8.2.9

International Institutions

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International Organisations and Globalisation

Various international political and economic organisations are very important in the advancement of globalisation.

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Bretton Woods institutions

  • Intergovernmental organisations (IGOs) like the World Trade Organisation (WTO), the International Monetary Fund (IMF) and the World Bank promote free trade policies to encourage FDI and to accelerate globalisation.
  • Since World War 2, these organisations have worked together to remove tariffs and quotas on goods that act as barriers to free trade.
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Bretton Woods institutions cont.

  • As more developing and emerging countries join the organisations, their actions to encourage free trade arguably continue to accelerate globalisation. China joined the World Trade Organisation in 2011.
  • These IGOs are collectively referred to as the ‘Bretton Woods institutions’ after the place in America where they are established.
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BRIC institutions

  • BRIC refers to Brazil, Russia, India and China.
  • New alternatives or rivals to the Bretton Woods institutions are rising as the BRICs gain global influence and set up their own organisations - such as the China Development Bank.
  • In 2015, the BRIC nations set up the New Development Bank to rival the World Bank.
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BRIC institutions cont.

  • By 2017, this New Development Bank had given loans of $1.5 billion dollars to member countries. Most of these loans went on developing renewable energy in these countries.
  • China is particularly influential in Africa, where Chinese money funds lots of infrastructure projects in the likes of Kenya.

Intergovernmental Organisations (IGOs)

Lots of IGOs founded by the USA have a key influence on the global economic system. The World Bank and IMF are called Bretton Woods institutions (this is where they were established in 1944).

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The IMF

  • The IMF was founded in 1944. It aims to help stabilise global currencies and it provides loans to developing countries to reduce poverty.
  • In return for a loan, a country must enforce a Structural Adjustment Program (SAP).
  • A SAP ensures that capitalism is promoted within the country and it can require a country to impose cuts to public services and privatise many state industries.
    • Many countries (particularly those in Africa) can see the IMF as a lender of last resort.
    • Many people also argue that SAPs and loans from the IMF result in the worsening of poverty for many developing countries as they can then become trapped in a cycle of debt (paying back debt & interest).
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The IMF cont.

  • Although the IMF is a global IGO, 8 countries control 47% of the total votes between them and these are the global superpowers.
  • So, through their control of the IMF, the superpowers have significant influence over the global economic system.
  • Recently, there have been reports of countries being loaned money from China in order to meet the conditions needed for further loans from the IMF.
    • This is an example of China’s growing influence as a superpower and an alternative to the IMF.
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The World Bank

  • The World Bank was founded in 1944.
  • Similarly to the IMF, the World Bank aims to support capitalism.
  • It also provides loans to developing countries and provides finance following natural disasters and humanitarian emergencies.
  • Whilst aiming to reduce poverty, the World Bank also wants to achieve sustainability.
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The World Bank cont.

  • Sustainability is the ability to meet the needs of the current generation without compromising the ability of future generations to meet their own needs.
  • The World Bank is currently working towards two goals for the world to achieve by 2030:
    • To end extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3%.
    • To promote shared prosperity by ensuring that the income of the bottom 40% in every country increases.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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