Global Business Strategy: World Bank - Coursework Example

Global Business Strategy Name Institution Date Table of Contents Global Business Strategy 1 Global Business Strategy 12 2 Table of Contents 2 Introduction 3 Economic Nationalist View of the World Bank Group 3 Structuralism view of the World Bank Group 5 Liberal view of the World Bank Group 8 Conclusion 10 Reference 11 Provost Claire, 2011.Global Development: Aid Still Benefits Companies from Donor Countries. 12 Guardian News, USA. 12 The World Bank, 2012. Democratic Republic of Congo Overview. Retrieved on November 20th 12 2012. From: 12 Introduction The World Bank has been considered by most nations as a liberator to them especially in times of hard financial situations. Most poor countries have received donations and loans from the World Bank. While the bank comes in as a liberator to most economies, it is very easy for one to be confused and assume that the World Bank is an aiding friend that considers others better than itself. This notion is not true since the donations and aid received have in some cases haunted the recipient nations. This paper gives a view of the World Bank Group in three different perspectives: the Economic Nationalist view, the Structuralism view and the liberal view. Economic Nationalist View of the World Bank Group The World Bank Group has been seen to benefit recipient nations’ welfare. This is because the nations get access to money when in need and in some cases, poor countries receive donations. This promotes the economy of the nation greatly. World Bank has continued in its mission to eliminate poverty and for the poor nations, it serves them good. The drive by World Bank Group to help poor nations has been seen in its increase in amount of donations that is given to the poor countries. Even in the proposals for functional changes in the design of the World Bank, emphasis is laid on ensuring that poor countries are on the benefiting end. Countries such as Ethiopia, Niger and Mongolia have been beneficiaries of donations from the World Bank, up to a total of $ 97 million. This was meant to support the efforts by the countries to more strategic in their efforts and to help settle the levels of hunger. It was also meant to help them invest in their futures. Ethiopia saw the implementation of a $ 51.5 million project funded in order to boost the incomes of people in rural areas (Moody, 2012). Despite the attractiveness of getting funds from the World Bank, the conditions that are imposed by the bank on the recipient country limit some of the operations of the country and this leads to loss of national control. Through its transfer of resources to those countries that are in need, the bank gains political as well as bureaucratic power over the poor. Some of the projects that are proposed by the bank to the countries turn against the country and forces them into more debts. The 50-year zero-interest loans that were given to Ethiopia and Mozambique have continued to haunt the countries and even increase their poverty levels. A scheme by the World Bank to Ethiopia in the 1970s has brought about the government’s current resettlement program that is murderous. Most fund recipients ended up with bigger debt loads, most of which are long running debts and this means the World Bank will continue to exercise its domain over the countries. According to Provost (2011), the countries that have more voting power stand to witness the benefits of World Bank. They have more influence on the actions of the bank. In fact it is such countries that try and influence some of the decisions to impose projects on the poor countries for their own interests. In 2009, it was reported that 67 % of aid from Greece came with conditions that only Greek contractors are used for development of the intended projects. The same year had reports that 54 % of aid from Austria was tied, and so was 50 % and 39 % of aid from Korea and Portugal respectively. Despite the efforts to detach conditions from aid, it is reported that two thirds of aid contracts that are formally untied are given to rich donor countries. Developing countries are thus pushed out of the contract equation by these powerful multinational companies and the procurement systems that are complex. In Uganda, Chinese and UK firms were given 32 % and 19 % of World Bank funded contracts. There has to be a catch for the donor countries too. While giving out their donations, their economic development becomes a zero-sum game. It means that other nations benefit at the expense of the donor countries. It some cases, it is a fight for influence and by so doing; the donor countries lose out in their economy. In such cases, the countries try to pursue political viability rather than economic feasibility. Canada has been working to devise new ways of providing foreign aid to other nations without straining its national budget. Such measures as increasing the share of aid that is country-programmable have been proposed. Donor countries are increasingly realizing that it is not just aid that helps the poor countries but reaching a good balance of priorities