Influence of Bretton Woods Institutions - Essay Example

?Bretton Woods s Bretton Woods s [Institute’s Based upon their actions judge the extent to which the Bretton woods institutions are pro-poor. At the end of the Second World War, along with the development of international organizations, such as United Nations to maintain peace in the world, there were many organizations formed to reestablish trade and commerce, which had disturbed by the war. These organizations were created in Bretton Woods, New Hampshire, during a conference, which brought together different nations of the world (Daly, Farley, pp. 318, 2004). Additionally, these organizations, which were created as part of the conference, included International Monetary Fund (IMF), World Trade Organization (WTO) and World Bank. Many people regard these post-colonial institutions to help the developing countries. According to Anghie (2002), these institutions define the ‘unique’ relationship, which exists between international organizations and the Third World. These institutions have been developed, in order for technological advancement of different countries from the developing world, and to refine, reinforce, reproduce and manage the statehood of countries from the Third World (Tan, pp. 31, 2011). Although, established with the aim of reconstructing Europe, the World Bank has taken part in many development projects that have occurred in the Third World. World Bank has also provided different loans to these countries, in order for them to establish themselves properly (Chebucto, n.p, n.d). Although these organizations have been created under the UN charter; in practice, they are largely autonomous (Willis, pp. 36, 2005). These institutions, developed some 60 years ago were developed to put an end to the depression, caused by economic problems, as well as the war, and were a beacon of light for many, especially for the development countries. For this purpose, the paper seeks to examine the ways that the institutions have helped the poor countries (Daly, Farley, pp. 318, 2004). However, since there is large criticism surrounding these Bretton Woods Institutions, it is also imperative to discuss the extent that these organizations have been pro-poor over the years. Nonetheless, it is important to discuss the roles of these two sister organizations, before judging their actions. Although, they had been developed for different purposes, their roles have changed dramatically over the ensuing years. The World Bank seeks to provide development assistance. On the other hand, the International Monetary Fund (IMF) promotes monetary cooperation on an international level through surveying the countries, and lends to those countries, which have a negative position in Balance of Payments (BOP). However, their roles often overlap with each other, since they both seek to provide financial assistance, through one way or the other. For example, considering the actions of World Bank and IMF after the economic crisis in Latin America, one would notice that both these organizations help each other in their respective goals (Weiss, Daws, pp. 1, 2006). One can recognize that they have been active in working for the development for the poor through the ways that they have rapidly changed their roles. Aside from maintaining a fixed exchange rate system, which helped poor countries develop economically, the IMF also gave loans to countries, which had balance of payments problems. Most of these problems are experienced by countries, belonging to the Third World, and the repercussions of negative balance of payments are quite magnificent. Hence, in order to correct this situation, short-term loans were provided, during the 1950s. The World Bank sought to develop different countries, by encouraging private investment to flow into the Third World, so that more development could occur in these countries (Weiss, Dawas, pp.5, 2006). Throughout the years, they kept adding more problems to their agenda, so that these problems could be solved. In 1988, the Multilateral Investment Guarantee Agency (MIGA) was formed, so that the private investors could be provided guarantee, against developing countries, which had problems, such as civil unrest, political instability, armed conflict and so forth. Such countries are often those that require the most assistance. The gap was filled, through the actions of IMF and World Bank (Weiss, Dawas, pp.6, 2006). The World Bank added rural development projects, which was to aid these countries. Hence, their ensuing goals had proved over the years that the actions of these Bretton institutions have been pro-poor. The World Bank also helps different countries in their development projects, which includes building school and health centers, providing electricity and water, and protecting the environment among other agendas. The World Bank also gives soft loans, or loans, which have low interest rates on them. Additionally, the World Bank (WB) has also provided grants and free technical assistance. Under the program, known as Heavily Indebted Poor Countries (HIPC), 26 poor countries were provided with debt relief, which will reap them the advantage of getting $41 billion over time (Lane, pp. 109, 2006). Nevertheless, their various critics state otherwise. After more than sixty years of the formation of these organizations, they have come under large criticism from a variety of groups, because they have not kept up to the promises of their development stance. Therefore, if one is to judge on the actions of these institutions, one would notice that the extent to which these institutions have helped the poor or the Third World has been limited. For this purpose, it is important to analyze their actions, which have ‘not’ helped the poor. One should first understand the origin of the Bretton Woods, which included the major powers, which included the Allied Forces. The developing world had no say in their formation, which is perhaps why the developing countries are skeptical about these institutions’ stance of being ‘pro-poor’. Therefore, their uneasiness stems from the idea that they had little say in the formation and have almost no part in the governance of these organizations, which are strictly controlled by the West, or rather the United States (Kenen, pp. 216, 1994). One can discuss the problems faced by developing countries, through the perspective of some economists. According to Stilgitz, the IMF has completely ignored the development and growth of the Third World, because it focused on one goal, which was to keep prices down, or to control inflation in a particular country. This decreased the level of government funding into the economy, which hindered the development