Criticisms Against Bretton Wood Institutions - Essay Example

GLOBAL ECONOMY: BRETTON WOODS Table of Contents Table of Contents 2 Introduction 3 Criticisms against Bretton Wood s: 3 Importance of Bretton Wood institutions: 6 TRIPS and Bretton Wood institutions: 8 Conclusion: 10 Reference List 11 Introduction The financial structure of the global economy is monitored by Bretton Wood organisations. The Bretton Wood organisations were formed in the year 1944 in order to manage the chaotic situation of the international economy after the World War II. The Bretton Wood organisations were mainly focused on developing a common platform for the nations of the world in order to facilitate international trade and commerce (Eichengreen, 2007). The Bretton Wood agreement led to the development of the gold standard for measuring and converting currencies across the nations. However, based on the recent occurrence of the global recession in 2007-08, Bretton Wood organisations were rendered helpless for managing the monetary turbulence and also stabilise its primary nations such as the US and European countries (Krishnamurthy and Vissing-Jorgensen, 2008). The three primary Bretton Wood organisations are International Monetary Fund, World Trade Organisations and the World Bank (Hall et al. 2011). However, the influence of these organisations on the economical and financial transactions of national systems has often been criticised. This essay will mainly analyse these criticisms and also try to evaluate the need for the Bretton Wood system and organisation in the contemporary scenario. Criticisms against Bretton Wood institutions: Hunt (2008) noticed that criticisms for the Bretton Wood organisations have been continuously focused on the approaches and regulations imposed on the underlying firms, institutions and countries. Obstfeld and Rogoff (2009) specified that the criticisms made for the Bretton Wood organisations can be mainly segmented into social and economic perspectives. Considering the economic or financial activities of the World Bank or IMF, often it has been noticed that Washington Consensus plays a big role in the description and design of loan conditions made by the Bretton Wood organisations. The Washington Consensus mainly focuses on the liberalisation of the national trade system of the nations and preventing the privatisation of the government segments. Krishnamurthy and Vissing-Jorgensen (2008) considered the utilisation of Washington Consensus as a barrier for the development of the global corporate industry. James (2012) reflected that as privatisation is increasing in the commerce and trade sector, the rules of the Bretton Wood institutions can prevent or slow down the growth of the global trade and commerce practices. Relating this statement with the concept of globalisation, it has to be considered that the policies of the Washington Consensus does not match with that of globalisation as globalisation considers the growth and development of both private and public sector firms. In the context of IMF, Obstfeld and Rogoff (2009) mentioned that IMF packages are designed and implemented on the regulatory bodies of the state and national government policies which also reduce the control of the government bodies for fulfilling their responsibilities. The changes in the social and economic conditions are urging the government bodies to design their policies in a mutually beneficial manner for the society and the corporate sector; however the uniform regulations of IMF may pose threats for the nations. The increasing influence of the Washington Consensus in this regard has been one of the major factors related with the shift in the authorities and abilities of the state and government of the member nations. Stiglitz (2006) observed that IMF policies have also been linked with decreased focus on the social benefits such as national investment towards education and public health segments. The European Union also mentioned that public health investments of the Government of the union have reduced consistently since the beginning of the 21st century and even more after the occurrence of the global recession process. In the words of Roubini (2004), World Bank is not able to observe the long term implications of the project being funded by them. Most of the times, the environmental and social concerns are neglected by the managerial departments of the project board of World Bank which has led to serious penalties for the cultural and social domains around the world. For instance, the projects related to the development of hydroelectric projects have caused many indigenous people to leave their culture and homeland behind and move to different locations. Gartner (2013) mentioned that World Bank’s responsibility and scope of operations have to increase to ensure that all the stakeholders are being considered in their planning and development strategies. Apart from that, World Bank’s partnership with the International Financial Corporation is also expected to further reduce the authorities of the state. Bown (2009) mentioned that World Bank, IMF and WTO are responsible for managing the financial and economic regulations based on the necessity of the global development and unification. However, the contemporary scenario of currency instability, fluctuations of gold standards and other economic barriers suggests otherwise. One of the basis challenges for the Bretton Wood institutions is to create a common regulatory board for managing the economic operations of the member nations. Crockett (2009) stated that centralised management approach of the Bretton Wood organisations for managing a diverse scenario has also inflected their ability to manage their roles in