G 8

World Bank

IMF

G 10

G 20

WTO

Structure of the World System& the Organizations that maintain the system

World System Theory:

WST argument:

AIC’s ideology and power of capital are continually being reinforced in the decisions of the IMF, WB and WTO in order to maintain their core status.http://www.youtube.com/watch?v=tiav0V_F0bkOn song dynamite

AICs commercial interests are embodied in the rules on global trade, aid and loan imposed on the LDCs :

• Washington consensus• Neoliberal policies• SAP• Conditionality• MFN

WASHINGTON CONSENSUS (1989)

• Liberalization

• Austerity

• Privatization

• De-regulation

LAPDog

AICs commercial interests are embodied in the rules on global trade, aid and loan imposed on the LDCs :

• Washington consensus• Neoliberal policies• SAP• Conditionality• MFN

http://www.youtube.com/watch?v=XIUWZnnHz2g&feature=related neolib as a water balloon 12 min

What are the Neoliberal policies? DOPE LD

Liberalize tradeDeregulate finance/currency Open up for foreign investment,Privatize economyDeregulate commercial activityEnsure property protection

http://www.youtube.com/watch?v=XtTeDv5FbNw free market/trade

We Made a Devils Bargain: Fmr. President Clinton Apologizes for 6.5min- 2010

AICs commercial interests are embodied in the rules on global trade, aid and loan imposed on the LDCs :

• Washington consensus• Neoliberal policies• SAP• Conditionality• MFN

http://www.youtube.com/watch?v=Be5SudSdO6Q

Martin Khor Structural Adjustment Explained 5 min 2011

How does Structural Adjustment Program (SAP) affect the Developing countries?Impact:• Balancing the government budget• Weakening the Labour• Deregulating the economy• Reducing the State

BLeeDS

IMF’s imposition of SAP on Asian countries created a financial crisis of economic contraction and depression.

AICs commercial interests are embodied in the rules on global trade, aid and loan imposed on the LDCs :

• Washington consensus• Neoliberal policies• SAP• Conditionality• MFN

Conditionality:

• Conditions placed on loans to LDCs

Conditions imposed to make aid effective in a recipient country – in reality could hurt the country’s economy or the country’s political stability http://www.youtube.com/watch?v=L7EbN-oxYAw public reaction to cutting gas subsidy

Bretton Woods Institutions: 1944

Multilateral bodies:

• IMF

• World Bank (IBRD)

15:19 World Bank : IMF : World Control 3 min 2013http://www.youtube.com/watch?v=gtPqT-UPBT4

What is IMF expected to establish globally?

Global:• monetary cooperation

• exchange rate stability

• trade expansion as lender of last resort

- Lends to correct balance of payment deficits

From where does IMF get its money?

• Subscriptions from member countries ‘Quota’ (capital) that they pay when they join the IMF

What do Quotas determine?• Countries’ payments• Voting power• How much they can borrow

e.g.: U.S. has 16.76 %, Seychelles is 0.03 % of quotas (2011) http://www.imf.org/external/np/sec/memdir/members.aspx, oct 22, 2011

Who are IMF’s members?

• 188 countries (2012) - 44 original members.

http://www.imf.org/external/about/members.htm

Why are Western countries more powerful in IMF?• Western powers control through their voting

majority in the Executive Board (EB).• EB members have larger monetary share. • EB votes affirming the will of the US or

Europeans.

http://www.imf.org/external/about/members.htm accessed Oct 2011

8In 2012

Governments have votes based on the amount of money they pay in to the organizations. In this sense, they operate much like private corporations, except that the owners of shares are governments instead of individuals. The U.S. government has by far the largest share of votes in both the IMF and World Bank and, along with its closest allies, effectively controls their operations

the IMF and the World Bank have great power, and are able to insist that governments adopt certain policies as a condition for receiving funds.The IMF and the Bank make sure that U.S. allies get the financial support they need to stay in power, abuses of human rights, labor, and the environment notwithstanding; that big banks get paid back, no matter how irresponsible their loans may have been; and that other governments continually reduce barriers to the operations of U.S. business in their countries, whether or not this conflicts with the economic needs of their own people.

