Advantages and Disadvantages of International Economic Institutions - Research Paper Example

s School Advantages and Disadvantages of International Economic s Introduction: Global economic s aim to understand the dilemmas and opportunities faced by several economies of the world. Through their formal chain of command system and global applicability, these institutions facilitate economic actions that are aimed to achieve progress and development. Some of the key institutions in the world are WTO, IMF and World Bank (Mole) There are many economic institutions in the world. According to EDIRC there are currently 12,542 institutions in 231 countries and territories mentioned. Many of these economic institutions came into existence after the world war. They were basically founded to promote economic cooperation between countries and help in the recovery of world economy from a downturn. The present World trade Organization (WTO) was General Agreement on Tariffs and Trade before 1995. According to the official website of WTO it has 153 members and is located in Geneva, Switzerland. Its aims include removing barriers to international trade, keeping an eye on global economic policy, providing a platform for negotiating and resolving conflicts, reviewing the national trade policies, helping developing countries by providing loans and finally conducting economic research. Now let’s shift focus from WTO to the famous international Monetary Fund (IMF) which was also created after World War 2 in the year 1946. According to the official website of IMF It has 185 members and is located in Washington DC. The question is why was IMF created? The great depression of the 1930s saw countries struggle to recover from their failing economies by increasing barriers to foreign trade, diminishing their currencies to increase rivalry against each other for export markets, and limiting their citizens' liberty to store foreign exchange. These tries showed to be self-destructive. Consequently, world trade fell sharply and so did the standard of living in various countries. This collapse in international monetary cooperation led the IMF's makers to plan an institution mature enough for taking care of the international monetary system that is the coordination of exchange rates and global expenditures that enables countries and their citizens to purchase products and services from each other. The new global body would make sure that exchange rates remained stable and it gave confidence to its member countries to finish exchange limitations that prevented trade. The World Bank is another instance of an institution that was made to act as a global connector of knowledge, learning and modernization for poverty elimination. It links together practitioners and institutions to assist them in locating suitable answers to their development challenges. With an emphasis on the "how" of modification WB connects knowledge from around the world and causes modernization to rise. The WB’s aim is to be enable connection of knowledge, learning and innovation for poverty reduction. Practitioners and institutions are connected to facilitate suitable solution to developmental challenges. The focus is on how to reform, and the methodology involves linking up knowledge from around the world and scaling innovation. WBI’s dream is to encourage change negotiators and provide them with suitable instruments enable development. The WBI has always sought to invest in a row of nontechnical methods that match technical answers to development problems. WBI’s part is to act as a booster for development. By enabling universal reach of innovative technology, they are making instruments, approaches, and online platforms to help in opening and working together on the development process between governments and nations.WBI assists in partnerships and information sharing between policy makers and practitioners. It has made a devoted team that has its centre of attention on South-to-South performer exchanges and participates in a joint venture and outreach function in increasing the eminence of SSKE through the programs of Aid Effectiveness and G20 actions.WBI has faith in supporting untied and teamed-up governance enabling local change agents to attain development results in their own circumstances.  Directed by this vision, WBI looks to make stronger the capacity of nations to use modern tools and practical ways toward producing and involving sustainable alternative.  WBI has greater than 50 years of know-how in grown-up education. Their educating tools are for development practitioners and include courses, tutorials, discussions, webinars and e-learning constituents covering a range of subjects related to global growth. They are absorbing and outcome-oriented and promote learning from colleagues. They are mainly provided through local and international institutes and an e-institute, international gateway or portal that offers an enormous collection of e-learning courses. WBI is relating these methods to the seven topics below that slash across division and regions and mirror strong country demand and World Bank's corporate main concerns such as climatic modification, weak countries, sovereignty, expansion and rivalry, healthcare and public-private joint ventures. 5. Find advertisement and market research activities conducted by Scion that are not cited in this case. Criticisms on these economic institutions and their disadvantages Liberation of trade results in discrepancy instead of income levels becoming equal among the rich and the poor people. It is possible that foreigners brought into a country by using the policies of international economic organizations are manufacturing much better products than those manufactured locally therefore resulting in a decrease of sales of local products and ultimately slowing down the expansion of local firms. Profitable issues gain importance over growth Monetary help is restricted to things that are dependent on something else being done and they slowdown society’s stability Outsiders become friends with administrative officials and politicians, they provide honorable jobs to their children and other family members and then apply their economic strength to change lawmakers polices to their benefit. These economic institutions are being managed by a small number of developed countries hence the steps taken can never be neutral and will always have bias in them. For some countries reduction in tariffs on goods they export has been smaller compared to the reduction in tariff on goods other countries export. Foreign private investment raises foreign exchange accountability on imported raw material. There can be meager scope of rise in exports of a certain industrial sector due to the limited amount of that industry’s liberalization. Some developing countries can be under the great pressure to free up their services industry. Liberalization of trade has resulted in globalization. Globalization has made the new generation forget their culture and tradition and act according to other people’s culture. Motivate unsuitable expenditure design through promotional activities, such as Mc Donald, Pizza Hut and Nokia. Main disadvantage of the IMF The developed countries decide which countries are eligible to borrow money. Developing or third-world countries have little authority regarding loans and the conditions attached to them. Often the loans are given to countries with corrupt governments that do not spend the money on growth. This deprives other developing countries with fine governments from economic development. The IMF will only give money to countries if they agree to follow specific orders. These orders have increased poverty in some countries. Unfair competition over goods and services brings a great disadvantage to poorer countries. There have been situations in which IMF did not give beneficial financial advice. Countries have suffered by following it. Benefits provided by these economic institutions Advantages provided primarily by the WTO are the following 1. Many countries were able to become members and gain recognition in international arena. 