Critically Evaluate the Debates Surrounding the Continuity

3. Critic eithery assess the debates surrounding the continuity of Bretton timberlandss origins. Which of these institutions would you recommend to be discontinued? Justify your choice. While preparing to redo the supra farmingal sparing trunk after WWII, 730 delegates of the 44 allied nations met in New Hampshire, unify States, to year the Bretton Woods placement. The aim was to set up rules and regulations to stabilize the world-wide m peer littletary system and ensure the set down movement of capital goods through a global market.The agreement established two regulatory institutions, foremost the International Monetary investment firm (IMF) to control the ex deviate rates and bridge temporary imbalances of payment. second, the International chamfer of reconstruction and Development (IBRD), later known as the human being bank, which was founded to finance the reconstructive memory of contain tell of war Europe. In 1947 the Havana Charter proposed a third reg ulatory institution, the International Trade Organization (ITO) that modify into the existence Trade Organization (WTO).This essay will critically evaluate the performance of the three Bretton Wood? s institutions, giving recommendations to operational changes for the IMF and the WTO, and argue to discontinue the WB as it operates currently. The IMF was one of the key institutions that alter the gentlemans gentleman economy after WWII. Its initial remnant was to regulate and stabilize exchange rates and assists the reconstruction of the worlds international payment system. One of the key objectives of the IMF was to prevent the devaluation cycle.Through joining the IMF in the post War period, countries surrendered their sparing rights, specially on setting its exchange rate, in return they were guarantied exchange stability, turning away of competitive exchange depreciation and a liberal regime of international repayments (deVries, 1986). Essentially the original institution behind the IMF, was to control the behaviour of countries that joined the IMF, spelled out in a code that was administered by an international institution. The 1970s oil crisis was a turning point for the role that the IMF played.Third world countries were close modify by the oil crisis, since their economies became dependent on oil and the increasing prices accumulated large amounts of debt. The IMF agreed to append money, and rose to new prominence, with new functions and greater functions of control everyplace even much dependent countries (Peet, 2009). The principal(prenominal) change in the IMFs electric charge, is the shift of lending to first world countries, in order to reconstruct the world payment system using expansionary policies, to lending to third world countries, accompanied by conditionalitys, which crop countries fiscal and monetary policies.Anne Kruger, managing director of the IMF, said Much of what we do is very different from the way the Fund operated in those early years. It has to be. The world economy has changed beyond recognition. But we compose apply those same total principles, international financial stability and the prevention of crises (Kruger 2004) The IMF became subject to b ar blame, one of the important critics is Joseph Stiglitz. He argued that the IMF has failed its mission to sustain global economic stability.The main point of his argument is that the IMF has diverged its initial mission based on the assumption that markets did not constantly work perfectly, that is, there were clips when intervention top executive be mandatory to secure a st up to(p) global economic order (Stiglitz, 2002) Now, he argues, the IMF operates largely on the unreasonable ideology that markets should be left to operate on their own, with no need of intervention. The upper-case letter Consensus largely influenced the change in economic policies of the IMF. The Consensus was based on Latin American countries, were growth was not sustained.The belief of the Washington Consensus was that this had happened as a result of excessive government intervention in the economy. The Consensus therefore recommended policies such as capital market ease, fiscal austerity and the privatisation of public companies. Furthermore, critics say the IMF frequently argues for the same economic policies c beless(predicate) of the situation. (Pettinger, 2008) The IMF blindly imposed the same conditionalitys to all its loans. What policies might have worked for one country might make matters even worse in others.The Argentinean financial crisis (1999-2002), infralines that the policies imposed by the IMF can lead a country into a severe recession. The IMF convinced the Argentinean government to maintain its fixed rate of exchange one peso for one U. S. dollar. This made imports artificially cheap but exports too expensive. Consequently, Argentina had a severe merchandise famine. Secondly, in order to maintain the overvalued currency, a country needs large reserve of dollars. The IMF change $40 billion to support the Argentina peso, enhancing the debt of the country.On top the IMF made its loans conditional to a zero deficit policy. Argentinas implosion has the IMFs fingerprints all over it. (Weisbrot, 2001) However the IMF has in addition been the last opportunity for umpteen countries to avoid a default. or so currently, the IMF has given Greece a 1. 