How the IMF, World Bank and GATT Were Designed to Prevent the Economic Problems - Coursework Example

How the IMF, World Bank and GATT were designed to prevent the Economic Problems which led to the Great Depression and World War II Name Institution Name Date Introduction The Great Depression was responsible for the failing economies in the 1930’s and as a result, the fall in the standards of Gold eventually made several nations to not only raise the trade barriers but also devalue their currencies. This was actually aimed at enabling them to compete against each other for the curtail using of foreign currencies by their people and also for export markets. It was therefore due to these factors that led to a decline in world trade and a rise in unemployment and also plummeting standards of living in several nations. It was due to this that the Bretton Woods Agreement in 1944 created a new International Monetary system. It can therefore be truly ascertained that the creation of both the World Bank and the International Monetary Fund were two of Bretton the most enduring legacies. The IMF and the World Bank are normally referred to as “The Bretton Woods Institutions” because they are twin inter-governmental pillars which support the structure of the “world’s financial and economic” order. Apart from that, GATT, just like the World Bank and the IMF was created with an aim of preventing the economic problems, which led to the Great Depression and the Second World War. Despite having been set with good intentions, there have arisen numerous complaints and criticisms that have been directed at these institutions in the contemporary times claiming that they have failed to achieve their set objectives (Lamdany, 2013). The Role of the World Bank in preventing Economic Problems On the other hand, the World Bank came into operation in 1944 during a Bretton Woods Conference and its initial name was “The International Bank For Reconstruction and Development” (IBRD). Its major purpose was to facilitate the financing of economic development. The first loans to be disbursed by The World Bank were aimed at actually financing the reconstruction in Western Europe of war-ravaged economies after the Second World War. When these countries recovered some sort of economic self-sufficiency, the World Bank then turned its major attention and focus towards helping poorer nations in the world. The World Bank’s central aim or purpose is therefore to promote social and economic progress in the developing nations through aiding to raise their productivity so that their citizens may live a fuller and better life. The Role of the GAAT in preventing Economic Problems GAAT refers to the “General Agreement on Tariffs and Trade” which was implemented with an aim of further regulating world trade to help in the economic recovery after the World War. The major objective of GATT was to reduce barriers of international trade by reducing the tariffs, subsidies and quotas. GATT is thus a multilateral agreement, which was negotiated during the “United Nations Conference on Trade and Employment “after failure to establish the International Trade Organization or ITO. GATT, having been signed during 1947 lasted up to the year 1994 and it was replaced in 1995 by the World Trade Organization. GAAT is a treaty that regulates trade in about 153 nations, is also tasked with conducting eight rounds of talks that address different issues, and also helps in the resolving of any international trade conflicts or disputes as they arise. The “Uruguay Round” which was finished on the 15th of December 1993 after 7 years of serious negotiations, led to an agreement among 117 nations which also included the United States was aimed at reducing trade barriers among the countries and also creating a more enforceable and comprehensible World Trade rules. Despite the fact that the IMF is tasked with supporting various developing countries through helping them to overcome various monetary challenges and also maintain a stable “international financial system”, its work is really complicated and thus it can have both negative and positive repercussions for the recipient countries. As a result, the IMF, the World Bank and GATT have both their supporters and critics as well. The challenges for these organizations therefore focus not only on some of the institutions’ operating deficiencies but also on the political environment on which they globally operate. For instance, the IMF has actually been a subject of different criticisms, which are focussed generally on its loans’ conditions, it lack of transparency and accountability and also based on its unwillingness to lend to nations having bad records of human rights. Criticisms Labelled Against IMF Some of the criticisms labelled against the IMF include among others, making loans to some countries based on the conditional implementation of some specific policies which include among others reduction of government borrowing, allowing of the failing banks to go bankrupt, higher rates of interest aimed at stabilizing currency e.t.c. Apart from that, the IMF was also criticized because of exchange rate reforms, devaluations, Free market