Economic governance

ETVT- Economic governance institutions require reform

Gleneagles debt cancellation

2005, G8 countries decided to cancel 100% of the debt owed by 18 highly indebted developing countries

what does the brandt line illustrate

north south divide- disparities in wealth and poverty

southern hemisphere states tend to have less influence in global politics- colonial history of exploitation

world systems theory- core, periphery and semi periphery

examples of core, periphery and semi periphery states

• core- economically and technologically advanced, exploitative -USA, UK

• periphery- industrialising but somewhere between- exploitative and exploited- China, India, Brazil

• semi-periphery- less economically developed, provide raw materials and cheap labour- Honduras, Bangladesh, Chad

World systems theory- Immanuel Wallerstein 1974

Is there still a North south divide?

• NO

  • Narrowed- 1980 North share of global gdp 4.5x south and in 2020- 2.5x

  • China’s GNI per capita approaching high income status

  • extreme poverty - 70% 1994 to 40% 2019 in 22 poorest states 1987

  • divide better explained by world systems?

• YES

  • Many have failed to prosper- landlocked Sub-Saharan states e.g DRC

  • semi-periphery states some of most unequal e.g Brazil, South Africa

  • rising inequality within states

Aims of the IMF and WB

• IMF- maintain stability in the international system

• WB- ‘end extreme poverty by 2030’ and ‘boost shared prosperity’

World bank institutions

• Intl Bank for Reconstruction and development (IBRD)- Global development bank providing loans and economic advice to low and middle income states

• Intl Development Association (IDA)- grants and low-interest loans to around 60 low income states

WB poverty line as of June 2025

$3 per person per day according to PPP

IMF membership

• 191 members who fund its work

• overseen by board of governors- group of finance ministers from member states- highest decision making body

• executive board = 24 directors e.g US, Japan, China day to day running

how does the IMF promote neoliberalism?

• promote trade liberalization, fiscal austerity, privatisation and deregulation

IMF quotas

• Governors vote shares and state borrowing limits determined by 'quotas’ varying on IMF contribution funds

• quotas reviewed every 5 years if governors agree- reform requires 85% vote in favour

• USA = effective veto with 16.5% of votes

• richer countries have greater voting power

criticisms of quota voting at IMF

• outdated, does not uphold principle of sovereign equality

  • EU = 15% of global economy but 25% of votes, (overrepresented) whilst China = 19% (2024) but 6.5% of votes

• US blocked quota reforms 2010-16 fearing loss of power to China

• Executive board unequal- Saudi Arabia 2% of quota votes vs 22 African nations w/ 3% of votes share a director

HOWEVER - weak arguement that as USA is anchor of intl. financial system, consent is required

Case study of conditional IMF loans

• 2010 Greece= debt crisis

• IMF, EU and ECB provided 289 bn euro bailout packages- Greece avoided default and exited bailout program 2018

• in exchange for loans, Greece required to implement austerity measures- raising VAT rates, reducing pub sector wages 20% and cutting pensions by up to 40%

• conditions highly controversial- recession 2013 unemployment= 27%, led to public unrest

Roles of IMF

• Providing loans to stabilise low/middle income states

• Stabilising financial system e.g 2008-9 crisis

• Providing economic forecasts

• Surveillance- warning of risks in Global Financial Stability reports- IMF recommended structural reforms identifiying critical weaknesses in Italian economy during Eurozone debt crisis

Washington consensus

economic policy advocating for free markets, fiscal discipline, privatization and trade liberalization

originally coined by economist John williamson to address Latin American debt crisis- shifting from import-substitution industrialisation (influenced by dependency theory) to market driven economies

SAPs = economic reform packages

Example of failure of SAPs IMF: Zambia

• Zambia debt crisis due to dependence on copper exports. IMF and WB made lending conditional upon 1992 SAP (privatisation and cuts on healthcare)

  • led to mass layoffs from state owned enterprises. 49% poverty 1989 to 80% by mid 1990s

  • 2001- 20% of adult population HIV positive. (debt repayments outpaced public spending)

  • Reforms did little to help the economy which only began to recover a decade later

• Copper prices rebounded 2004 with rising demand from China (semi-periphery?)