6 billion euro loan, to keep the Greek economy floating, and stabilize the euro zone. Another criticism of the IMF is that decisions made on which countries have the right to borrow money argon made by a handful of nations who have the main rights.Out of the 24 board peniss in the IMF, lone(prenominal) 10 be diligent by ontogenesis countries, holding besides 26% of the shares. America in comparison has nearly 18% of the shares in the IMF. This inequality in the board of the IMF shows that decisions are mainly focused in developed countries. Sti glitz argues that the IMFs decisions were compulsive by the collective will of the G7. Wealthy, industrialized nations, and the commercial and financial interests within those countries dominate the IMF. The IMF was not wrongly criticized, tho the existence of the IMF is still important and inevitable.The current financial crisis has shown that supranational organizations such as the IMF still play a key role in stabilizing countries economies. However in order for the IMF to change state in future and efficiently operate in economically developed and less developed countries, several(prenominal) changes will have to be adopted. Firstly the board members will have to split up more evenly. It is understandable that larger countries with more economic output have slightly more voting power than smaller ones. However developed countries, holding 74% of voting power, solely make decisions.Since the IMF largely gives loans to less developed countries, they should have enough members on the board to able to make decisions, on loan agreements. Secondly the IMF has to make detailed analyses of severally country they borrow too, and based on that give consultancy on economic policies. History has shown that countries can prosper with different economic policies. While the western economy has largely with child(p) on a liberalized set down market, the Asian Tigers have managed to grow, ignoring the neoliberal economic policies the IMF imposed on them.Therefore the IMF must acknowledge that not every country can develop successfully under the same economic policy. The man Bank is the second institution founded at the Breton Woods conference. It was formally named the International Bank for Reconstruction and Development (IBRD). The initial role was to help in the reconstruction of post-war Europe, hardly mentioning the issues of global impoverishment reduction. Now, however the initiation Bank operates as a development agency, providing loans to developing cou ntries, in order to reduce destitution and increase living standards.In its mission statement the bank says, Our dream is a world without poverty. The size of the World Bank has also changed dramatically, starting with 38 members in 1946, to 187 members currently. The World Bank comprises two main institutions, the IBRD and the International Development Agency (IDA). The IBRD provides loans to commendationworthy middle-income countries, charging an interest rate of around 1%. It raises money through bond sales in the international capital market.These bonds have a triple A rating, since they are backed by member states share capital. The IDA, on the other handy, focuses on providing long-term, interest- clean-handedhanded loans to the worlds 78 unfortunateest countries, 39 of which are in Africa, (World Bank move outicial website, 2011) addressing issues such as primary education, basic health services salvage water supply and many others. Resources to fund IDA loans are rais ed through subscriptions from wealthy members such as United States, Japan and Germany (Hill, 2002)The IBRD financed several successful projects in various areas in the developing world and was able to improve the living conditions and reduce the poverty rate in whatever areas. The IBRD, for example, largely funded the education system in Mexico. The WB funded over 18,000 schools under the Quality schooltimes Program in rural areas of the country. Recently the WB has granted a 300 million US dollar loan, to moreover support Mexicos School Education System (Educacion y Cultura, 2012). The IDA has also successfully cut poverty and improved infrastructure in some areas of the world.A notable example is the Highway Program in Azerbaijan, which focuses on improving international and interior(prenominal) road networks for stimulating economic growth (World Bank Official Website, 2011) The highway project reduces travel time by 33%, stimulates switch and business along the rural are a and created over 20,000 jobs. However the World Bank has faced some severe criticism as well. One of the strongest criticisms has been the negative environmental mend of some the World Bank projects. For instance, the construction of the Yacyreta dam in the 1990s in Argentina, which was largely funded by the World Bank.As a result of the dam, over 40,000 people have been displaced, and the majority of them were not compensated for their losings (The Whirled Bank Group, 2002). Furthermore, because of the dam construction several children failed to reach their school. The dam also had negative impacts on biodiversity, and collectable to the calm waters, diseases such as malaria and the dengue fever started to spread. Another polemic aspect of the World Bank has been its undemocratic governance structure, which is dominated by the main developed nations. These countries choose the leadership and senior vigilance of the World Bank, and so their interests dominate the bank (Cornell University Press, 2006) Similarly to the IMF, the US holds the most voting power with 15. 