process in a particular country (Milner, pp.5, 2005). Moreover, if one is to understand the development projects by these organizations, one should analyze their impact. Many commentators have put forth the argument that different types of aid, which has flowed to the Third World, in what is known as the “Humanitarian Emergency Aid Model” and the “Humanitarian Development Aid Model” largely has short-term impact, because it does not leave the Third World independent, and able enough to deal with its own problems (Milkias, pp. 221, 2010). While concessional lending by the Bretton Woods organizations was a major form of assistance to the Third World, and the interest rates were quite less, these institutions failed to recognize that, the loans are not the only solution to the problem of Third World. Under existence of external shocks, which include civil unrest, oil price shocks (especially in the 1970s), recessions in the industrial economy, presence of armed conflict in these areas have led these loans to flow into nothing. The debts have built up, because the countries have been unable to pay off these debts. Since these institutions claim to work for the development of the global world economy, especially that of the Third World, why were these problems not seen? Why was it difficult to perceive these problems that existed in the developing world? Hereby, it is necessary that these institutions develop their crisis prevention programs effectively, because clearly they are lacking in that (IMF, n.p, n.d). Another action of these institutions that have been under wide criticism included the Structural Adjustment Policies (SAPs), which were introduced in these countries. Originally developed to “restore economic growth, while maintaining internal and external stability”, these policies advocated the neo-liberal agenda, which was sometimes not in favor of the conditions of a particular country. These SAPs, which are also terms as conditionalites have failed to consider external shocks, as well. Since the price mechanism had been used for the allocation of resources in these countries, which works the best under ‘near-ideal conditions’, it is possible to simply state that these conditions do not exist in any way in these countries. Additionally, these institutions do not meddle in the workings of the developed world, especially the United States. However, this has been justified by these organizations, by stating that once the developing world asked for help, which meant that it required assistance and interference, which is why the organizations sought to implement these policies (Khan, pp. 2, 2009). Additionally, one should understand the ramifications of the World Bank’s presence in different developing countries to understand the extent to which these organizations are actually ‘pro-poor’. In the case of building a dam in India, near the Narmada River Valley between 1978 and 1993, many settlements of indigenous people were destroyed, which caused great social turmoil and problems. The debts for the developing world have piled up to such a great extent that “External debt per capita for sub-Saharan Africa (not including South Africa) is $365, while GNP per capita is just $365”. The economic experts should have foreseen that. Development has not occurred at all in these countries, because they are fulfilling their debt obligations, instead of providing social services. The poor and middle income groups have largely disintegrated (The Levin Institute, pp.16, Year). Henceforth, it can be stated that the extent to which the poor countries have been helped by these Bretton Institutions have been quite limited. According to Easterly “there was much lending, little adjustment and little growth in the 1980s and 1990s’ in the Third World. The 1960-1979 (prior to the involvement of these organizations), the annual per capita growth for the developing countries came up to 2.5% annually, but from 1980 to 1988, the growth rate has been pulled down to zero. Conditionalities and debt repayment has sprawled many problems for the poor (Milner, pp. 12, 2005). While trying to live up to other aims, these organizations have failed to minimize the impact of their policies and actions on the poor, and continuously justify their actions. Therefore, these institutions should look at their policies, and reconsider the SAPs. References Daly, H. E., & Farley, J. C. 2004. Ecological Economics: Principles And Applications. Google Books. Retrieved July 1, 2012, from http://books.google.com.pk/books?id=WGKt763MIbsC&pg=PA318&dq=Bretton+Institutions&hl=en&sa=X&ei=KVHvT-mvGe6M4gT7t4WJDg&ved=0CE8Q6AEwB International Monetary Fund and World Bank. n.d. The Levin Institute. Retrieved July 1, 2012, from www.globalization101.org/uploads/File/IM Kenen, P. B. 1994. Managing the World Economy: Fifty Years After Bretton Woods - Peter B. Kenen - Google Books. Google Books. Retrieved July 1, 2012, from http://books.google.com.pk/books?id=0nWb1bX9kHIC&pg=PA216&dq=Bretto Khan, A. A. 2009. Structural adjustment programmes: nature and impact. Business and Finance Review. Retrieved July 1, 2012, from relooney.fatcow.com/0_New_4725.pdf Lane, J. 2006. Globalization And Politics: Promises And Dangers. Google Books. Retrieved July 1, 2012, from http://books.google.com.pk/books?id=H1FZmQbi1CcC&pg=PA107&dq=advantages+of+ Milkias, P. 2010 Developing the Global South: A United Nations Prescription for the Third. Google Books. Retrieved July 1, 2012, from http://books.google.com.pk/books?id=bL_tfDgYmBIC&pg=PA221&dq=Have+ Milner, H. 2005. “Globalization, Development, and International Institutions: Normative and Positive Perspectives.” Princeton University. Retrieved July 1, 2012, from www.princeton.edu/~hmilner/forthcomin Reforming the Bretton Woods Institution. n.d. Chebucto.ns.ca. Retrieved July 1, 2012, from www.chebucto.ns.ca/Current/P7/bwi/cccb Tan, C. 2011. Governance Through Development: Poverty Reduction Strategies, International. Google Books. Retrieved July 1, 2012, from http://books.google.com.pk/books?id=47PcXRDO2-wC&pg=PA31&dq=Bretton+Institutions&hl=en&sa=X&ei=KVHvT-mvGe6M4gT7t4WJDg&ved=0CEMQ6AEwB The Logic of Debt Relief for Poor Countries. n.d. International Monetary Fund. Retrieved July 1, 2012, from www.imf.org/external/np/exr/ib/2000/09 Weiss, T., & Draws, S. 2006 Bretton Woods Institutions. Global Economic Forum. Retrieved July 1, 2012, from http://www.globaleconomicgovernance.org/wp-content/uploads/UN%20Woods%20Final.pdf Willis, K. 2005. Theories And Practices Of Development. Google Books. Retrieved July 1, 2012, from http://books.google.com.pk/books?id=nO1p13U185kC&pg=PA36&dq=Bretton+Institutions&hl=en&sa=X&ei=KVHvT-mvGe6M4gT7t4WJDg&ved=0CFwQ6AEw Read More