Post War Global Organisations (Edexcel A Level Geography)
Revision Note
Written by: Jacque Cartwright
Reviewed by: Bridgette Barrett
Global Organisations Established Post War
The International Monetary Fund (IMF), World Bank (WB) and World Trade Organisation (WTO) were established by the WWII allied nations and have been important in maintaining the dominance of ‘western’ capitalism, global economic management and trade policy namely, free-trade
Bretton Woods
The IMF and WB were set up during the Bretton Woods conference in the US at the end of the Second World War
Its aim was to help rebuild and guide the world economy
The WTO was originally set up as the General Agreement on Tariffs and Trade (GATT)
Together these three IGOs are known as the Bretton Woods institutions and have had a huge influence on world trade and economic development
World Bank (WB)
Founded in 1944, the International Bank for Reconstruction and Development - soon called the World Bank - has expanded to a closely associated group of five development institutions
Originally, its loans helped rebuild countries devastated by World War II
With its headquarters is in Washington DC, the WB is not a traditional high street bank, but a global bank owned by member countries (187 countries)
It has two main institutions, the International Bank for Reconstruction and Development and the International Development Association
The bank has over 10,000 employees and over 100 offices around the world
In its early days the bank didn't lend much money, but by the late 1960s and 1970s it started lending more money to developing countries in order to fund schools, hospitals, infrastructure projects, and agricultural reform with the goal of reducing poverty
In the 1980s the World Bank along with the IMF began imposing SAPs (structural adjustment programmes) on many of its borrowers - based on a model of western free markets
From the 1990s onwards the World Bank became more interested in helping countries achieve the UN's Millennium Development Goals, which included reducing poverty, improving health and education and ensuring sustainable growth
International Monetary Fund (IMF)
The International Monetary Fund (IMF) help makes currency exchange between countries easier
Member countries of the IMF agree to exchange their currency with other countries
The IMF lends money to countries, along with advising about their economic and monetary policies, which helps keep the value of world currencies stable
This makes international trade and investment around the world possible
Foreign exchange
Before countries can buy goods from another country, money (currency) has to be exchanged from a buyer's country into the seller's country's currency - foreign exchange of currency
Every currency, whether it's the US dollar or the Euro, has a value in terms of other currencies
Without a reliable supply of foreign exchange in each country, and without relatively stable exchange rates, world trade would drop drastically
The IMF works to help member countries ensure that they always have enough foreign exchange to continue to do business with the rest of the world
World Trade Organisation (WTO)
The WTO deals with the global rules of trade between nations
The WTO is the only international organisation dealing with the rules of global trade
Its main function is to ensure that global trade flows smoothly, predictably and freely as possible
The WTO creates and embodies the ground rules for global trade among member nations, offering a system for international commerce
This means WTO rules become part of a country's domestic legal system
The WTO is the most important and powerful international institution ever to have been created
Through the dispute settlement body, the WTO has the unique tool of a global government which can create binding agreements and make sure they are respected and enforced
Theoretically, WTO decisions are absolute and every member must abide by its rulings
So if the US and the UK are arguing over chlorinated chicken, it is the WTO which acts as judge and jury
WTO members are authorised by the organisation to enforce its decision by imposing trade sanctions against countries that have breached any of the agreed rules
Global Trade Policies
Global borrowing rules and trade policies have been especially effective in delivering growth to the developed world, but the impact of Structural Adjustment Programmes (SAPs) and Heavily Indebted Poor Counties Schemes (HIPC) policies on the developing world’s economies and economic sovereignty is disputed
Structural Adjustment Programmes (SAPs)
Structural Adjustment Programmes (SAPs) are economic policies imposed by the International Monetary Fund (IMF) and the World Bank on developing countries as a condition for receiving loans or debt relief
The main components of SAP policies include fiscal austerity, trade liberalisation, privatisation, deregulation, and currency devaluation
The impact of SAP policies on the economies of the developing world has been controversial and debated
Some Potential Benefits and Challenges of SAPs
Benefits | Challenges |
|---|---|
SAPs typically involve measures such as trade liberalisation, fiscal austerity, deregulation and currency devaluation. For example in Nigeria, SAP policies helped to restore economic growth, without inflation, and reached 5% GDP. SAP policies helped to reduce Nigeria's dependency on oil and imports by diversifying the productive base of the economy through revival of its agricultural sector | Reduced public spending on health, education, and social services, leading to increased poverty, inequality, and human suffering. For example, in Zambia, the SAP policies resulted in a 50% drop in health spending per capita and a rise in child mortality from 111 to 191 per 1000 live births between 1980 and 1990 |
SAPs help to shrink government budget deficits, eliminate hyperinflation, and maintain debt-payment schedules. For example, SAPs in Bolivia and Uganda reduced their fiscal deficits and inflation rates and improved their debt servicing ratios in the late 1980s and early 1990s | Increased vulnerability to external shocks, such as fluctuations in commodity prices, exchange rates, and interest rates. For example, in Mexico, the SAP policies exposed the economy to the volatility of the global financial market and triggered the peso crisis of 1994-1995, which caused a severe recession and social hardship |