is important. The countries have realized that the strain through donations is not economically sustainable (Tabb, 2000). Structuralism view of the World Bank Group The voting procedures of the World Bank Group have been seen to favor only the rich capitalist nations. The target of economic development is these rich nations, at the expense of the poor. The World Bank Group acts as though its plans are meant to benefit these poor nations yet in real sense it is the rich nations that benefit. World Bank was formed to rescue shattered economies. Ever since its formation, it has continued to defend capitalism and ensuring maximum profits to big multinationals while maintaining the control of the US over the economy of the world. While it seeks to give long term loans to governments for the financing of development projects like power plants, roads and other infrastructure, it gives extension of loans on condition that the countries accept structural adjustment programs (SAPs). These SAPs are forced on the countries. For the governments to pay off their loans, the World Bank demands that the governments raise this money through selling of public assets as well as companies and cutting the expenditure on some social services like education, pensions, healthcare and childcare. These SAPs force the countries to open up their markets to foreign trading and remove restrictions on foreign trading. The huge amount of profits that are made by these multinationals are taken from the country and brought to the West. It is the world’s richest that end up benefiting from the profits (The IMF, The World Bank, and The Global Economy). While the World Bank has asserted that neo-liberal reforms are meant to bring major economic growth in the long run, the truth is seen to be the opposite of expectations. Loans given to countries have brought a huge debt gap. This means that poor countries commit large portions of national incomes in payment of interest. This logic of capitalism indicates that money will be flowing from the poorest countries in the world to the richest. This debt has turned out to be the greatest weapon used by the capitalist powers in their dominion over poor countries. Debt is used by World Bank as leverage to force opens the new markets and access cheap raw materials and labor. Countries that wish to obtain new credit without defaulting loans are forced to accept the dictatorship of the World Bank. Presently, the underdeveloped world has an international debt of about $2.5 trillion. These developing nations pay debts to the West nine times more than they received in form of aid. For instance, after Mozambique suffered some devastating floods in 2000, the Western countries gave $40 million in aid. However, Mozambique has been paying over $70 million annually as debt repayment to the Western banks. Diseases have continued to spread but a GDP of only 1.1 % is set aside for healthcare. Between 1994 and 2000, poverty in Africa has been reported to increase by almost 50 %. This can be attributed to the SAPs that almost all nations in sub-Saharan Africa got into in the 1980s. In Latin America, over a third of the total annual economic output is owed to other countries and banks. The government of Haiti was once blocked by World Bank from increasing the minimum wage and was forced to privatize profitable public companies that had been generating revenue for services that were desperately needed. Despite the national shortage of health workers and teachers, the government was forced to cut by half its services. It must be stated that the World Bank does not enjoy when revolution occurs in countries. After the Nicaraguan revolution (1979), loans to it were cut down by the World Bank and IMF. This is because the revolution was projected to spark further revolutions across Central America. After the Sandinista regime had been forced to nationalize corporations and carry out other reforms like healthcare and literacy campaigns, the USA demanded that the World Bank increases interest rates on existing credits in Nicaragua. Further, through the World Bank, the US ordered that Mexico stops its selling of oil to Nicaragua. The US even went further and tried to overthrow the Nicaraguan regime by funding the “Contra” guerilla army. Following 12 years of civil war and formation of a new conservatist government, the World Bank engineered massive SAPs that greatly transformed the economy of Nicaragua. Presently, the country has a debt that is six times its GDP and about 74 % of the population is poor. Besides, unemployment rate is about 60 % and the percentage of malnourished children under the age of five is 30 % (Cook and Hopwood, 1996). Liberal view of the World Bank Group Nelson (2003) asserts that in this perspective, the World Bank is seen as looking to achieve economic development as a positive sum game. It is meant to benefit all nations. Einhorn (2006) purports that by its design, the World Bank is meant to achieve economic development in all countries. Looking at the subsidiary institutions presents the clear role that is played towards the achievement of economic