8%, additionally all World Bank presidents have come from the US. Japan and China follow with only 7% and 6% voting power correspondingly. This large voting power inequality shows how voiceless most of the developing countries are, although nearly all loans affect their economies. The last, and arguably the most important criticism of the World Bank, are the neoliberal policies that World Bank imposed on lending nations.The ideas that were created in the Washington Consensus, including the deregulation and liberalization of markets, privatization and the downscaling of government, were seen as they key policies to promote development. However, what might have worked for the western economies might not be the scoop up solution for developing nations. Usually the World Bank imposes structural adjustments to countries to which they lend money. These adjustments include reduced state support, and the liberalization of markets. Studies have shown that these policies have led to intensified poverty and a slowdown in the economy, especially in African nations.Richard Peet claims that the austerity policies attached to the World Bank have declined the per Capita income by 25% in sub-Saharan Africa, and the removal of food and agricultural subsidies caused prizes to rise and created food insecurity (Peet, 2003). The policies have not only exacerbated poverty, but due to the imposed decline of health expenditures of governments, HIV and other diseases spread rapidly, causing the life expectancy of Africans to drop by fifteen years during the last two decades.In the Millennium Development finale 6, the World Bank states, to reverse the spread of HIV/AIDS, through prevention, care, treatment, and mitigation services for those affected by HIV/AIDS. Although the WB has been successfully fighting AIDS in some African nations, expending over 3,000 million USD in the construction of HIV testing and teaching sites, it has worsened the situation in other areas through imposing neoliberal economic policies on countries. Overall the World Bank is an institution out of time and place (Rich, 1994).The IBRD claims to be a development agency, however the institution is funded through return bonds on the capital market, creating a conflict of interest. Due to the fact that numerous shareholders own the IBRD, they will always have the pressure to create shareholder value, and cannot focus their attention solemnly on poverty reduction. Furthermore, the World Bank has largely overlapping interest with the IMF, especially the IBRD. They both focus on the same means neoliberal policies, and impose these on the countries they lend money to.These policies have mostly ended in poverty and economic failure in developing countries. Consequently, the IBRD should be discontinued, and the capital that the IBRD holds could be transferred to the IDA. The IDA could then be reorgani sed as a subgroup of the IMF. This would not only give the IMF a better image, but also tincture new ideas into the organisation. The IMF can still give similar loans as the IBRD did, since they have the capital and the power to credit those loans. There is no doubt that the IDA is an important institution with the correct core values, ut there is but no need for two supranational institutions focusing on the same broad goals. On top, over the last decades, there have been increasing inflows of FDI into developing countries and private microfinance, which can boost development and gross domestic product growth. The main role of the IDA should therefore be consultancy, to ensure the private loans are used effectively. An change magnitude cooperation with the United Nations Development Programme (UNDP) and the UN should ensure sustainable poverty reduction. The third supranational institution, originating from the Breton Woods agreement is the World Trade Organization.Initially nam ed the General parallelism on Tariffs and Trade (GATT), it aimed to govern international clientele relations, since countries would use tariffs to cherish their own economies at the expense of their neighbours. This was seen as a threat to push the economy into a further recession hence an institution was needed to encourage the free flow of goods and services. The GATT was transformed into the WTO in 1994, under the Marrakech Agreement. Currently, the WTO has 154 members, and embraces 95% of the global market.Its mission still is, to supervise and liberalize international trade. It has two main functions, firstly to provide a forum for negotiations and for settling disputes. If there is a dispute the WTO may direct the loosing member to take action to bring its laws, regulations or policies into conformity with the WTO Agreements, however there is no punishment