Social Change and the Developing World - Essay Example

 The global governance system consists of national governments, non-governmental organizations, and international organizations like the United Nations, international currency exchanges, and transnational corporations (McMichael 43). In addition, other regional intergovernmental organizations such as the European Union, ASEAN, NAFTA, APEC, MERCUSOR, and the African Union are also under the global governance system (World Bank 2003). These institutions, can deal with most of the challenges that face the global community; thus, global governance can be described as a multilayered and extensive system. Most of these global institutions were created at the end of World War Two, and since then, they have responded quite well to most of the challenges especially those that increased during the first half of the 20th century. These include global poverty, decolonization, global security, the end of the cold war, and environmental threats like global warming. However, according to McMichael (43), global institutions do not work well as individuals, but as a group. For instance, the UN, IMF, the G8 Summit and World Bank suffer from a corrosive decrease in legitimacy because they are unrepresentative, fragmented and ineffective (Helleiner 22). Therefore, this paper will discuss how such global institutions are shaping the future prospects of developing societies using both positive and negative examples. Global institutions have highly contributed to globalization. Globalization is a process that aims at expanding international business operations, which is facilitated by global communications as a result of developments in socioeconomic, environmental, political and technological advancements (Roberts and Hite 100). Its purpose is to provide institutions with a superior competitive position with low operating costs in order to achieve high number of products, consumers and services. This competition is achieved through diversification of resources, creation, as well as development of new opportunities for investment by opening up more markets, and accessing new resources and raw materials. According to Helleiner (25), developed countries meet certain socioeconomic criteria based on economic theory and have a high level of economic development as stated by UN, IMF and World Trade Organization (WTO). Moreover, globalization has made a significant impact on shaping the prospects of developing countries mainly in terms of economy and creation of new opportunities. Structural adjustments that are stimulated by the studies and influenced by the World Bank and other global institutions have started in most of the developing countries. It has also brought a lot of new opportunities to developing nations and access to markets and technology, which promotes productivity and better living standard (Helleiner 26). The International Financial Institutions (IFIs) such as the IMF, multilateral development banks, World Bank, and other international development agencies respond effectively to the needs of developing countries. They also ensure that the growth opportunities they create reach even the poorest people in the world (World Bank 2003). Both the World Bank and the IMF form part of the United Nations system, and they share the same goal of promoting the living standards in their member countries. However, the IMF focuses on the issues of macroeconomic while the World Bank focuses on eradication of poverty and long-term economic development. IMF and World Bank can work individually, but they collaborate regularly at many levels in order work together on certain initiatives and help their member countries. Thus, they both work together in reducing debt burdens of poor countries that are heavily indebted. For example, in 2010, about 39 countries were found eligible for relief of their debts under the Heavily Indebted Poor Countries (HIPC) initiative in which about $76 billion was to be spent. Such countries included Chad, Comoros, Ethiopia, Somalia, Sudan, Benin and Afghanistan among others. Roberts and Hite (18) argue that the aim is to help low-income countries attain their development goals without creating any debts in future. Moreover, both the IMF and the World Bank collaborate in reducing poverty through the Poverty Reduction Strategy Paper (PRSP) initiative (World Bank 2003). This is a plan that links national policies, development outcomes and donor support required to reduce poverty in poor countries. For example, the World Bank lends about $22 billion and above to developing countries via the IBRD and IDA (International Development Association). The Latin American region, which is among the poorest nations, receives the largest amount from the World Bank of $5.2 billion i.e. 24% of the total amount loaned by the bank. This is then followed by South Asia, which receives 22% of the loan ($5 billion). The PRSPs strengthen that HIPC initiative, as well as the IMF concessional lending and the World Bank. Thus, the World Bank gives loans to poor countries that help them to engage in poverty reduction programs. Moreover, in 2005, the World Bank participated in about 278 projects, which took place in about one hundred countries. By working with the local government in these countries, the World Bank helps them in various institutions such as education, healthcare, and economic development among others. For instance, it has supplied more than 5 million textbooks for various schools in Africa, trained over 50,000 doctors in India, and encouraged companies to join the foreign countries in order to provide jobs and promote