Globalization: Business and Society in the Information Age
The Challenges the IMF, WTO and World Bank Have On Shaping Domestic Economic and Social Policy
Often there is an event or period of time in history that shapes the world in some way, and brings about changes never before seen. One such period of time that has impacted the world, and its economy is the Great Depression. The Great Depression was the worst world-wide economic depression of the 20th century. It started in 1929 with the stock market crash on October 29th in the United States and lasted until the late 1930’s affecting countries both rich and poor. After the conclusion of World War II, the world created several international institutions, designed to manage and stabilize the world’s economy in the hopes of avoiding another Great Depression. The institutions created included the International Monetary Fund (or IMF), the World Bank (then known as the International Bank for Reconstruction and Development), and the General Agreement on Tariffs and Trade, which eventually expanded and transformed into what we now know as the World Trade Organization (or WTO). These organizations all help the global economy by allowing international investing, issuing loans to countries with struggling economies and by promoting international trade. All three each share common goals of international policies. A brief overview of the origins and operations of these organizations include the World Bank, which was created to finance the reconstruction of Europe after the war, and to help the development of those countries that were among the poorest in the world. It has been expanding its original mandate over the years to help fund infrastructure developments in countries that are still developing themselves. The IMF was developed to regulate the international monetary system to help promote global trade. Now, it gives loans to countries, stabilizes exchange rates and helps to promote growth and employment. Finally, the WTO was established in 1995 to replace the GATT, and is made up of a panel of 134 countries whose purpose is to negotiate trade agreements and then monitor and enforce those agreements. Although the purpose of these three organizations is to promote the well-being of the world’s economy, they have all been heavily criticized for how deep their involvement is in the international economy, and how they factor into domestic economies. Since they now address the issues that used to be dealt with at a national level, international policies are having an effect on people within the states. Many argue that the policies set forth by these organizations have negatively affected the domestic economies of countries rather than help them. These domestic economy and social policies seem to mostly affect smaller, less developed countries because over time, these institution’s missions have changed to promote the growth of the developing world, so their focus has been on these types of countries rather than the larger, developed ones. One of the issues less developed countries face with these groups is the fact that they are controlled by just a few wealthy nations, including the United States, Germany, France, UK and Japan, who desire to remain the controlling powers in the economy. In the cases of the IMF and World Bank, voting power is distributed among the nations based on the strength of their economy. It is only the WTO that offers equal voting power to all countries. So because developing nations lack the financial strength and resources of the world’s wealthiest countries, they are forced to submit to the policies passed by them. All of these institutions are interconnected. In the case of the IMF, as they started providing more long and short term loans at lower-than-market interest rates, they began to attach a number of conditions ( or conditionality) and negotiating with the countries they are offering loans...
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