enforced. Secondly, it oversees the implementation, judicial system and operation of the covered agreements (WTO offici al website, 2012). The WTO claims that the introduced trading system has produced several wins. Listed in the 10 benefits of the WTO) The main benefits are, firstly, that free trade generally cuts the cost of living and gives the consumer more choice. The reduced trade barriers through negotiations results in reduced costs for producers, reducing the price of finished goods and services, ultimately resulting in a lower cost of living. The increased global competition also forces producers to cut costs, again resulting in a benefit for the consumer. Secondly, lowering trade barriers adds to personal income. The WTO claims since the Uruguay Round trade deal between $109 and 510 billion dollars were added to the world income. In Europe, the EU focussing calculates that over 198993 EU incomes increased by 1. 11. 5% more than they would have through with(p) without the Single Market. Thirdly, trade stimulates economic growth, which could lead to increased jobs, if countries have the c orrect adjustment policies. Lastly, the least criticized benefit of the WTO, is that the system is based on the rules rather than power. Meaning that voting power is equal for every member, and decisions are largely made by consensus.Rich and poor countries alike have an equal right to challenge each other in the WTOs dispute settlement procedures. Although the WTO claims that free trade is essentially positive for all nations, critics have targeted the 10 benefits of WTO harshly. Richard Peet argues, that the WTO clearly does not adopt a neutral stance on trade policy. He further says the WTO is passionately against protectionism and just profoundly for trade liberalization (Peet, 2003). The WTO therefore generally favours some interests while harming others. Furthermore, Peet targets the effect of free trade on workers and unemployment.The fact that the WTO shows no evidence for the increase in employment, stating reliable estimates become impossible, shows that there is little b ehind this benefit. Quite on the contrary, several workers have befuddled their job as result of free trade, due to increased competition and the cost reduction of manufacturers. Furthermore, free trade often resulted in developing countries trading more but actually earning less. The reason being, many countries were unable to shift their production from primary commodities to manufacturing. The increased competition between developing countries and dropping good prizes meant lower profit margins.Another point of criticism deals with the TRIPs agreement, which sets down minimum standards for many forms of intellectual property. Critics argue that the TRIPS agreement has a detrimental effect on the access of medicine in developing countries. The most controversial issue involves the use of drugs to cure AIDS. For example, Thailand suspended the patents of drugs treating HIV and heart conditions, to make the medicine affordable for poor patients. The EU and the US protested formally and the US even threatened retaliatory actions. The WTOs operations have also been criticised for being biased towards developed nations.While the EU has largely enforced trade protectionist measures, subsidizing the textile and agricultural industry, developing nations have been forced to open their markets. European and US lobbyism plays a great role in the WTO, and explains wherefore the US and the EU were allowed to use these protectionist measures. In general, the WTO has proved to be an extremely useful institution for freer trade, and in some cases successfully enhanced the growth of nations. However several developing countries have felt the downside of free trade, with some of their economies shrinking due to increased competition combined with higher unemployment rates.Nevertheless, according to Ingo Walter an international trade professor at NYU the world as a whole is certainly materially better off under free trade than with no trade at all and so is the individual na tion (Walter, 2011). The WTO will face several challenges in the future, including trade negotiation between BRIC countries and the EU and US. If export-oriented interests mobilize in countries, including the BRICs, they will push for reciprocal market openings (Schaffer, 2009) The WTO must ensure negotiations are fair, and to ensure that they cannot allow US and EU multinationals to interfere with the WTOs decision making.In conclusion, the critics towards the Bretton Woods institutions have several core similarities. These critics argue that the institutions do not effectively alleviate poverty, they are generally poorly governed and developing countries remain marginal and without influence in decision-making. Those institutions have profoundly affected the developing world and it is time for a reform of these organizations. This essay has adumbrate the possibility of a united World Bank and IMF, in order to pool the capital towards a common goal.For this merger to succeed the I MF will have to undergo serious restructuring and embrace a goal towards the sustainable development of the world economy. 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