiny as a rising power and one-party state

46
Q

supplementary multilateralism

A

actions of the multilateral institution supplement existing bilateral ties with the great power

47
Q

remedial multilateralism

A

privileges countries underserved by bilateral ties and thereby denotes the use of a multilateral platform to shore up the gaps in the great power’s existing relations

  • Can be used to extend a great power’s sphere of influence by making up for weak or non-existing bilateral ties
48
Q

three ways in which AIIB’s loans could reflect Chinese influence

A
  • selection of loan recipients
  • size of AIIB loans
  • speed of loan delivery
49
Q

Kaya, Kilby Kay findings of Chinese influence in the AIIB

A

evidence for remedial multilateralism
no evidence for supplementary multilateralism

50
Q

limits to Chinese influence in the AIIB

A

board decisions taken by simple majority

management of AIIB is international and professional: pressure from management and staff to uphold principles of multilateralism

substantial share of AIIB loans are co-financed with other MDBs

51
Q

Inter-American Development Bank

A

1951
46 members
US 1/3 votes

52
Q

Asian Development Bank

A

1966
48 members (inc. 19 non-regional)
Japan + US largest shareholders
Funds NGO projects

53
Q

African Development Bank

A

1966

Introduction to International Organisations (13 decks)

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