SAPs aim to attract foreign investment by reducing inflation and exchange rate volatility, which increases investor confidence and reduce uncertainty. Also, by strengthening governance, rule of law, and anti-corruption measures, SAP policies can improve the transparency, accountability, and credibility of the institutions, which can reduce corruption, bureaucracy, and political risk for foreign investors | Loss of policy autonomy and sovereignty, as the IMF and the World Bank dictate the economic agenda of the borrower countries. For example, in Argentina, the SAP policies forced the government to adopt a fixed exchange rate regime and to relinquish control over its monetary policy, which contributed to the economic collapse of 2001-2002 |
SAPs aim to achieve long-term or accelerated economic growth by restructuring the economy and reducing government intervention. For example, SAPs in Ghana and Tanzania led to higher GDP growth rates and increased private sector investment in the 1990s | Erosion of domestic industries and agriculture, as cheaper imports flood the market and undermine local production. For example, in Ghana, the SAP policies led to a decline in the share of manufacturing in GDP from 15% to 10% and a loss of 300,000 jobs in the sector between 1983 and 1989 |
SAPs facilitate the process of global economic integration by liberalising trade and investment policies and promoting exports. For example, SAPs in Mexico and Chile opened up their markets to foreign competition and increased their export earnings in the 1980s and 1990s | Increased social unrest and political instability, as the population protests against the harsh measures and their negative consequences. For example, in Bolivia, the SAP policies sparked widespread demonstrations and riots in 1985, 2000, and 2003, which challenged the legitimacy of the government and threatened social cohesion |
Heavily Indebted Poor Countries (HIPC)
HIPCs are a group of 39 low-income countries that qualify for debt relief from the World Bank and the International Monetary Fund (IMF)
HIPC policies aim to reduce the debt burden of these countries and free up resources for poverty reduction and social development
The impact of HIPC policies on the economies of the developing world is mixed and controversial
Some Potential Benefits and Costs of HIPCs
Benefits | Costs |
|---|---|
Reduced debt service payments and increased fiscal space for public spending on health, education, infrastructure and other sectors. For example, in Uganda, the ratio of debt service to government revenue fell from 35% in 1998 to 6% in 2004, allowing for more spending on primary health care and universal primary education | Insufficient debt relief and unsustainable debt levels, especially in the face of external shocks such as commodity price volatility, natural disasters and pandemics. For example, in Zambia, the debt-to-GDP ratio rose from 86% in 2005 to 120% in 2020, partly due to the fall in copper prices and the impact of COVID-19 |
Improved macroeconomic stability and growth prospects, as well as enhanced creditworthiness and access to international markets. For example, in Mozambique, the annual GDP growth rate increased from 3.7% in 1996 to 8.1% in 2008, while the inflation rate decreased from 47.7% to 6.2% | Conditionalities and policy prescriptions that may undermine national sovereignty and policy space, as well as limit the scope for alternative development models and strategies. For example, in Bolivia, the HIPC conditions required the privatization of water services, which sparked social protests and political instability |
Strengthened governance and accountability, as well as increased participation of civil society and donors in the design and implementation of poverty reduction strategies. For example, in Ghana, the HIPC process led to the establishment of a multi-stakeholder monitoring committee that oversees the use of debt relief funds and ensures transparency and accountability | Trade-offs and opportunity costs between debt relief and other forms of development assistance, such as grants, concessional loans and aid for trade. For example, in Malawi, the HIPC initiative resulted in a reduction of aid inflows by about $150 million per year, which could have been used for other development purposes |
Criticisms of World Bank
The WB has had a number of criticisms including:
Its imposition of policies on developing countries (particularly the damaging SAPs)
Its assumption that LDEs cannot develop without outsider help and knowledge
The largest contributors (HDEs) have too much power over policies
That the head of the World Bank always comes from the US
That it focuses too much on GDP growth rather than improvement in living standards
Some development projects were environmentally damaging e.g. dams causing deforestation
Some projects involved expensive technology which countries cannot fund themselves
Criticisms of IMF and SAPs
Reforms implemented too quickly
SAPs have been criticised for undermining social welfare, environmental protection, human rights and national sovereignty
SAPs have also been associated with increased poverty, inequality, unemployment, debt and social unrest in many countries
IMF has given loans to countries with military dictators
Ignores human rights abuses and detrimental impacts of SAP conditions on employment, health and education
Negative impacts on the environment as countries are encouraged to implement ecosystem-damaging projects to get more cash
Criticisms of WTO
The WTO has been heavily criticised over the effects of free trade and economic globalisation
For instance, many countries have been waiting for the WTO to conclude a long-awaited global trade deal, that is intended to cut subsidies, reduce tariffs and give a fairer deal to developing countries
The so-called Doha Round of Talks began in 2001, but a breakthrough is yet to happen
However, there are plenty of rows among the WTO’s key players over agricultural tariffs and subsidies which just goes to prove that there are no global players only global tantrums
For and Against The WTO
For | Against |
|---|---|
