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The Struggle to Shape the Global Economic Environment: The IMF, World Bank, The US, and the Developed and Third World Countries - Term Paper Example

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Name Name of Professor The Struggle to Shape the Global Economic Environment: The IMF, World Bank, the United States, and the Developed and Third World Countries Introduction As the Second World War released its fury all over Asia and Europe, the heads of powerful nations, particularly the United States and England, believed that building a new world order after the war would require multilateral organizations that could put in force policies supporting the free flow of capital globally (Chittick 2006)…
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The Struggle to Shape the Global Economic Environment: The IMF, World Bank, The US, and the Developed and Third World Countries
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Download file to see previous pages The International Monetary Fund (IMF) was formed to facilitate global trade by curbing constraints in foreign exchange. It also produced a treasury of financial resources to be used by countries undergoing problems of short-term balance of payments so they could carry on with their foreign transactions without disruption (Killick 1995). This transformation of the global economy would confer privileges to all trading nations, particularly the wealthiest traders, England and the United States. Another institution established at Bretton Woods was the World Bank, or previously known as the International Bank for Reconstruction and Development. The institution was assigned to create financial reserves for post-war developments, which, since they were running at a loss, were not expected to be set off my private funds (Baker 2002). The World Bank was obliged as well to support private capital thru investments and loans acquired by private investors. The pioneers of these organizations expected that by instituting basic guidelines prior to the aftermath of the war, they would be able to keep themselves from the double risks of state-driven, socialist economies, and global disorder caused by aggressive forms of xenophobic private enterprise (Baker 2002). They predicted that if the most powerful nations did not guarantee some way in to large capital for the select few of less developed nations, as stated by Danaher (1994), those select few could implement rules with the possibility of disentangling the global capitalist economy. According to Fischer (2004), the traditional objective of the IMF and the World Bank, which has been implemented with retribution, has been to assimilate nations into the global capitalist economy. Fischer (2004) furthered that in spite all the arguments about poverty mitigation and progress, the main role of these multilateral organizations has been to immerse less developed countries’ governments and leaders more deeply into a global economy governed by giant, transnational firms. The IMF and the World Bank, over the past six decades, have progressively acquired influence and authority, becoming the major intermediaries identifying which nations will be granted international loans. This positive grants these multilateral institutions the authority to put into effect economic strategies drafted in Washington, where the IMF and the World Bank are founded (Danaher 1994). For the less developed countries, this brings back the ghosts of the colonial period. Effects of the IMF and the World Bank on Developing Countries The structural adjustment programs (SAPs) of the World Bank and IMF are intended to alleviate consumption in Third World nations and to reroute funds to export production for debt repayment (Baker 2002). This has brought about excessive production of major goods and a steep drop in their prices. In addition, it has resulted in the destruction of customary agriculture and to the appearance of masses of property-less farmers in almost all countries where in the IMF and the World Bank function (Baker 2002). Another devastating effect is the weakening of food security in all less developed countries, but specifically in Africa. Increasing reliance on food imports puts these weaker nations in a ...Download file to see next pagesRead More
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