• Indian buyer purchased mines, debt relief 2005 and Chinese investments accelerated growth until 2015

• Covid-19- ‘poly-crisis’ on poverty

post washington consensus

approach centered on debt cancellation, poverty reduction and good governance

Bolivia - cochabamba water wars

• Failed WB water supply project in Cochabamba

• 1998- IMF loan of $138 million on conditional Bolivia would sell ‘all remaining public enterprises’

• privatisation of water (US TNC ‘Bechtel corp’) led to water prices skyrocketing (38% increase), widespread unrest

• demonstrates how policies often serve western interests- US sponsored coca eradication programme

evidence of IMF neoliberal reform failure

In asian Financial crisis of 1997-8, China and Malaysia’s state controlled capitalist economies were more resilient than the IMF’s neoliberal reforms imposed in Indonesia and south korea

criticism of IMF- Impact on borrowing states

• ‘one size fits all’ washington consensus template caused more harm than good 80s and 90s

• IMF’s fairness has been questioned by poorer states and civil society. Requires more reform from poor states, and unlike WB not accountable to communities who are negatively impacted by their policies

successes of IMF- impact on borrowing states

• SAPs successfully used to stabilise Mexico in 90s

• Poland’s ‘shock therapy’ SAP transition to liberalism

• 2005- provided debt cancellation for very poor states

• since 2015- advised against welfare-reduction policies

• poor states w/ weak governance are highest borrowers- IMF provides low-cost loans to high-risk borrowers that cannot raise finance elsewhere

Positive IMF impact on regional/global stability

• reforms in reponse to intl. economic crises- prioritising global financial surveillance

  • lending capacity increased to $1 trillion 2023-24 (quotas doubled)

• 2022- creation of Resilience and Sustainability Trust to provide longer-term loans for fragile states to help prevent crises from escalating into social conflict that may draw in neighbours

Negative impact on regional and global stability- IMF

• ‘asleep at the wheel’ in unexpected global financial crisis

• failed to predict 1997 Asian financial crisis

• IMF’s lending conditions still require fragile states to prioritise private debts despite debt crisis

  • new full debt cancellation programme is needed

differences and similarities between IMF WB

• similarities

  • Membership, structure (board of governors), ideology- both support developing states with loans and advice

• differences

  • organisation structure (subtle), focus on purpose, roles and global significance)

WB organisation

• 189 member states

• annual board of governors- finance ministers from member states who meet annually

• president of WB elected by majority of directors- have always accepted the US govt nominee

• day to day work- 25 executive directors from USA, Japan, China, Germany etc

Similarity on external relationships - IMF and WB

• formal partnership

• Independent specialised UN agencies- WB works alongside ECOSOC and has aligned its work w/ SDGs

WB contemporary roles

• extreme poverty reduction- end by 2030, shared prosperity for bottom 40%

• raising finance- ¾ of funding from private investors, donor states gave $93 bn 2022-25

• debt relief, development loans and aid

• climate resilience projects- Most infrastructure projects now for climate protection. From 2023, all projects must comply w/ 2015 Paris Agreement

• Crisis response- approved $73 billion for 322 crisis response operations.

  • $37.5bn in emergency financing to Ukraine alone

IDA established

1960 to help the poorest states

1980s WB world debt crisis

bank adopted ‘washington consensus’, imposing neoliberal SAPs on loans

Began to advise China and India on trade reforms

HIPC

1996- WB and IMF set up Heavily Indebted Poor Countries Initiative to provide debt relief in exchange for SAPs

HIPC and Post washington consensus

1999 SAPs replaced with Poverty reduction strategy papers

WB role after 2000

• aligned w UN millennium development goals

• Good governance became main lending requirement

• 2005- HIPC cancelled debts for countries that tackled corruption, introduced market reforms and reduced poverty

• 2013- adopted SDGs which began to guide all work

• 2020s- adopted multidimensional poverty measure

WB- equity in decision making and representation

• 2010- reforms increased developing states governors vote shares to 47%

• Executive director allocated to Sub-Saharan African states

• Bank required to engage with civil society through Civil society team which works with civil society policy forum

weaknesses of WB equity

• does not uphold sovereign equality- board of governors dominated by the USA which holds veto power at IBRD- 16-17% of vote shares

