Week 10 - The World Bank & the IMF

3/3/2016

The World Bank and the International Monetary Fund (IMF) were created to stablize the global economy and to manage the diverse economies across nations through loan making and technical assistance. A part of their strategy is to reduce poverty - which has generally presented itself as labor, trade and agreements to utilize natural resources. U.S. media has speculated on the impact of both institutions.

The World Bank Group has set two goals for the world to achieve by 2030:

End extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3%
Promote shared prosperity by fostering the income growth of the bottom 40% for every country

The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the ordinary sense but a unique partnership to reduce poverty and support development. The World Bank Group comprises five institutions managed by their member countries. Established in 1944, the World Bank Group is headquartered in Washington, D.C. We have more than 10,000 employees in more than 120 offices worldwide.

The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Created in 1945, the IMF is governed by and accountable to the 188 countries that make up its near-global membership.

Watch the videos below. Pick a country from either the IMF or the World Bank website. In your original post explain how the

Answer the following prompts (Use the videos and your textbook as a source.)

What is the current relationship between the IMF and World Bank How has that changed over time? Do their functions overlap? If so - how?
What is the IMF and World Bank's relationship to the World Trade Organization (WTO) ?
How does the IMF and the World Bank set its policies and practices within "developing" nations? What are the benefits of support from the IMF or World Bank? What are the disadvantages?
What first world nations benefit from the work of IMF or the World Bank? Explain your perspective.

Original Posts 250 words (minimum). Respond to three other students 50 words (minimum). Original post due Thursday @ midnight. Responses (3) due Sunday @ midnight.

24 Comments

Michael Stevens

3/8/2016 05:51:04 pm

The treasuries of the United States and Britain came together in order to draft the blueprint for the IMF built upon the philosophy of Keynesian economics (video 1). The result bailed out Europe in the form of the Marshall plan. This lead to American companies becoming lending predators to various countries oversees. The dependence on the IMF and World Bank hinders a budding nation’s ability to create and manage its own national banking system. Although it could be perceived as a world organization that can help struggling nations grow through the approval of loans, it has become a form of post-colonialism where the end-result is a bunch of foreign investors in charge of a country’s financial system. Governments can force a country to fall into debt, then countries will need to borrow from the IMF; once a country borrows from the IMF, then they will have to cut back on education spending (video 1). Once education is cut, this will lead to more chaos within the country, and the cycle continues. Now, public works can become privatized in order to make a dent in the national debt. Thus, oftentimes, the main beneficiaries are companies from first-world countries rather than the third-world countries it is meant to improve; for example, 50% of the Ecuadorian budget was allocated to paying its debts (video 1). These institutions have also contributed to the growing income equality taking place around the world. Since the IMF has close ties to America, the first world nation that benefits the most from IMF loans are American bankers and financial experts. The WTO is related to the IMF and World Bank because loans and loan requirements are oftentimes related to world trade such as tariffs and arrangements with private contractors for public works.

wenli zhou

3/20/2016 01:44:10 pm

HI Michael,
I agree with you that the main beneficiaries are companies from first-world countries rather than the third-world countries. However, it is because most of the services are provided by first world company. Developing nations are unlikely to have such technology. But developing nations get benefits from programs such as provide low-interest loans, zero to low-interest credits, and grants.

Mary Rasooli

3/25/2016 08:37:03 am

The fact the the US companies have essentially become as you stated (lending predators) is a sickening thing to see. for the US to be the country that people seek aid from and then to have huge investors from the US operating in the IMF to completely strip away a small countries independence is absolutely another form of post colonialism. Good thoughts!

Megan Fernandez

3/13/2016 04:25:22 pm

Globalization has created the need for closer cooperation between the multilateral institutions with key roles in the formulation and implementation of different elements of the framework for global economic policy, in particular, the International Monetary Fund (IMF), the World Bank and the World Trade Organization. Each organization has a mandate for cooperation in the agreements under which they have been established. They also have signed agreements among themselves, for mutual cooperation and regular consultation, which identify means to foster greater coherence in global economic policy-making. The World Bank and IMF’s desires for greater coherence in global economic policy-making through closer cooperation between the WTO is expressed in a number of agreements, ministerial declarations and decisions. The International Monetary Fund and the World Bank were both created at the Bretton Woods Conference in New Hampshire, US in 1944.

The IMF and the WTO share close to 150 member countries in common. The work of the IMF and the WTO is complementary. The IMF focuses on the international monetary and financial system, while the World Trade Organization focuses on the international trading system; both work to ensure a sound system for global trade and payments.