the economy. For example, when Mozal-an iron-smelting corporation began operating in Mozambique, it raised the GDP by ten percent; thus, creating hundreds of new jobs, which help to reduce poverty. According to World Bank (2003), the most successful loans led by the World Bank, was the one that was used in a project, in Morocco, in 1995. The roads in Morocco were in a bad condition, which hindered transportation of goods and services into the rural and mountainous regions. For this reason, the World Bank funded a project at a cost of about $115 million in order to upgrade the road by 2005. Thus, after its construction, most villages that received supplies only once a month due to poor road conditions were able to receive them daily. The prices of transportation decreased, which resulted in a decrease, in the prices of goods and services, because of easier access to town than before. Therefore, the Word Bank helped to improve the economic conditions in Morocco especially in rural communities where many families benefited, and this contributed to reduction of poverty. However, Stathakis, George and Vaggi (92) argue that the IMF and the World Bank are the main course of poverty in most developing countries especially in Africa today. He claims that although these two monetary institutions are said to contribute in reduction of poverty, most of the debts, which are the main cause of poverty, are due to the policies of the IMF and the World Bank. Their programmes have also been highly criticized because they usually result in poverty scenarios in most cases. In addition, it has been noted that their policies have also changed from what they were intended. For example, the IMF was initially created to promote growth and full employments through giving loans to economies that were in crises, and to establish mechanisms in order to stabilize exchange rates and ease currency exchange. However, these visions have changed mainly due to pressure from the American government. Roberts and Hite (22) state that the American government forced the IMF to start offering loans based on strict conditions. Thus, these policies have caused a decline in social safety and worsened environmental and labor standards in the developing countries. On the other hand, the World Bank was originally created to fund the rebuilding of infrastructure in countries affected by the Second World War. Nevertheless, its vision changed in the 1980s when it turned its attention from Europe to the developing countries mostly in Africa. According human rights activists, the aggressiveness of the World Bank in developing societies affected the local ecologies and indigenous communities because they were often ruled by domineering administrations, which worsened the developing nation’s debt crisis. In addition, the IMF and the World Bank are owned and highly controlled by developed countries such Japan, UK, USA, and Germany among others. Moreover, the World Bank itself is funded by the US treasury. According to Solimano and World Bank (72), the IMF and the World Bank usually loan money to developing countries so that they can adjust their own economies. Thus, the economic direction of most nations is monitored, planned and controlled in Washington (Stathakis, George and Vaggi 102). For example, the World Bank assists developing countries through the country to country investigations with a meeting with the Finance minister who are usually given restructuring agreement pre-drafted for voluntary signature. Thus, according to Roberts and Hite (22), these instructions include trade liberalization, privatization and high interest among others. The trade liberalization for poor developed economies could have serious attendant effects such as selling of substandard and cheap goods from outside in developing countries. These goods mainly include clothes, creams and shoes among others, which flood the markets and undermine local industries that produce or would like to produce same products. Moreover, under extensive trade liberalization, Africa’s small industries are unable to take off due to import of goods like milk, wheat, rice and many others. Thus, the developed countries that access to these products reduce their prices and export them to developing countries especially in Africa in order to get rid of them (Michalopoulos 88). Therefore, if such circumstances are not controlled well, Africa would never be able to produce its own food, which would affect its economy and lead to poverty. Additionally, privatization affects government enterprises that do not function well; hence, wholesale privatization of government owned properties cannot be justified (Hoogvelt 76). There are quite a number of difficulties like in the limited indigenous business that threaten to take over most of the government enterprises, the shortages of local capital that pay for the running of privatized enterprises, as well as the great importance of services to the people of some enterprises compared to being profitable (Kingsbury 98). On the other hand, high interest rates raise the incentive to save money, but they encourage tentative investment that brings quick money profits to a few while promoting un-productivity. It also makes it difficult to get capital to start a new business; thus, resulting in stagnation. In such a case, there would be a need to cut the government expenditure. However, this would affect the soft-sectors especially the health, education, and housing. In addition, in most countries, the government does not cut the expenditure on the army or any unnecessary areas that are considered unproductive. For this reason, cut