IMF and The World Bank

When was the IMF and World Bank established?

in 1944 at the Bretton Woods conference

what was the aim of the IMF?

To ensure the stability of the international economic system

what are other objectives of the IMF?

To ensure exchange stability

Promote international monetary cooperation

expand international tradem

provide loans to member states

Lender to developing countries

what does weakened the confidence in the IMF?

It’s inability to predict and therefore prevent the global financial crash 2008 which caused significant instability on world markets

how many member states do the IMF and World Bank have?

189

How many employees do each organisation have?

The IMF – 2700

World bank – 10,000

How did they both receive funding which receives more funding?

The man sees more with $675 billion in quotas while by the World Bank received about $60 billion through the issuing of bonds or loans

how is the IMF funding arrangements secure?

It is founded primarily by quotas but then also can be founded by multilateral and bilateral boring agreements. This means it can lend up to 1,000,000,000,000 dollars

what is the leadership structure of the IMF

It has a board of governors that head to the IMF

has an executive board of 24 executive directors with eight permanent and the rest on geographical rotation

what has been the nationalities of the leaders of the IMF and World Bank since their inception

are European has been chairman of the IMF executive board while an American has been president of the world bank

how is voting power determined in the IMF?

it’s based on quota share which is the percentage of funding

what level of approval must proposal have for it to pass in the IMF?

it must have 85% approval

why does the US have veto power in the IMF?

As they have 17% of the vote share so therefore any proposal they disagree with won’t pass

What are the conditions of economic liberalisation?

• Reduction of welfare spending

• Reduction of subsidies to domestic industries

• Reduce tariffs on imports and exports

• Reduce restrictions on foreign investment

• Privatisation

• Reduce domestic taxes

Argument that economic liberalisation is in fact a form of neo-colonialism?

They offer loans to poor countries but only on the condition that they deregulate and privatise their economies.

This allows western companies free access to their raw materials, cheap labour and markets.

What’s the aim of structural adjustment programs?

To resolve what are perceived to be structural inefficiencies that inhibit growth

How are SAPs used?

As a condition for loans, if a country does not accept them, they can’t receive IMF loans.

What do the use of SAPs imply about the issues of poor countries?

Its down to structural mismanagement of the economy, not global inequality

What do SAPs typically demand?

• Cut public spending and raise taxes to balance the budget

• Privatisation

  • Reduction of state pensions and wages to public sector workers

How do SAPs undermine state sovereignty?

- The imposition of neoliberal economic reforms requires the state to relinquish their own beliefs.

Fundamentals of fiscal policy are dictated by the IMF

Example of SAPs

To receive $56 billion in loans, Argentina had to cut spending, raise taxes and monitor budget responsiblity via an independent organisation. They still owe billions of dollars.

What are main criticisms of SAPs?

• Indirect Tax rises disproportionately affect the poor as they dont differentiate between income bands

• Has little effect on millions of people in rural areas and with agrictural jobs

• Undermines state sovereignty, going against democratic legitimacy

• Privatisation doesn’t necessarily benefit all members of society

• Inequality!!

Bolivia case study 1994 - what happend?

In order to receive a $25 million loan for water, the World Bank insisted the local cooperative to be privatised.

A french TNC took control, this led to a rise in prices leading to a lack of water supply for the poor.

What have been the impacts of SAPs in Africa (8)

1. Privatisation

2. Tax cuts

3. Deregulation

4. Cuts to public services

5. Cuts to public sector

6. Reduction of worker’s rights

7. Export orientation

8. NGOs have increased in importance

Whats been the effect of privatisation?

TNCs have been able to buy state enterprises at very low cost

Effect of tax cuts?

These are primarily for the wealthy, more regressive indirect taxes have risen, shifting the burden onto middle and low income groups

Effect of deregulation

Has made it easier for TNCs to shift their profits abroad

Has also phased out minimum wage legislation, allowing more exploitable labour

Effect of cuts to services/ public sector

Left people without healthcare, and those in public sector jobs unemployed

Effects of export orientation

Led to a fall in subsistence farming and urbanisation with an increase in slum living conditions.

Also led to over-reliance on cash crops, subject to international prices

Why have NGOs expanded?

Need to fill the gap in provision of healthcare and education that cuts have caused

What is the aim of the world bank?

To end extreme poverty and promote shared prosperity

How does the World Bank try to achieve its aims?

• Promotes economic growth using capital investment and free trade

• A global redistributor by using funds of the wealthiest countries to undertake development projects in the poorest countries

• Often provides loans at near 0% interest

• Regards population growth as greatest cause of poverty

What is the structure of the World Bank

Comprised of 5 major institutions. The head is, by charter, always an American chosen by the US president.

What was extreme poverty defined as up until 2022, what is it now?

Living on less than $1.9 PPP a day, now $2.15 to account for inflation

Which 8 countries saw the largest annual average reduction in extreme poverty between 2000-15?`

1. Tanzania (-3.2%)

2. Tajikistan (-3.1%)

3. Chad (-3.1%)

4. Rep. Congo (-2.7%)

5. Kyrgyzstan (-2.6%)

6. China (-2.5%)

7. India (-2.4%)

8. Moldova (-2.4%)

Issues with using extreme poverty to measure the effectiveness of the World Bank

• Don’t know how much living standards have improved by - just more than $1.90 a day

• Is this due to the World Bank or other factors like NGOs/ development for other reasons.

How are important decisions made in the World Bank?

• Special majorities are required for many decisions by the governors/ executive directors. Like capital increases or increase in the numbers of EDs

Issue with the funding arrangement of the World Bank

As wealthiest countries contribute the most, they exert undue influence over the terms of development in some of the poorest countries in the world

Ways in which the World Bank has been ineffective

• World Bank does not address structural inequalities between developed and developing countries

• Political control and manipulation by the US

• Millions living on >$2.15 a day still face poverty, material deprivation and exclusion

• Doesn’t account for relative poverty, as poverty line varies in each country

• Extreme poverty is still concentrated in Sub-Saharan Africa, 40% of inhabitants in extreme poverty

• 700 million still in extreme poverty worlwide

Poverty stats

• Children and youth account for 2/3 of the world’s poor

• Crises in Syria and Yemen led to extreme poverty rates doubling

• by 2030, 2/3 of the world’s poor will live in fragile contexts

  • 1.3 billion, or 20% of world’s population, lives in multidimensional poverty

What are fragile contexts

Fragile contexts are the world’s most dangerous places. They are countries, cities, regions and communities that are fraught with chronic instability, conflict and violence, trapping large numbers of people in a cycle of desperation and poverty.

What’s multidimensional poverty

Poverty isn't just about lack of income but encompasses simultaneous deprivations in multiple areas like health, education, and living standards