development across nations. For instance, the International Bank for Reconstruction and Development (IBRD) was assigned the task of facilitating loans to middle-income countries at market-based rates. This is meant to help those countries get access to loans and work towards bringing up their economy. On the other hand, the International Development Association (IDA) was tasked with providing credit to governments while the International Finance Corporation (IFC) was meant to work with the private sectors directly. This is evident that all sectors have been targeted. Most importantly, reduction of poverty levels is seen as a key objective. The IDA is therefore tasked with ensuring that the poorest countries are brought on to the development journey through offering of highly concessional financing. When Paul Wolfowitz was taking over as the World Bank president in 2005, he found an already established trend towards the fight against poverty in the world. This had been achieved under James Wolfensohn. Under Wolfensohn, the World Bank had attained a “human face” and was seen to have the dream of a world without poverty. The new era saw an alteration in some of the priorities of the institution and emphasis was laid on building nations, strengthening of the rule of law, improvement of governance, enhancing the voice poor’s voice and participation and stamping out of corruption. All these were done in line with institution’s mission of stopping poverty in the world (Stiglitz, 2000). It should be noted that over the more than sixty years of the World Bank’s existence, it has played a key role in the architecture of international institutions. Its achievements in assisting countries to develop and grow using an outward-looking and liberalizing strategy have all been seen. Over time, attention is shifting from middle class countries to poor countries and the middle class countries with the poorest pockets. In addition, it is evolving to an institution of choice that works with developing countries in tackling common global issues like health and environment. It has also embraced the mission of rebuilding states that were torn during wars. Any issue pertaining money and growth of the economy that will bring about the reconstruction of a nation, the World Bank is seen as the liberator. Besides, the bank has even embarked on increasing its lending towards agriculture and infrastructure. Under Paul Wolfowitz’s era, the sectors that were targeted for improvement included infrastructure, agriculture, health, education and energy. The main agenda is in accordance with the Millennium Development Goal of poverty elimination from countries and aid to poor countries was even doubled in an effort to cut down poverty levels. However, there is need for a change in the structure of the bank in order to effectively achieve its goals. Some changes have been noted in terms of shifting the role IBRD from its focus on middle-class countries. More changes should be made because there has been a lot of a change in the world ever since the formation of the bank and the structure should therefore be changed so as to be in line with the current world setting. These changes should be made on the roles played by the constituents of the bank together with adopting new strategies like creativity and innovation (Einhorn, 2006). The DRC has been a key beneficiary of the World Bank in its struggle to revive its economy. Reports suggest that an economic growth of 6-7 % has been noted while inflation dropped by over 40 % in 2011 (The World Bank, 2012). Conclusion In conclusion, it is worth noting that people should not be mystified by the prospect of the World Bank in the way it presents its case of aiding nations and helping in economic recovery. Truth is that the World Bank has its pros and cons. Some countries have greatly suffered after accepting the loans and aid given by the World Bank while few others have benefited. It is important to note that the situation in most poor countries has brought the World Bank under a lot of criticism and major adjustments should be made in the World Bank if it is to continue operating under its design objectives. Reference Cook Martin and Hopwood Bill, 1996. Global Warning: Socialism and the Environment. London: Militant Publications. p.91- 92. Dr. Roy Nelson, 2003. Institutions of the Global Economy: World Bank Group (WBG). Thunderbird. Einhorn Jessica, 2006. Foreign Affairs: Reforming the World Bank. New York. Vol. 85, Iss. 1; pg. 17. Moody Kim, 2012. Global Capital and Economic Nationalism. Detroit. Provost Claire, 2011.Global Development: Aid Still Benefits Companies from Donor Countries. Guardian News, USA. Stiglitz Joseph, 2000. What I learned at the world economic crisis: The Insider. New Republic; Vol. 222 Issue 16/17. P.56-60. 4p. 1. USA. Tabb K. William, 2000. "After Seattle: Understanding the politics of globalization," Monthly Review. Vol. 51, No. 10. The IMF, The World Bank, and The Global Economy. Retrieved on Nov 20th 2012 from:  . The World Bank, 2012. Democratic Republic of Congo Overview. Retrieved on November 20th 2012. From: . Read More