• BRICS underrepresented

• USA effectively appoints president- every president from US

Positive WB impact on states and communities

• Banks HIPC cancelled more than $100 billion of debt from 37 of poorest states

• bank has responded to criticism with reform- works with states to develop projects with local control- since 2015 local communities can complain to wb if a project negatively affects them or environment

• since covid 19 bank has doubled support for climate resilience projects

negative WB impact on states and communities

• 1994 review found 3rd of SAPs had failed- expansion of agricultural exports and cutting health = poverty and debt rose

• poor record on environment and hr

  • until 90s supported dictators and did not tackle corruption

  • state-led infrastucture projects that displaced communities and damaged environment

• growing debt crisis- 2024 60% of low income states in risk or in debt crisis

examples of wb state-led infrastructure projects that displaced communities/ damaged environment

• Narmada dam- India

• polonoroeste road - Amazon

Positive WB impacts on global development

• extreme poverty rate fallen 38% 1990 to 8.5% 2024- over a billion, mostly in china and india

  • china and india advised by wb - successful liberalisation of their economies, rapid growth and developing trade partners

• Bank provides open data platform for development economists and produces regular expert reports, carefully evaluating the impact of its projects

negative impact on global development WB

• North south divide/ extreme poverty increased 80s and 90s

  • progress on extreme poverty has stalled at 8.5% and more people in poverty in sub-saharan africa 1990

• WB maintains neocolonial dependence of global south

  • low growth= poor states cannot increase voting power in bretton woods institutions to effect reform

• Banks budget is tiny

  • 2023- expert group at cop28 estimated developing states need $2.4 trillion per year. WB budget = $120 billion, the rest must come from private finance

example of successful world bank project

cote d’ivoire- 2018-2023

benefited over 400,000 by creating digital platforms to improve agricultural market access

$70 million

WTO establishment

1995, provide institution for general agreement on tariffs and trade

aims to maintain rules based global free trade system, creating predictability for businesses and promoting fair competition

WTO members

2025- 166 member states, 97% of world trade

eu states are members but are represented in negotiations by EU commission

strengths of equity and representation in wto

• Unlike imf/wb, every state in WTO has equal voice at ministerial conference

• India/Brazil bought into quad 2009 to give voice to global south

• Developing countries can access preferential tariff-free terms, promoting shared prosperity- EU only offers this to least developed countries

weaknesses of equity and representation at WTO

• poor states lack permanent representation, expert negotiators and bargaining power- ministerial conference must accept or reject in full Quad’s proposals for ‘single undertakings’

• Quad system- undermines equality

  • India and Brazil claim to represent poorest states but have little in common with them

• countries can designate themselves as developing which can block negotiations

2 key rules at WTO

• Non-discrimination: imports from all states must be treated the same, except developing states which can be given free-trade access. regional free trade deals are also permitted

• Reciprocity- if a state acts unfairly by manipulating global markets, trade partners are allowed to take steps to rebalance (This is how Trump justified widespread 2025 tariffs)

WTO decision making

• operates on consensus- every member can veto proposed trade rules

• biennial Ministerial conference finalises trade rules and reforms

• Quad- US EU India Brazil- negotiates trade reforms in ‘single undertakings’ packages, must be accepted or rejected in full at ministerial conference

WTO- impact of the dispute resolution

• the multilateral dispute resolution process is essential to avoid tension spilling over into conflict

• US blocked nominations to the Appellate body due to frustrations over Chinese state subsidies, preventing appeals from being heard until reforms agreed- appellate body effectively paralysed, unable to hear disputes since 2019

WTO- positive impacts on trade agreements

• WTO’s consensus based multilateral system crucial for maintaining liberal, rules-based free trade system , encouraging peace

• joining WTO is beneficial to developing countries

  • 2024 world trade report- implementing trade reforms required before joining has boosted members trade by 140%

• increased trade participation strongly linked to reduced poverty rates in low/middle income states

WTO fish 1 agreement 2022

bans fisheries subsidies for illegal, unreported and unregulated fishing

first WTO agreement to focus on environmental sustainability, partly fulfilling SDG14

negative WTO impact on trade agreements

• multilateral consensus decision making is slow

• WTO failed on fair trade?