It is democratic because the rules were written by its member states, many of which are democracies who also select its leaderships | The WTO is too powerful in that it can compelled sovereign states to change laws and regulations by declaring these to be in violation of free trade rules |
By expanding World Trade the WTO in fact helps to raise living standards globally. The term free trade assumes there are no barriers or tariffs to trade between countries and that the cost of goods and services is determined by the balance between what the producer country wants for the goods and services and what the receiving country is prepared to pay | The WTO is run by the rich countries for the benefit of rich countries and large multinational corporation. These harm smaller countries which have less negotiation power. It doesn’t lend weight to the problems of developing countries; e.g. rich countries not fully opening their markets to products from poor countries |
If a commodity or service is scarce and where the competition for those goods or services the producer country can exert influence on their cost | WTO is indifferent to the impact of free trade on workers' rights, child labour, the environment, and health |
However if there is an abundance or surplus supply of a good then the consumer country can negotiate a lower cost | It lacks democratic accountability as any hearings on trade disputes are closed to the public and the media |
Jamaica's SAP
Started in 1977 when Jamaica signed its first Stand-By Agreement with the IMF to address the country's debt crisis, balance of payments problems and dependency on foreign capital
It involved austerity measures such as wage freezes, public sector layoffs, devaluation, trade liberalisation, privatisation and deregulation
The SAP was supported by loans from the IMF and the World Bank, which imposed conditionalities on Jamaica's economic policy
It faced popular resistance and social unrest, especially in the 1980s
It had mixed results on economic growth, poverty reduction and human development indicators
On the one hand, it helped to reduce inflation, stabilise the exchange rate, increase foreign reserves and improve fiscal discipline
On the other hand, it also contributed to low growth, high unemployment, poverty, inequality, social unrest and environmental degradation
According to some statistics, Jamaica's GDP growth rate averaged only 1.4% per annum in the 1980s and 1.3% per annum in the 1990s, compared to 2.2% and 3.0% for Latin America and the Caribbean respectively
Jamaica's debt-to-GDP ratio reached 147% in 2013, one of the highest in the world
Jamaica's poverty rate increased from 12.9% in 2007 to 19.9% in 2017
Jamaica's Human Development Index (HDI) value was 0.734 in 2019, ranking 96th out of 189 countries
Membership of Organisations & Trading Blocs
A word on terms
Nationalism - identification with one's own nation and support for its interests, especially to the exclusion or detriment of the interests of other nations e.g. Donald Trump and MAGA
Isolationism - a policy of remaining apart from the affairs or interests of other groups, especially the political affairs of other countries e.g. North Korea is not involved with other countries
Sinicization - the spread of Chinese culture and ownership
Fundamentalism - a movement or attitude stressing strict and literal adherence to a set of basic principles e.g. Afghanistan
Protectionism - government economic protection for domestic producers through restrictions on foreign competitors - US vs Chinese imports
Foreign Direct Investment - FDI overseas investments in physical capital by TNCs - Apple in China
Internationalism - belief that it is good for different countries to work together - IGOs, TNCs, UN, World Bank etc.
New International Division of Labour - divides production into different skills and tasks that are spread across regions and countries rather than within a single company - outsourcing of jobs
As a result of the dominance of these organisations, membership of global trade and financial IGOs is almost universal
However, regional groupings have emerged in the form of trading blocs such as NAFTA, SEATO, ASEAN, Mercosur and COMESA
There are over 30 major trade blocs and agreements, which all seek to have some form of free trade agreement between themselves, along with customs (import/export) integration and closer political unity such as the EU
Critics argue that economic sovereignty has been removed to some degree
Economic sovereignty is the ability of a country to control its own economic policies and resources
Protectionism
Protectionism by restricting imports through increased taxes and tariffs on goods that can be produced within the country, has become increasingly popular
Countries have argued that free-trade agreements are unfair and disadvantage some others
Former President Trump argued that protecting US jobs through bilateral, not multi-lateral, trade agreements was a better option
For example, keeping US coal mines open rather than importing coal from overseas
This attitude was one of the ways that Trump won the election but also swayed the British population and the Brexit vote
Brexit
Protection of UK trade markets was through the withdrawal of the UK from the EU on 31 January 2020
The UK and the EU eventually agreed on a new trade deal that came into effect on 1 January 2021, which allows tariff-free and quota-free trade between them
The trade deal also includes some shared rules and standards on workers' rights, environmental regulations, and dispute resolution mechanisms
The UK is no longer part of the EU's single market and customs union, which means there are new checks and paperwork for goods crossing the border
The UK is free to negotiate its own trade deals with other countries, such as the US, Australia and New Zealand
Northern Ireland remains aligned with some EU rules to avoid a hard border with the Republic of Ireland, which is still an EU member state
Examiner Tips and Tricks
When discussing IGOs, remember to consider the wider implications of these global organisations and not just the positive aspects.
Keep your focus clearly on the issue, impact of work that has been done (positive and negative) and make clear comparisons between different organisations, this will ensure your response is balanced and has a coherent argument.
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