http://www.imf.org/external/np/sec/memdir/eds.aspx (Oct 22, 2011)Appointed IMF Executive Directors and Voting Power - Top 5 members in voting power :

DirectorAlternate

Casting Votes of Votes by Country

Total Votes1 Percentof FundTotal2

Appointed

Meg LundsagerDouglas A. Rediker

United States 421,965 421,965 16.76

Mitsuhiro FurusawaTomoyuki Shimoda

Japan 157,026 157,026 6.24

Hubert TemmeyerSteffen Meyer

Germany 146,396 146,396 5.81

Ambroise FayolleAlice Terracol

France 108,126 108,126 4.29

Alexander GibbsRobert James Elder

United Kingdom 108,126 108,126 4.29

Some countries in IMF Executive Board & their voting power:

% SDR Quota % of Votes

USA 17.09 16.77Japan 6.57 6.24China 4.00 3.81Canada 2.68 2.56India 2.45 2.34Mexico 1.52 1.47

SDR: Special Drawing Rights"http://www.imf.org/external/np/sec/memdir/members.htm#3", IMF. Retrieved on 2011 -Oct 22

http://www.imf.org/external/mmedia/view.asp?eventID=1153(accessed 16 Oct 2009)

% Gains in Quota for EMCs

http://www.imf.org/external/mmedia/view.aspx?vid=79161031001 accessed oct 22 2011 Video on voting structure

Criticisms of IMF & WB:

1. Washington Consensus and neoliberal policies imposed on DW by IMF & WB have been discredited (#6 Birdsall & Fukuyama).

2. To remedy the impact of 2008 global financial crash on developing countries, UN and development economists have offered policies that have been misdirected (DW #6)

3. Although the West’s influence is diminishing (Susan George, End of Poverty), the status quo is maintained in development policies due to the disproportionate power of Rich countries in WTO, IMF & WB.

Bretton Woods Institutions: 1944

Multilateral bodies:

• IMF

• World Bank (IBRD group)

the IMF provides funds to governments in immediate financial emergencies: bridging trade and balance of payment deficits. As to the source of their funds, the IMF gets most of its money as subscriptions from member governments-the amount determining the number of votes each government has in running the operation. When, in extreme circumstances, the IMF needs an especially large amount of funds, it can activate a line of credit it has established with governments and large banks.But, IMF imposed wrong policies on the Developing Countries 1. Blamed Developing countries for their B of P deficit –during the Oil crisis (1971). 2. Argentina experienced a catastrophic economic crisis in 2001, caused by IMF’s restrictions on Argentina’s budget —this undercut the government's ability to sustain national infrastructure in crucial areas: e.g., health, education, and security—and privatization of strategically vital national resources.

• The World Bank promotes long term development strategies – thus it shapes the developing countries’ economies that receive its loans: e.g., to build hydroelectric or clean water projects or training programs for local business

• WB requires that public sector (State owned) should be replaced by private sector (corporate): e.g. privatization of communal lands and other public corporations.

• WB raises its money in the financial market - as loans from the private sector, operating through financial markets. Because investing in WB is secure (secured by funds from member governments) it can borrow private funds at low interest rates. WB then offers these low interest loans to the developing countries. Thus, through it, WB allows developing countries’ governments to borrow on the international capital markets at lower rates than they could borrow if they were to try to borrow on their own.

The World Bank: a Bretton Woods institution (1944)

Original aim: post-war reconstruction of Europe• First loan of $250 million was to France (1947)

What is its aim today?• Reconstruction is WB’s important focuso Natural disasters, o Humanitarian emergencieso Post-conflict rehabilitation needs.

The World Bank• Owned by member countries• Voting power related to members’ capital

subscriptions • Quota is based on a country’s relative

economic strength• Raises most funds in financial markets• IBRD sells AAA rated bonds and other debt

securities• Charges interest that reflects its low-cost

borrowings in capital markets

Susan George: http://www.youtube.com/watch?v=NQ952ba75Yk&feature=related7min 2011

IBRD: 188 members (2012)• World Bank provides long-term development

loans to LDCs

IBRD’s Board : 24 Executive Directors.

