THE IMF AND WORLD BANK - Essay Example

? The IMF and World Bank: What the critics have to say Fatemeh Araeipour Econ 335-10, MW: 2:30-3:45 Dr. Nasser September 26, Do not focus too much on the functions of these institutions. Refer to the provision of Public goods . Look at the criticisms as presented by J. Stiglitz. Show how these institutions interact with distressed countries. Define the term " institution"? The IMF and the World Bank “The International Monetary Fund (IMF) and the World Bank are institutions in the United Nations system and are composed of member countries, 188 countries. Their approaches to this goal are complementary, with the IMF, focusing on macroeconomic issues and the World Bank concentrating on long-term economic development and poverty reduction” (IMF, 2012, p. 1). With such goals and objectives of civilization’s best interest and financial well-being, the IMF’s and World Bank’s humanistic visions should be at the top of the list of the most essential and necessary financial institutions. It becomes somewhat anti-productive and fatalistic to envision ongoing threats against the IMF and World Bank’s purpose and comprehensive strategic plans. Is terrorism the eminent threat? However, appropriate checks and balances are part of strategic planning definitions and comprehensive operations. Who and what is the IMF? The IMF (known as the ‘Fund’) was created/constructed at a United Nations Conference in Bretton Woods, New Hampshire, USA in July 1944. Forty-four representative governments (The Governances) were in attendance at this conference. The visionary goal, purpose, and function were to construct a comprehensive strategic plan – a framework – for “economic cooperation that would avoid repetition of the vicious circle of competitive devaluations that have contributed to the Great Depression of the 1930s” (IMF, 2012, p. 1). IMF Activities and Public Goods The International Monetary Fund (IMF) has approximately 188 countries that participate in its global membership. The IMF manages the challenges and opportunities that are results of “globalization and economic development” concerning public goods. Furthermore, Michael Camdessus, IMF Managing Director, addressed during the United Nations Economic and Social Council (July 2, 1997), “…Good governance is important for countries at all stages of development…our approach is to concentrate on aspects of good governance related to macroeconomic policies – namely the transparency of government accounts, the effectiveness of public resource (public goods) management, and the stability and transparency of the economic and regulatory environment for private sector activity” (IMF, 2012, p. 2). The IMF’s role of governance and management of public resources or public goods during global economic crisis has been focused on restoration of growth and jobs. In doing this, the IMF has emerged as a public goods and resources management institution. The IMF is referred to an institution. By definition, institution means “…an organization, one dedicated to public service” (Webster’s College Dictionary, 1996, p. 360). In “Interview with Joseph Stiglitz (2000)”, by Lucy Komisar, Joseph Stiglitz – member and chairman of the President’s Council of Economic Advisors – “cautioned against free market ‘shock therapy’ (Komisar, 2000, p. 1). In 1997, he became chief economist of the World Bank and often criticized the IMF and US economic politics…”peers assumed he will win a Nobel Prize” (p. 1). “I spoke with Stiglitz several times in April. He was generous with his time, unpretentious, and genial…” (p. 1). Stiglitz purposively states, “…The world needs an international development agency – the World Bank. There’s the view that it represents a form of corporate welfare that is counter to the IMFs own ideology markets. But anybody who watched government from the inside recognizes that governments need institutions, need ways to respond to crisis” (Komsisar, Stiglitz, 2000, p. 1). This is in response to crisis involving public goods and resources. Purposive actions of the (IMF) and World Bank IMF Responsibilities: A main purposeful responsibility of the IMF is “to ensure stability of what is called the ‘international monetary system’. This system deals with exchange rates and payments between IMF countries enabling interaction and networking. According to the IMF (2012), this system is essential for the promotion of (1) sustainable economic growth; (2) increasing living standards; and (3) the reduction of poverty” (IMF, 2012, p. 1). Financial Assistance: The 188 member countries are permitted to request financial assistance (financing) from the IMF in order to create ‘breathing room’ that is needed to “correct balance of payment problems and dilemmas” (p. 