2. Countries obtained valuable technical advice and training. 3. Reductions in tariffs and taxes for a country. This benefit is provided by WTO. 4. Improved opportunities for agricultural exports as a result of the increase in world prices of agricultural products due to a decrease in local subsidies and barriers to trade. This benefit was obtained by developing countries that have an agrarian economy. This benefit is provided by WTO. 5. Benefits from greater higher security and certainty of the international trading system due to refurbished conflict resolution and the treaties on subsidies and anti-dumping measures. These benefits have been provided by the WTO. 6. Liberalization of trade has encouraged rivalry among firms and improved product quality to a large extent. 7. Liberalization of trade has encouraged globalization which in turn has encouraged people to become more tolerant of other people’s lifestyles and values. In other words people can tolerate more diversity and relate easily to people belonging to other cultures. 8. Liberalized trade has allowed countries to specialize in industrial sectors that are more efficient in the country. This results in less wastage of the scarce natural resources. For example Pakistan can focus on improving textile industry while importing automobile parts from other countries. Advantages – the main advantages of the IMF are the following It encourages international monetary co-operation and international financial stability. It gives temporary financial assistance to countries in debt – specifically negative balance of trade or a negative balance of payments otherwise what happens is that their currency devalues hence making their exports much cheaper than the competing products made by other countries. This ultimately results in the export earnings of those countries to fall unpredictably hence harming their firms. It encourages economic development It provides monetary advice to countries regarding how to manage their economies. The European Union The European Union is the sole economic and political organization comprising of 27 European countries. It has provided 50 years of tranquility and stability, assisted in improving living standards, coming up with one European currency, and is steadily making a single Europe-wide market in which people, services, products and resources move among Member States as openly as possible within a single country. The EU was founded at the end of the World War. The initial measures were to promote economic assistance: countries that trade with one another are economically mutually dependent and will therefore stay away from disputes. Since then, the union has transformed into a single enormous market with the Euro as its general currency. What started as an economic merger has grown into an organization covering all sections, from growth help to environmental rules. The EU actively supports human rights and social equality and has the most impressive emission minimization targets for fighting global warming on the planet. Thanks to the elimination of border restrictions between EU countries, it is now possible for people to move freely within a large part of the EU. It has also become much convenient to exist and be employed in another EU state. According to the official website of European Union, the Euro – used every day by approximately three hundred and thirty one million Europeans – is the most concrete evidence of collaboration between EU countries. Its advantages are instantaneously obvious to anyone going abroad or doing e-commerce rooted in another EU state. Ireland is a member of EU and according to the official website of EU since becoming a member of EU in 1973, Ireland has converted itself from an agrarian economy into a modern, technologically-ahead economy. Positive things associated with Ireland being a member of EU By being a member of the EU Ireland’s companies in research, education and training and transport and energy can get grants. Irish people can freely travel to other EU countries looking for jobs if they fail to find jobs in Ireland. People from other countries can come to Ireland looking for jobs. This will increase workforce diversity and bring in new skills in the workforce. Also, demand for local goods will rise as a result of people coming in from EU countries. Ireland has become a part of the fight against globally destructive things like global warming Opportunity to specialize in those industrial sectors for which raw materials are easily available within Ireland and for which conditions of Ireland are ideal. In this way Ireland can specialize in making that thing while another EU country makes capital goods for that industry in which Ireland is specializing. This will benefit both the countries. Being mutually dependent on one another prevents Ireland from going at war with other European countries. In this way another world war can be avoided. EU has helped Ireland during the recent financial crisis. Negative things associated with Ireland being a member of EU Other EU members could be sending such people to Ireland that are corrupt and were not able to get jobs back in their hometowns because of not being skilled. Once such people enter Ireland and again fail to find employment then they can resort to a life of crime hence causing Ireland’s law and order situation to deteriorate. On the other hand other EU members can also send very skilled people to Ireland so skilled that Irish employers start preferring those skilled non-Irish people over Irish citizens hence forcing Irish citizens to leave their hometowns searching for jobs. It is possible that although two or more countries are economically mutually dependent but the countries get unequal amounts of benefit from the collaboration. It is possible that if Ireland is getting capital goods from another EU country and it is focusing on making one single product then the profit earned by selling that product is lower than profit obtained by the country selling capital goods to Ireland in the name of competitive advantage. It is possible that Ireland is not interested and does not have the money to contribute to global causes like fighting against Global Warming. The reason can be as simple as Ireland not being industrialized enough in the first place to have caused such extensive damage to the natural environment and so since it did not damage the environment then why should it contribute equally to the fight against global warming. In other words the interests of a group can never be equivalent to the interests of all of its individual members. It is possible that Ireland has to get materials for production from outside the European Union despite those products being available with EU members because the materials present within EU are costing much more. Now, importing materials from countries outside the EU is likely to offend EU members and as a result relationships can deteriorate. Ireland and other economic institutions Currently Ireland is a member of IMF and WTO (became a member on 1st of January 1995). Conclusion Joining any economic institution can have both positive and negative consequences but the key is to be aware of these and work diplomatically to create win-win situations. Considering that EU has agreed to help Ireland in recovering from the recent financial crisis it appears important to remain a member of the EU. Works Cited EU. Basic Information. 2012. 26 3 2012 . Friends Mania. Foreign Aid and Economic Assistance Advantages and Disadvantages. 2012. 27 3 2012 . IMF. IMF Title Page. 2012. 30 3 2012. Mole, William. Global Economic Institutions. Routledge, 2003. Oxfam Education. The International Monetary Fund. 2012. 27 3 2012 . Shingh, A, L Phom and K Laxmi. International Economic Institutions/Slideshare. 2012. 27 3 2012 . WBI. WBI Title Paage. 2012. 30 3 2012 .   Read More