A group of IMF and World Bank governors meet as part of the Development Committee, whose meetings coincide with the Spring and Annual Meetings of the IMF and the World Bank. The Managing Director of the IMF and the President of the World Bank meet regularly to consult on major issues. They also issue joint statements and occasionally write joint articles and have visited several regions and countries together. IMF and Bank staffs collaborate on country assistance and policy issues that are relevant for both institutions. Both institutions conduct country missions in parallel and participate in each other’s missions. IMF assessments of a country’s general economic situation and policies provide input to the Bank’s assessments of potential development projects or reforms. Similarly, World Bank advice on structural and sectoral reforms is taken into account by the IMF in its policy advice. The staffs of the two institutions also cooperate on the conditionality involved in their respective lending programs.
The 2007 external review of Bank-Fund collaboration led to a Joint Management Action Plan on World Bank-IMF Collaboration (JMAP) to further enhance the way the two institutions work together. Under JMAP, the IMF and World Bank country teams will discuss their country-level work programs to identify macro-critical sectoral issues, the division of labor, and the work needed in the coming year.

Cooperation and consultation between the IMF and WTO is key, given the increased areas of mutual support and responsibilities between the two institutions. Potential areas of heightened interaction include current and prospective WTO agreements on financial services, trade facilitation, and regionalism. The IMF supports a multilateral approach for trade negotiations, the conclusion of the long-running WTO Doha* Round negotiations, and broadened attention to emerging issues such as fostering an open regionalism, spillovers from trade, and global value chains.

*The Doha Round (Doha Development Agenda) is the latest round of trade negotiations among the WTO membership. The Round was officially launched at the WTO’s Fourth Ministerial Conference in Doha, Qatar, in November 2001. Its aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules. The work program covers about 20 areas of trade. Its fundamental objective is to improve the trading prospects of developing countries.

Thu-Thao Ho

3/14/2016 08:23:23 pm

I really like the way you explained how these financial institutions tie in with world policy making. It's a fact that the WTO and the IMF work very well to increase mutual support. Also it is very interesting to see how the IMF impacts our multilateral trade with other nations as well. The financial institutions being involved deeply in our international world truly solidify the fact that money does impact how we live our lives.

3/16/2016 07:21:37 am

Hello Megan,
First off, I would like to acknowledge how good of a job you did explaining how the International Monetary Fund and the World Bank are interrelated; they were even brought into being on the same day, in the same place. Afterward, they work on the same projects together, and even write joint statements and joint articles. It is important to realize how each one is co-dependent upon the other to some extent.

Mark De Martini

3/16/2016 09:34:59 pm

Megan,
Great job explaining the IMF, WTO and World Bank. Your posting gave me a much better understanding of these organizations.

3/20/2016 02:05:30 pm

Hi Megan
Thanks for sharing your understanding on these three organizations with us. I learned a lot from you explaination. I agree cooperation and consultation between the IMF and WTO is key.

3/25/2016 08:43:28 am

Thanks for the detailed look into the relationship of the IMF, WTO and WB. It is interesting to see how these groups are related and organized. Awesome!

3/13/2016 09:27:22 pm

The World Bank and the IMF were instruments of the post WWII's new world order. The world economy has always operated on money and loans since the middle ages. America and England were expert on international financial and lending practices since both traded heavily on the world market. The total destruction brought on by WWII provided an opportunity to reshape the world to benefit American interests. Historically, the winners of wars set the rules and the vanquished or weak comply. The World Bank was established as a financial reserve to facilitate loans for European countries recovering from the war under the Marshal Plan. The mandate expanded to help developing nations secure loans for advancing human development. The IMF worked in tandem with the World Bank to administer loans and provide plans for counties in debt. John Perkins in The Economic Hitman explains the World Band and the IMF have become predatory on developing nations by enticing them with attractive loans they can't pay off. Once in debt, the IMF forces developing countries to restructure, devalue their currency, turn over national assets to transnational companies and surrender autonomy. The pattern is little different from banks enticing an individual with credit cards with generous credit limits until that person is buried under a mountain of debt. For whatever good the IMF and World Bank intended to do I believe the result is based on corporate greed. The IMF and World Bank have the potential to do great good by advancing human development through foreign aid but the process is exploited. I think a real risk is when debtor nations refuse to pay the loans and nationalize their assets. The system could collapse and plunge the world into a financial crisis. The WTO is there to set the rules of trade and advance good governance. Because 162 nations are members, maybe the WTO can resolve some of the inequity and friction created by the World Bank and IMF. This may be overly optimistic since wealth is being consolidated in the hands of the rich. The advantages of working with the World Bank and the IMF is securing loans that can be used to invest in infrastructure that supports future economic growth (Keynesian Economics). The disadvantage, or risk is unsustainable debt. The debt leads to a loss of national autonomy, and the exploitation of natural resources factors into future poverty.