  • intellectual property rules caused immense human suffering in AIDS pandemic by denying affordable drugs- 2010 40 million children in Africa had lost at least one parent to AIDs

  • Doha Development Round- failed over disagreements on EU/US agricultural subsidies

  • Chinese industrial subsidies remain high, distorting market

• some countries become more unequal when they open to global market

• Fish 1- partial response to global overfishing, compared to fish 2- wouldve had greater impact on sustainability, not yet negotiated

G7 members

USA, UK, France, Germany, Japan, Canada, Italy, EU council/commission presidents

coordinating economic and foreign policies between 7 wealthiest liberal democracies to address challenges/ promote global stability

Russia ‘G8’ membership

1998-2014

Role of GDP

• 1970s, 7 largest capitalist economies, but GDP not defining feature. Russia ranked 20th 1998, and China and India 2nd and 5th in 2024 but not members

G7 decision making

• each member state holds presidency for a year, setting own agenda and chairs annual summit meeting

• meetings are closed, allowing for frank discussion and reaching consensus

G7 2000s

• post 9/11 broadened focus to security/counterrorism

• invited AU leaders to discuss development

• summits in high security resorts eg Carbis Bay high security policing

G7 protests

• Genoa- 2001. Anti-globalisation protestors used black block tactics

G20 1999

After 1997-8 Asian Financial Crisis, G8 set up G20 group of financial ministers to try to contain future crises

‘Make poverty history’ campaign

G8 agreed to cancel all outstanding debts of 40 heavily indebted countries 2005

suspension of Russia G8/7

2014- suspended after annexing Crimea. Left after

declining significance of G7

G8 decided to bring together G20 state leaders during global financial crisis

G20

G7, BRICS & other states , EU, AU (19 state members, 2 regional org)

IMF, WB and WTO all attend

promotes discussion between govts of major economies, regional org and economic governance institutions to support global economic stability

G7/G20 membership and decision making similarity

• No headquarters or permanent staff

• Each member state holds presidency for a year and presidents set agenda and chairs annual summit meeting

• Members are invited to join

• meetings are closed, allowing frank discussions to reach consensus

• regular press releases and joint ‘communique’

• businesses, think tanks and civil soc meet in ‘engagement forums’ to provide recommendations for G7

by 2009- G20

most influential group in global economic governance, preventing global banking system collapse, agreeing extra IMF funding

2021 G20

Group agreed to a global minimum corporate tax- 15% for multinational companies

Putin and G20

Putin has not attended G20 since 2023 ICC arrest warrant

G7 equity and representation

• has invited additional states to discuss e.g AU

• G7 is a self-appointed elite ‘club’ which undermines liberal principle of equality. Failure to include emerging economies in 2005 caused resentment

Significance and authority of G7

• Legitimate leadership role in western world. Leaders have power to allocate resources e.g counterrrorism

• Economic significance of G7 has declined relative to G20, and share of global GDP predicted to decline further as significance of BRICS increases

Positive G7 impact

• closed meetings= relationship building. Liberal democracies cooperate due to shared values

• 2005- G8 solved world debt crisis through full debt cancellation to IMF/WB HIPC Initiative. 2008- 80% HIPC debt cancelled

• Flexible and responsive compared to formal institutions.

  • 1998 - consensus on Kosovo humanitarian intervention waving way for UNSC resolution

  • recognized own limitations in convening G20 to deal w 2008 crisis

criticisms of G7 impact

• Not transparent- high security, remote locations

• Criticised by civil society for entrenching global inequalities- no accountability, repeated promises on climate finance have not been fulfilled

• Resentment in global south and 2009 BRICS creation in perception that G7 control Bretton woods

• divisions during Trump presidency- disagreed on climate change after Trump’s 2017 withdrawal from Paris, trade during US-China trade war 2018-20

G20 significance

• large enough to be significant, small enough not to be stuck in endless negotiations like WTO. Even w/out AU, members make up 85% of glob. economy

• BUT g20 acts as a means to consolidate economic power- self appointed ‘guardians’ of the global economy make far reaching decisions without scrutiny or accountability