5 Exec Directors: appointed by the 5 largest shareholders (the US, Japan, Germany, France and the UK).

19 Exec Directors : elected by the Bank's other members.

The “World Bank Group”

1944 1960 1956 1988 1966

International Development Association (IDA)• Established 1960 to provide concessional assistance to

countries unable to borrow at commercial rates

What does IDA do? (March 2011)o Gives grants and interest free loanso Borrowers pay 1% administration feeo 52 countries contribute to funding ($49.3bil)o $12.6 billion – grants and loans to Africa and South

Asia, in education, health, social services, water and sanitation.

http://www.worldbank.org/ida/ida-factsheet.pdf oct 22, 2011

FY11 Top Ten IDA Borrowers($million, excludes regional projects)

Bangladesh 2,139

India 2,072

Pakistan 1,292

Vietnam 1,280Ethiopia  630Ghana 605Nigeria 535Kenya  490

Tanzania 420

Mozambique 413

New IDA Lending by Region:Sub-Saharan Africa...........43%South Asia...........................39%East Asia/Pacific..................10%Europe/Central Asia...............4%Latin America/Caribbean........3%Middle East/North Africa.........1%

http://www.worldbank.org/ida/ida-financing.html

Millennium Development Goals MDGs)

WB’s Mission

Help developing countries and their

people reach the Millennium

Development Goals by working with

our partners to alleviate poverty.

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining

World Trade Organization (WTO) ( for expanding free trade)

It oversees and regulates:

• Global trade balance

• Monetary stability

 Wto p1 6.36 min - 2007 http://www.youtube.com/watch?v=aOE7Ve06tXA&feature=fvwrel  http://www.youtube.com/watch?NR=1&v=HbwZhCfO2GQ&feature=fvwpwto p 2 6.45 min

WTO works on power-based bargaining

What do poor countries face?• Agricultural Protectionism• High Tariffs on Labour intensive goods• Anti-dumping

What do Rich countries reject?• Opening AICs’ agri market• Access to cheaper medicines• Lowering industrial tariff

WTO (cont’d)• From 1995-2010, declarations of WTO have

not advanced the trade related development in LDCs

• AICs rejected G-21 demand to cut their agri subsidies/ tariff barriers

• Widening disagreements between the rich and poor countries

Subsidies per Head per Year (in U.S. $)2006

Country Cattle Chickens Pigs Sheep

Aid per poor person in

developing world

EU 15 $179.28 1¢ $9.24 $28.93 $16.11

Australia $17.12 39¢ $6.49 94¢ 54¢

Canada $68.59 15¢ $18.99 0¢ 95¢

Japan $163.23 21¢ $3.92 0¢ $2.38

New Zealand $2.66 13¢ $2.14 19¢ 8¢

Norway $965.72 $1.48 $39.98 $94.06 83¢

Switzerland $987.58 $7.63 $139.62 $16.11 61¢

United States $29.06 58¢ $9.03 $4.12 $7.67

All $92.59 38¢ $10.58 $12.85 $29.17

http://www.foreignpolicy.com/story/cms.php?story_id=3547&page=5

Unequal trade relations:• Tariff barriers• Non Tariff barriers

• E.g. http://www.youtube.com/watch?v=GiZfi8uQo4Q 0.27-1.43 3.30-3.55- 6.1 to7.4

Davos: • World Economic Forum (WEF) – founded in

1971 by K.M. Schwab, a Swiss prof. • Annual meetings in Davos, Switzerland• Membership: top leaders in business & politics:

Presidents, PMs, Trade Ministers - a business forum - the richest businesses negotiate deals and lobby powerful politicians

What would be their real objective? • profit-making?

or• solving economic problems such as poverty?

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• MFN

Most favored nation status (MFN) • An agreement between two nations to levy

tariffs on each other at rates as low as those levied on any other country.

• If one of these nations reduces tariffs on a third country, all of that nation's MFN partners also receive that lower tariff rate.

http://www.youtube.com/watch?v=Be5SudSdO6Q

Martin Khor Structural Adjustment Explained 5 min 2011