in government expenditure causes harm to people’s welfare. According to Michalopoulos (90) developing countries especially in Africa do not have a significant role in the General Agreement on Tariffs and Trade (GATT) i.e. (WTO) system. The WTO, which replaced the GATT in 1995, is highly powerful due to its dispute settlement system and institutional foundation. Originally, the GATT was created to improve the living conditions and ensure full employment to its members and increase the volume of real income. However, Calvert P. and Calvert S. (77) argue that these objectives were reinforced through the establishment of WTO. The success of the WTO can be measured through the volume of world trade, which has shown excellent results. For example, over the last four years, world trade has gone up 25%. However, these benefits of world trade are not shared by all countries. For instance, the least developed countries (LDCs), which represent 20%, of the world’s population generate only 0.03% of trade flows (Hoekman, Mattoo and English 75). For this reason, the WTO does not help in shaping the future prospects of both the LDCs and developing countries. Michalopoulos (90) adds that the WTO is a democratic institution that is dominated by industrialized countries, as well as their corporations. Thus, the logic of commercial trade encompasses the WTO. Hence, the developing countries have limited power within the WTO framework due to various reasons. For instance, most developing countries are mainly dependent on the EU, U.S. or Japan for exports, imports, security, and aid among others. This is because they have never used their high numbers to influence the agenda and trade negotiations, which would work to their advantage. Additionally, trade negotiations that are only based on trade-offs, which is also known as barter trade benefits the diversified economies because they can achieve more by giving more. This mainly includes the richest developing countries and developed countries. Thus, the developing countries are excluded in the trade-offs and trade negotiations, which affect their economy (Hoekman, Mattoo and English 55). Kingsbury (44) also argues that developing countries lack enough technical and human resources. Hence, many cannot attend the 40-50 meetings conducted in Geneva every week. For this reason, they enter trade negotiations less prepared than their counterparts in the developed countries. Moreover, the developing countries have discovered that finding recourse in the dispute settlement system is quite expensive and require a lot of legal expertise that they do not have. Moreover, the way the trade system is run is not quite appropriate for their development requirements. For this reasons, WTO does not play a significant role in shaping the future of the developing societies. In conclusion, Hoogvelt (66) argues that global institutions reflect the reality that the United States has dominated world politics. After the Second World War, America built a postwar international order around a number of governance institutions such as IMF, GATT, World Bank, United Nations, and the regional security alliances. However, this is currently changing, and countries like China have risen up and may rival the United States and Europe in the next few decades. These global institutions such as IMF, GATT, World Bank, and United Nations among others, can deal with most of the challenges that face the global community; thus, global governance can be described as a multilayered and extensive system (Segell 102). However, there are countries that have resisted their influence due to various reasons. Some of the circumstances that can increase a nation’s ability to resist pressure from global institutions are such as if the country is not desperate for internal capital due to lack of crisis, and many others. Thus, not all global institutions can help in the shaping of the future prospects of developing nations, but they make a significant contribution to reducing poverty, debt burdens, monitoring the progress of MDGs among others. Works Cited Calvert, Paul and Calvert, Susan. Politics & Society in the Developing World, Harlow: Pearson. 2007. Print. Segell, Glen. Stability and intervention in Sub-Sahara Africa. New York. Glen Segell Publishers. 1998. Print. Helleiner, Gerald. A World divided: the less developed countries in the international economy. Toronto: CUP Archive. 1976. Print. Hoekman, B, Mattoo, A. & English, P. Development, trade, and the WTO: a handbook, Part 1, London: World Bank Publications. 2002. Print. Hoogvelt, A.M. Globalization & the Postcolonial World: the new political economy of development, CA: Johns Hopkins University Press. 2001. Print. Kingsbury Damien. Key Issues in Development. Basingstoke: Palgrave Macmillan. 2004. Print. Mc Michael, Philip. Development & Social Change, Thousand Oaks. Pine Forge Press. 2008. Print. Michalopoulos, C. Developing countries in the WTO, London: Palgrave Macmillan, 2001. Print. Roberts, Jack. and Hite, Arnold. The globalization and development reader: perspectives on development and global change, New Orleans: Wiley-Blackwell, 2007. Print. Solimano, Andrés, and World Bank. Development Research Group. Macroeconomics and Growth. Can reforming global institutions help Developing countries share more in the benefits from Globalization? London: World Bank Publications. 2001. Print. Stathakis, George and Vaggi, G. Economic development and social change: historical roots and modern perspectives. London: Routledge. 2006. Print. World Bank. World development indicators. World Bank Publications, Apr 1, 2003. Print. Read More