International Institutions
Economics: Edexcel A A Level, topic 8.2.9
International Organisations and Globalisation
Various international political and economic organisations are very important in the advancement of globalisation.
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.
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 2001.
- These IGOs are collectively referred to as the ‘Bretton Woods institutions’ after the place in America where they are established.
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.
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).
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).
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.
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.
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.
Test yourself on International Institutions
By 2017 the New Development Bank had given loans of how much to member countries?
Which of the following countries has been a particular focus for Chinese investment in infrastructure projects?
Which of these organisations could be described as a rival to the World Bank?
When was the IMF founded?
What does SAP stand for?