context of the variety of programs and plans associated with the financial and economic requirements of the nations. Continuing the above statement, Crossan and Guatto (1996) mentioned that the operations of all the Bretton Wood institutions have to be aligned first for ensuring a stable planning, decision making and designing process of the business processes of the firm. However, Lombardi (2009) criticised that developed countries have always held a special place within the organisational planning process which can be considered as a prejudiced focus of the Bretton Wood organisations. Lipscy (2014) also added that limited authorities for the national financial and economic authorities may reduce the scope to develop alternative approaches for financial and economic policies for international growth. The criticisms mentioned have focused on the approaches and the implications of the decisions and projects of the Bretton Wood institutions on the national and international economic and financial constitutions. Importance of Bretton Wood institutions: Despite the fact that many criticisms exist in context of the operational process and policis of the Bretton Wood organisations, they are still operating as the major house for developing and designing the financial regulations of the world. One of the primary factors that highlight the importance of these institutions is their ability to understand the financial and economic requirements of the nations and the future implications of the decisions of the national policy making authorities (Kahler, 2009). Towbin and Weber (2013) considered that the Bretton Wood institutions were developed with the aim of unifying the trade and commerce activities of various nations within a single regulatory framework. This also reflects that most of the projects of the World Bank or the IMF have a broader concept for social and economical development. Going against the previously mentioned criticisms of reduced focus on public health and education of society, Kahler (2013) stated that World Bank and IMF are working on programs related to the advancement of the lower sections of the society and the underdeveloped countries. There has been a huge change in the policy developments and the regulations of the national institutions because of the rapid growth of the commercial segment and increase in multinational trade among the countries of the world (Hall and Tavlas, 2013). This has urged a change in the focus of the Bretton Wood institutions and may have shifted their objectives from social growth to corporate stability and unity. Nevertheless, Hockett (2013) mentioned that changes in the operational processes of the Bretton Wood institutions have also resulted in creating better markets for the international small and medium scaled. The domestic markets are now being reflected to the international consumer zone and also have the tenacity of creating national and organisational brand equity. Hall and Tavlas (2013) highlighted that one of the most important contributions of the Bretton Wood organisations is their ability to help the countries with poor and instable economic scenarios. For instance, loans and investments are being made with reduced rate of interest by the concerned authorities and also acting a guiding hand for the national economic forums around the world. Norton (2009) stated that the Bretton Wood institutions have a clear vision but they have not been able to reflect the same to their stakeholders in a transparent manner which is creating the problem of initiation or implementation of their plans. Hall and Tavlas (2013) cited that the Bretton Wood institutions have helped in the creation of a flexible and open currency measurement system, however, this is also a hyped topic of debate as unrestricted flexibility for exchange rate measurement has also lead to the building of a fluctuating currency monitoring process. Related to their focus on the financial policies development, Gartner (2013) stated that IMF has ensured that the national authorities of the countries can design their monetary policies in an independent manner. As IMF is responsible for creating a shared and common platform for economic growth of the member nations, they have a strict monitoring routine over the national monetary policies of the member countries. Obstfeld and Rogoff (2009) considered that the concept of developing a flexible exchange rate for the organisations has allowed the firms to create a proper balance between the internal and external factors influencing the economic situation of the countries. On the other hand, the changes in the monetary policies and currency rates have allowed the nations to direct their economic growth in the desired manner. From the perspective of the social institutions, Towbin and Weber (2013) referred to the consideration for the development of the underdevelopment sections of the society by inclusion of public health, education and other necessary public benefit schemes. The changes in the operational processes of the Bretton Wood institutions have also lead to the formation of the international gold standard for measuring the strength of the economy of the nations. In other words, the development of the international trade and commerce has been to a large extent facilitated by the Bretton Wood institutions (Krishnamurthy and Vissing-Jorgensen, 2008). Although the balance between the deficit and surpluses in context of economic development of the nations is still a problem for the concerned organisations, strategies for developing business prospects is expected to build better economic scenario for the underdeveloped countries (Obstfeld and Rogoff, 2009). Lipscy (2014) stated that stability for