Has global economic governance been effective in tackling poverty?

Structure of the essay?

• P1 - IMF and WB promote neoliberal capitalism vs free markets have deepened poverty

• P2 - WTO promotion of free trade vs WTO overly benefits rich countries

• P3 - UN international focus on poverty vs UN structure systematically disadvantages poor

P1 - IMF and WB tackles poverty by promoting neoliberal capitalism

• Both the IMF and WB are financial institutions that use lending to help countries escape financial crises and develop economically

  • Crucially, it can be argued that they are effective at tackling poverty as they place conditions on these loans that require countries to move towards austerity and free market economics

• The conditions imposed by the IMF often include liberalising trade, privatising inefficient state enterprises and reducing fiscal deficits to help countries attract investment.

  • Even though these measures have been unpopular, particularly the Structural Adjustment Programmes (SAPs) of the 1980s and 1990s, advocates argue that they are essential for addressing fundamental economic problems.

  • While the reforms involve short-term pain, such as cutting government spending, they are necessary to restore long-term stability and growth

    • In cases like Ghana in the 1980s, IMF-backed reforms had some success in reducing inflation, stabilising the currency, and fostering growth.

• This argument is in line with Classical Economic Development Theory which suggests that when countries in the Global South open their economies to trade, they can specialise in producing goods where they have a comparative advantage.

  • By engaging in global capitalism, nations can benefit from increased capital flows.

  • After India opened its economy to global markets in the 1990s, it experienced rapid growth averaging 6-7% annually, especially in IT, catapulting Indian cities like Bangalore and Hyderabad to major tech centres.

    • This growth helped reduce extreme poverty from 45% in 1993 to around 6% in 2024, according to WB data.

P1 - neoliberal reforms promoted by IMF and WB have entrenched poverty

• IMF and WB are not effective as tackling poverty due to neoliberal, free-market reforms have consistently deepened poverty in countries that were already the poorest.

• Free market reforms imposed by the IMF and WB under SAPs in the mid-late 20th century deepened poverty and dependence on external financial aid.

  • Receiving much needed financial assistance was made conditional on accepting these reforms which included deregulation, and decreased spending on essential services such as education and healthcare.

  • In line with dependency theory, this entrenched African nations’ position in exploitative global economic structures, forcing them to remain dependent on exporting raw materials while importing expensive manufactured goods.

  • As of 2023, approximately 38% of subsaharan Africa remains in extreme poverty and the region remains heavily dependent on exports of raw material - 75% of its exports consisting of unprocessed goods like oil and minerals

• The free market reforms were based on flawed economic thinking and imposed despite resistance in subsaharan African countries.

  • In Nigeria, SAP was introduced in 1986, leading to privatisation, regulation, and devaluation of the currency.

    • Such reforms caused inflation to rise, public services and living standards to decline. By the early 1990s, poverty had increased from 28% to 66%, as real wages fell and the cost of living soared.

    • In Zambia, SAP resulted in mass lay-offs in the 1990s, especially from state-owned enterprises, driving poverty level from 49% in 1989 to over 80% by the mid-1990s.

P2 - WTO promotion of free trade has reduced poverty

• One argument in that global economic governance has been effective at tackling poverty is WTO’s promotion of free trade and globalisation, driving growth.

• WTO’s primary aim is to promote free trade and prevent protectionism, ensuring that global trade flows as smoothly, predictably, and freely as possible. It achieves this by providing a forum for negotiating trade agreement and settling disputes between members.

  • The Bali Trade Facilitation Agreement, established in 2013, successfully reduced red tape and simplified customs procedures globally.

  • It estimated to reduce global trade costs by 14.3% on average, helping small businesses and landlocked countries participate more effectively in trade

    • This has clearly been successful, as between 2000 and 2024, the global economy has nearly tripled in size, with nominal GDP increase from about $33 trillion in 2000 to approximately $104 trillion by 2023

• According to WB data, extreme poverty rates globally have dropped from 35% in 1990 to 9% in 2019.

• China’s transformations is also one of the most significant examples of how promotion of free trade promotes growth and thus reduction in poverty.

  • After its succession to the WTO in 2001, China has skyrocketed to the 2nd largest economy with 20T nominal GDP as of 2025, and is expected to become 1st in 2035, due to its deep engraining in global supply chains.

  • As a result, it averages around 10% annual growth and 30% of global exports.

  • The economic growth has lifted over 800 million people out of extreme poverty, making it the largest.

    • Extreme poverty rate fell from 88% in 1981 to less than 1% by 2019.

P2 - free trade and global trade perpetuate global capitalism which is unequal for poor countries

• GEG is not effective as free trade perpetuates global capitalism which is inherently unequal for developing nations and exacerbates their poverty

• Structural theory argues that wealthier, industrialised countries (the core) dominate global markets, while poorer, less developed nations (the periphery) are dependent on exporting raw materials.

  • As a result, the North-South divide remains and countries in the global south remain stuck in a cycle of exporting low-value commodities while importing expensive manufactured goods.

  • For example, crude oil and gas account for around 92% of Nigeria’s exports and about 65% of government revenue.

    • These revenues are extremely volatile and this structural dependence traps Nigeria in poverty, with 40% living below the poverty line.

• The WTO, IMF, and WB present free market economics reforms as the clear path to economic development and poverty reduction, in line with CEDP.

  • However, in reality, the countries that have experienced significant economic growth and poverty reduction were driven by significant state investment whilst embracing global trade.

    • China’s growth isn’t simply attributed to opening the economic, rather their governments actively led strategic industrial politicise and export strategies.

    • The states role in managing and directing growth was critical, especially in protecting nascent industries and steering investment into key sectors.

P3 - UN efforts to bring international focus to tackling poverty

• A final argument to posit that GEG has been effective in tackling poverty is that IGOs have fostered a global commitment to poverty reduction: institutions like the UN, IMF, WB have launched initiatives aimed at reducing poverty as central to their mandates.

  • The Millennium Development Goals, established by the UN in 2000, targeted halving global poverty by 2015. This goal was met ahead of schedule, driven by UN driving collaboration through the Economic and Social Council in particular.

  • The Sustainable Development Goals, launched in 2015, now aim to eliminate extreme poverty by 2030.

• IGO have also recognised how climate change will disproportionately affect developing countries and how this will further poverty.

  • As a result, the UN and developed countries have pledged to help developing countries financially.

    • At COP29 in 2024 in Baku, countries strengthened their commitment under Common But Differentiated Responsibilities, bolstering 300B to developing countries, up from the previous 100B.

P3 - IGOs are run by wealthiest countries and they use them for their own success

• It can be argued that GEG has been ineffective in tackling poverty’s decision making is largely decided by the wealthiest countries motivated by economic success rather than tackling poverty.

  • For example, the IMF and WB are structured in such a way that disproportionately favours wealthy, Western nations. Voting power at both the WB and IMF is determined by financial contributions, meaning that richer countries have significant more influence over decisions than poor countries.

  • The US is the only country with veto power over structural changes within the World Bank and holds around 16.5% of the total voting power in the IMF.

  • It would require an 85% majority to deny the US power, effectively giving them a de facto veto power over key IMF policies.

• The worlds rich countries have consistently failed to put helping the the worlds poorest countries develop and reduce poverty.

  • This reflects the Worlds Systems Theory which argues that the world economy operates as a single system where wealth is continually extracted from the periphery to benefit the core and developed nations have no interest in stopping this.

  • This can be seen in the WTO’s Doha Development Round which aimed to create a multilateral free trade agreement that reduced trade barriers and addressed inequalities between developed and developing countries