3/16/2016 07:39:48 am

Hello Mark,
You bring up a lot of good points about the International Monetary Fund and the World Bank. According to your response, it appears that you believe that the IMF and World Bank are merely tools, and tools can be used for both good and malignant purposes. However, you come to the conclusion that people will always find a way to exploit the system. In this manner, what would be the point of doing anything if the result would be exploitation? In my opinion, I believe that people should still act and make a difference despite exploitation because although there are those willing to exploit, there are also those want to make the world a better place.

3/16/2016 09:33:14 pm

Michael,
In my response to Thu-Thao I suggested policy and regulations to reform the IMF and the World Bank are possible if the political will exists. I also think developing world leaders need to take account of their actions, since they are the ones who apply and receive the loans. Developing nations are guilty of taking short term money in exchange for long term debt. Developing world leaders often get rich while their countries decline into poverty. I wish the better angels of man could be relied on to do the right thing, but on all levels greed drives the economy.

3/20/2016 02:33:41 pm

Hi Mark
thanks for sharing this with us. The WTO is there to set the rules of trade and advance good governance. At the same time, WTO needs support from the world bank as well, fro example, often work together to help countries improve their ability to trade.

3/25/2016 08:47:15 am

Hi Mark!
Enjoyed your post. It is definitely safe to say that the IMF is predatory and finds ways to exploit countries in desperate need of support and assistance. The issue really is the unsustainable debt as you had mentioned, and how that debt is a pathway to losing that autonomy that a nation should have.

3/14/2016 08:18:19 pm

The IMF and the WTO are originally created to restore the world order. They have long since been providing financial assistance to nations in need. Two of key developed nations that play a huge role in regulating these financial markets are the United States and England. Under the Marshall Plan, the World Bank served to grant loans to European nations in order for them to recover from WWII. However, both the World Bank as well as the IMF have provided huge loans that are nearly impossible to pay off. The IMF deals a lot with countries who suffer greatly from massive debt by potentially decreasing the value of a nations currency. The major problem with this is that too much debt can lead to the state of Germany after WWII which was massive inflation. Both the IMF and MTO share 150 nations respectively (video 1), and such stron ties could lead to investments that can greatly increase economic growth. However, there are huge risks in sustaining large debts. Underdeveloped nations do not have enough resources in order to export and place the earnings to paying off debt. The financial institutions are not a bad idea, but when it gives nations the right to borrow so much money and not be able to pay it off, that leads to a worldwide case of bad credit and interest.

3/16/2016 07:45:30 am

Hello Tina,
You make some great points about the interconnectedness of the International Monetary Fund and the World bank. You also raise some interesting points. For example, if the purpose of these institutions is to provide loans to underdeveloped countries, then they are by their very nature risky endeavors: lending to a poor person will ALWAYS be risky. With these risks come criticism and responsibility. For example, what should the consequences be if a poor country fails to pay back the loan? Your posts highlights the responsibilities of these institutions as well as the inherent high risk in their main purpose. Good job.

3/16/2016 09:22:48 pm

Thu-Thao,
The situation isn't much different from banks letting a student run up a mountain of debt that takes years to clear. banks can be made to tighten lending standards to avoid chronic debt in the same way the IMF can be changed to be less predatory. I think it's a matter of political will. The IMF and World Bank started out well enough using the Marshal Plan to rebuild a ruined Europe and that seemed to work out Ok. Why can't the same standards apply to developing nations so they can receive what they need, instead of what they can't pay off?