the economic and the business processes of the nations have been always considered as the primary objective of the Bretton Wood organisations, but the financial functions of the international segment such as liquidity and convertibility has been a challenge for the Bretton Wood firms to maintain their position. For long, the aim of the World Bank has been to eradicate the social and economical problems such as illiteracy, unemployment and poverty. However, the growing population of the globe has created barriers in fulfilling this objective. Some common practices developed by Bretton Wood organisations such as Foreign Direct Investment has helped in enhancing the relationship between the political scenarios of the nations and build up social stability within them. Gartner (2013) also opined that organisations have been framing their strategies in accordance with the regulatory frameworks of the Bretton Wood institutions which are bringing in a uniform approach for development of the firms. Thus having an overall influence over the financial and economic approaches of the corporate, national and social foundations has been utilised by the Bretton Wood institutions for creating a definite framework of international development. TRIPS and Bretton Wood institutions: Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) was initiated by the World Trade Organisation for creating a specific approach in context of the intellectual property rights. However, TRIPS has always been in the main frame from countries, scholars and private sectors for its approach on the intellectual property rights (Legrain, 2004). The changes in the regulatory functions of the government have also increased the strictness of filing any intellectual property rights. According to Towbin and Weber (2013), TRIPS was developed considering the ethical and moral factors that influence the culture of innovation and also the appreciation of value of a concept for the society. However, as the WTO implemented TRIPS as an overall framework, it changed the national policies of intellectual property rights. The framework of the TRIPS did not consider the economic, legal and political situations of the nations which and influenced the process of filing and acquiring intellectual property rights in the concerned countries. However, the changes in the aspects of the laws related to the projection of subjects have reduced the ability of the nations to reflect their issues and economic status to the Bretton Wood institutions. One of the primary factors that were highlighted in context of TRIPS was their limited focus on the ethical constraints faced by the nations. Krishnamurthy and Vissing-Jorgensen (2008) on the other hand stated that WTO has allowed the member nations to change the rules of TRIPS and also enhance the scope of the process. Hall and Tavlas (2013) criticised that roles of diversification of ideas and concepts have been generated in TRIPS because of individual valuation of the ideas of each members. This also led to the arguments and chaos among the countries regarding intellectual property formation and authorisation. Gartner (2013) noted that TRIPS was designed on the basic aspects of the definition of intellectual property which considered idea as the primary source of development. However, internationalising of an idea and owning it in front of the global crowd is a complex process as different members of WTO can have different perspectives for a common thought. The concept of common good for instance can be viewed in short-term and long-term process and can be achieved in numerous ways. Obstfeld and Rogoff (2009) reflected that the basic concept of IPR has been taken from the Western concept by WTO which again is not acceptable to the Asian members. Towbin and Weber (2013) criticised the concept of internationalising the IPR because this can also be considered as loss of the traditional value to the originators. Also the fact that the ethical considerations of the IPRs in the concerned nations and organisations are not aligned and has contributed towards inefficient management of TRIPS concept by the WTO. Which Conclusion: The concept of developing a uniform approach has always been one of the major efforts of the global, national, local and corporate organisations. The development of the Bretton Wood was instigated for bringing discipline in the economic and financial conditions of the nations after the World War II. However, as the scenario changed and the situation became more stabilised, the needs of the member nations also changed. Considering the time frame of operations, there was a huge shift in the concept of managing financial and economical decisions of the firms. Many scholars have stated that the policies of World Bank and IMF projects are not focusing on gaining social stability and development or are not considering the future implications of their projects on the social aspect. The development of TRIPS by WTO was one such aspect which has been highly criticised because of the duality of the policies and regulations of the insertions. However, there is a need for the Bretton Wood organisations if there has to be a uniform platform for global financial and economic operations. Reference List Bown, Chad P., 2009. Protectionism Increases and Spreads: Global Use of Trade Remedies Rises by 18.8% in First Quarter 2009. Washington, D.C.: Brookings Institution. Crockett, A., 2009. Rebuilding the Financial Architecture. Finance and Development. September, pp. 18-19. Crossan, M., and Guatto, T., 1996. Organizational learning research profile.Journal of Organizational Change Management, 9(1), pp.107-112. Eichengreen, B., 2007. 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