1). Technical Assistance: The IMF, as an institutional function, “provides technical assistance and training to help the 188 member countries strengthen the capacity to design and implement effective policies of financial assistance” (IMF, 2012, p. 1). Technical assistance is offered in several categories: 1. “tax policy and administration; 2. expenditures management; 3. monetary and exchange rate policies; 4. banking and financial systems; supervision and regulation; 5. legislative framework and statistics” (IMF, 2012, p. 1). Who and what is the World Bank? What are its functions? “The World Bank promotes long-term economic development and poverty reduction by providing technical and financial support to help countries during reform or implementation of projects” (IMF, 2012, p. 1). Examples of reform or project that are funded by the World Bank are: construction of health centers and schools; providing water and electricity; fighting disease; protection of the environment. (IMF, 2012, p. 1). Funding assistance from the World Bank is often long-term and is generated via the issuance of bonds and contributions from the 188 member countries. “The IMF and World Bank collaborate regularly and at many levels to assist member countries. They work together on several initiatives to accomplish visions, goals, objectives” (IMF, 2012, p. 1). Complaints from critics of International Financial Institutions (IFIs) Following is a list of complaints made by critics of the IMF and World Bank. Critics make untimely attacks against many of the strategic plans and implementations of the IMF and World Bank. Critics complain that many of the strategies contribute to serious problems. 1. “Critics say that the conditions placed on loans are too intrusive and compromise the economic and political sovereignty of the receiving countries. ‘Conditionality’ terms are under question” (The Levin Institute, 2002-2009, p. 8). 2. “The social impacts and the environmental impacts of supported projects often go ignored by the World Bank” (The Levin Institute, 2002-2009, p. 16). 3. “The World Bank has funded has funded dam-building projects in India that force resettlement of people of territories that have been populated since prehistoric times. Land lost to such projects caused resentment and social turmoil for which the World Bank was blamed” (p. 16). 4. “The World Bank has been attacked by critics for funding the ‘Western Poverty Reduction Project in China’ which is speculated will resettle 37,000 ethnic Chinese” (The Levin Institute, 2002-2009, p. 16). 5. “Most recently, the construction of a pipeline has met with opposition because critics speculate that it will increase pollution as a result of fossil fuel use, contribute to further oil dependency, damage forests and regional water supplies, and contribute to human rights abuses” (The Levin Institute, 2002-2009, p. 16). Recommendations for Necessary Reform Three major foci of reform were spot lighted during the G20 (a Financial Stability Board) Summit in London (2009) – Reform of the IMF and World Bank issues. “G20 leaders should form agreements on the issue to triple IMF resources to help meet the financing needs of developing countries; (Linn, 2009, p. 1). B20 leadership and Governances should request that the IMF monitor and report transparently on the commitments and implementations of G20 national stimulus plans and efforts to repair banking sectors; (p. 1). G20 leadership and governance should commit to far-reaching reform of the IMF” (Johannes Linn, 2009, p. 1). References International Monetary Fund (IMF), 2012. FactSheet: The IMF and the World Bank. [Online; Web] Retrieved from http://www.imf.org/external/np/exr/facts/imfwb.htm International Monetary Fund (IMF), 2012. FactSheet: The IMF at a Glance. [Online; Web] Retrieved from http://www.imf.org/external/np/exr/facts/glance.htm. International Monetary Fund (IMF). (2012). Good Governance: IMF’s Role. Retrieved from http://www.imf.org/external/pubs/ft/exrp/govern/govindex.htm. International Monetary Fund (IMF). (2012). Overview: What We Do. Retrieved from http://www.imf.org/external/about/whatwedo.htm. Kosmisar, L. (2000). Interview with Joseph Stiglitz. The Progressive (June). Retrieved from http://www.progressive.org/0901/intv0600.html. Levin Institute (2002-2009). International Monetary Fund and World Bank – Globalization 101. [Online; Web] Retrieved from http://www.globalization101.org/ Uploads/File/IMF/imfall2011.pdf. Linn, J. (2009). The Great Debate: Reform the IMF and World Bank. [Online; Web] Retrieved from http://blogs.reuters.com/great-debate/2009/03/30/reform-the-imf-and- world-bank/ Websters II New Riverside Dictionary (1996). Definition of ‘institution’. Houghton Mifflin Company: Boston, MA. Read More