criticisms, lack of involvement and transparency and its support for military dictatorships (Mody, et al, 2004). Criticisms Labelled Against the World Bank Just like the IMF, the World Bank is also primarily criticized due to various reasons like for instance administrative incompetence in which it is criticized that it has really shifted from being a lender of the last resort to an “international welfare organization”. This has a result made the financial institution to be labelled as being incompetent, bloated and even corrupt. Critics have also pointed out the fact that the lax standards of lending by the World Bank have resulted into a loan portfolio that has been rapidly deteriorating. Apart from that, the World Bank has also been criticized for supporting or rewarding corrupt and inefficient nations (Kumar, 2003). The critics assert that the lending policies of the World Bank normally reward macroeconomic inefficiency is undeveloped countries thus allowing inefficient countries to avoid the kind of fundamental reforms which would end poverty in the long run in such countries. Some analysts have pointed out the fantastic growth prevalent in East Asia to the poor economic conditions in the African continent. The World Bank has also been accused on putting focus on large projects instead of the local initiatives and putting negative influence on practice and theory. Critics have further pointed out the fact that The World Bank has put dominance in most of the G7 countries as opposed to other countries (Ritzen, 2005). Criticisms Labelled Against GATT Various criticisms have been labelled against GATT by numerous critics. For instance, according to an article titled “Why GATT doesn’t mean “Free Trade” authored by a one Peter Boyle and available at https://www.greenleft.org.au/node/5473, it is asserted that there was an impression which arose that the major objective of the new GAAT was actually to end trade conflicts in Agricultural exports between the United States and Europe. This was because held back the finalization of the Uruguay Round was the refusal by the French government to accept the 20th November deal between the European Community and the United States regarding the farm subsidies. Critics have also asserted that since the establishment of GATT in 1948, the United States has not really hesitated in flouting some of the GATT codes especially when such codes were known to suit its own interests. Indeed, the United States has a special “Trade Law” known as Section 301 which surprisingly allows the country to not only identify any unfair trade practices among the member countries but also allows it to retaliate as well (Weissman, 2014). Critics of GATT have also asserted that indeed, the earlier rounds of the GATT negotiations have brought to fore “limited liberalisation of trade” that did not aid the developing nations. In fact, after the insistence of the United States, agriculture was eventually excluded from earlier GATT deals and as a result, protectionism was enforced for the trade in the textiles via the “Multi-Fibre Arrangement”. Critics argue that it such arrangements are responsible for the prejudicing of exports from the developing nations. In addition to that, the United States has also come under harsh and criticism that is virtually unanimous at the GAAT because of its threat to impose some of the trade sanctions on India, Brazil and Japan. Such criticisms have come twice during GAAT’s special meeting that examines trade policy trends. Some major trading countries from both the Third World and the West have also argued that by the United States threatening to implement unilateral action; it was therefore violating one of GATT’s underlying principles (Abass, 2012). Conclusions Despite the fact that the IMF, The World Bank and GATT were established with good intentions at first, it is unfortunate that most of the criticisms that have been labelled or directed against all of them emerge not only to be true but also justified as well. It is therefore important that these institutions come from the slumber land and reassess the initial reasons as to why they were established and stick to them accordingly. Such institutions ought to be free from any political manipulations and therefore operate independently as they were earlier own established. In addition to that, all member countries should treat each other with uttermost respect and equality should be practised by all the member states. The re-evaluation of the performance of these financial institutions should be done from time to time to ensure that their standards of operation conform to what is required. References Abass, A. (2012). Complete international law. New York: Oxford University Press. Kumar, A. (2003). World bank literature. New York: U. Of Minnesota. Lamdany, R. (2013). Independent evaluation report: The role of the IMF as a Trusted Advisor. New York: International Monetary Fund. Mody, A, et al (2004). Keep capital flowing: The role of the IMF? New York: International Monetary Fund. Ritzen, J. (2005). A chance for the World Bank. New York: Anthem Press. Weissman, R. The final act. 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