Strengths of G20 equity and representation

• More inclusive than G7- AU joined 2023

• economically diverse- established and emerging powers & politically diverse

weaknesses of G20 equity and rep

• 2 tiers of representation - states and regional organisations

• member states represent own interests

  • France, Germany, Italy, SA own membership as well as respective EU/AU

• SA and Argentina not in 20 largest economies

G20 positive impact

• brings states, regional orgs and global institutions together to solve problems in flexible way

• reduced impacts of global financial crisis

• achieved agreement to reform WTO’s dispute resolution process

• 4 consecutive summits 2022-25 chaired by members from global south- Indonesia, india, Brazil, SA)- maintained groups focus on sustainable development

Criticisms of G20 impact

• unimpressive communiques- need to achieve consensus produces weak agreements

  • Communique on Russia/Ukraine condemned ‘human suffering’ with no mention of Russia

• Criticised for prioritising global free trade over needs of disadvantaged

• less productive since 2010s due to rising tensions- decisions on climate change= weak, COVID 19 response inadequate for developing countries

dependency theory

• Globalisation exploits periphery states, pushing them into dependency

• colonialism est. significant power imbalances- exploitative relationships still shape politics today

• Powerful states dominate through (economic) intergovernmental organisations

  • Structural changes to global governance needed

• persistance of poorer states relying on exporting raw materials for processing in developed states

  • Botswana reliant on sale on uncut diamonds- 80% of exports. Recently demand for natural diamonds has decreased= economic crisis Botswana

• associated with neo marxism

features of dependency

• Global markets- periphery states sell natural resources and prices fall below production cost

• intl. debt from global banks

• bretton woods dominated by wealthy western states

• foreign investment- wealthy shareholders extract profits from MNCs & exploit low paid

• Exploitative elites- domestic corruption and privatisation

Brazil/India 1950s-90s

ISI- Import Substitution Industrialisation- protectionism

Orthodox view on poverty

• Western approach to development and poverty reduction

• focus on economic growth- industrialisation and manufacturing should be prioritised

• free market relationships should be built with other states- consumer consumption promoted

• advocates external expertise and assistance from glob. governance bodies e.g IMF/WB

Measurements of poverty

• WB- less than $3 a day = extreme poverty

• UN global dimension poverty index- considers multiple factors e.g schooling, child mortality

UN Human Development Report 2025

• 1.1 billion people live in multidimensional poverty

• 740m of the world poor live in middle-income countries

• 887m of the worlds poorest are exposed to climate hazards

Classical economic development theorists

• Invisible hand of the market- free trade = supply and demand determining prices

• David ricardo- Comparative advantage- states should not impose tariffs but instead produce surplus of efficiently produced goods and trade internationally for foreign porducts

  • reduced prices, increased profits

Classical economic development theory

• Adam smith- free markets driven by states, competing against eachother w/out govt inteference= improved productivity, innovation and wealth

• Free markets associated with globalisation/economic growth

• IMF,WB,WTO promote free trade

example of comparative advantage in global politics

• Brazils climate and labour cost is a comparative advantage in coffee production, whereas Germany has advantage in high tech industries

• according to Ricardo= both should allow tariff-free access to eachothers markets

• however- in practice, Brazil needed to diversify as not to rely on volatile agricultural markets e.g bad harvest

Modernisation theory

developing countries should modernise and become less reliant on agriculture and raw materials

west post 1945

Rostow’s ‘Stages of Growth- a non-communist manifesto’

1. Traditional subsistence agriculture

2. Basic domestic market

3. industrialisation

4. diversification

5. mass-consumption

US development aid should encourage trade and investment, rejecting communism

neo classical development theory

• disagreed with rostow- state owned businesses cause of poor development due to lack of competition

• Washington consensus promoted market reforms (deregulation and privatisation), free trade reforms, fiscal reforms and monetary reforms

• SAPs

case study- jubilee debt campaign and Make poverty history

• Jubilee Debt campaign - human chain around G8 in 1998

• Make poverty History- music events and protests 2005 helped to persuade G8 and WB to give full debt cancellation to 40 HIPC states 2005

how does ECOSOC help to reduce poverty?

• work based around SDGs- SDG1- end poverty