3/20/2016 01:37:11 pm

The relationship between the Bank and the IMF are more like a twin intergovernmental pillars which supports the structure of the world's economic and financial order. The Bank and IMF exhibit many common characteristics. Thus, they do have functions overlap. Virtually every country on earth is a member of both institutions. Both institutions concern themselves with economic issues and concentrate their efforts on broadening and strengthening the economies of their member nations.Staff members of both the Bank and IMF often appear at international conferences, speaking the same recondite language of the economics and development professions.
Despite these and other similarities, however, the Bank and the IMF remain distinct.The fundamental difference is this: the Bank is primarily a development institution; the IMF is a cooperative institution that seeks to maintain an orderly system of payments and receipts between nations.
The IMF, World Bank and the WTO work together on many levels, with the aim of ensuring greater coherence in global economic policymaking. For example, The IMF has observer status in certain WTO bodies, and may participate in meetings of certain WTO committees and working groups. The WTO Agreements require that it consult the IMF when it deals with issues concerning monetary reserves and money exchange.
One of the major function for the World bank and IMF is to reduce poverty and support development in developing countries. Developing nations get benefits from programs such as provide low-interest loans, zero to low-interest credits, and grants.
first world nations benefit from the work of IMF or the World Bank more because every contribution they make will give them a worldwide impact., in the first video, the host explained that: “the us build the IMF not as a democratic institution, rather as it photographic foundation efforts on image at home for economic and financial right, system and voting rights among government”. The U.S had contributed more in the world bank, thus, the world bank created a very strong base for the U.S leadership around the world.

Sharelle smith

3/21/2016 12:04:22 am

This further proves that the u.s is a big international bully. The government pretends to help these impoverished nations while on the back end are creating a new plan to steal more resources. The u.s preaches about democracy but at the same time when the u.s has influence on the choice of future leaders it's not a real democracy. And creating situations for more war is putting more devastation to the lives of the citizens that live in these countries. This is a shame because in other countries you hear the citizens say how much they love the u.s when the u.s is exacerbating the problems and issues that they are dealing with on a everyday basis.

3/20/2016 11:59:45 pm

From the video it basically shows that the world bank and Imf are the same thing. A global scheme to keep other countries from decolonizing to continue to grow the u.s empire. They were first set up so that Europe and the u.s could support each other financially. It was then used for the u.s to be a creditor for other nations. A creditor with other countries serving a indentured servitude that would never end. They loan money to other impoverished countries knowing that they can repay the loan and that they would eventually have to pay the loan back with their natural resources. Which make sense as to why the u.s never burns the oil in the Middle East because it belongs to the u.s anyway because of the tremendous debt. This creates a need for payment from other countries which in turn causes war. Mean while the people are dealing with war and corrupt leaders. I don't see any advantage to this for other countries at all. The only benefit is the illusion of infrastructure being built and a false sense of security that isn't there. The countries because of colonization have lost there way and continue to find it difficult to break away from colonialization because of this. Borrowing money from the world bank blocks their effort of ever being self sufficient and being able to establish a true government because they are fighting issues at home and that is distracting in itself. Selling their resources is of no value because the u.s or world bank isn't purchasing the resources for its real value. So they further dismantle and destroy the value of the countries currency and stability. If the country wants to rebuild its government they would have to find a way on its own which makes it impossible because the u.s will block any opportunity or chances for that to happen. They will cover it up and make it seem like they weren't doing that. It's also terrible because the focus is about paying the debt while other programs are defunded like health care and education.

Final Exam

3/21/2016 07:08:27 pm

Do we have in-class Final Exam?

Anteo Swenson

3/22/2016 07:26:37 pm

The International Monetary Fund and World Bank appeared after the Second World War. The International Monetary Fund promotes monetary cooperation internationally and offers advice and assistance to facilitate building and maintaining a country’s economy. The IMF also provides loans and helps countries develop policy programs that solve balance of payment problems if a country cannot obtain financing sufficient to meet its international obligations. However, the loans offered by the IMF, are loaded with conditions. Often, a loan provided by the IMF as a form of "rescue" for countries in serious debt ultimately only stabilizes international trade and eventually results in the country repaying the loan at rather high interest rates. The World Bank's purpose is to aid long-term economic development and reduce poverty in developing countries. It accomplishes this by making technical and financial support available to countries. The bank initially focused on rebuilding infrastructure in Western Europe following World War II, and then turned its operational focus to developing countries. The World Bank’s support helps countries reform inefficient economic sectors and implement specific projects, such as building health centers and schools or making clean water and electricity more widely available. Both international organizations, by facilitating the access of the aided countries to the international trade, are working for the World Trade Organization. It’s true that they access the international trade business, buy they do this even when their economy is no stable, and this is so because it is a condition of these organizations. Yes it can provide a nation with development, but it’s also putting them in debt, and some cases, the debt is paid with physical territory or the rights to something that should pertain to the state. For example, Brazil had to pay with sections of its rainforest to international corporations. This is why the nations who benefit from the IMF and the World Bank are the first world nations with plenty of transnational corporations or geopolitical interests; like the United States.

3/25/2016 08:49:24 am

Thank you for providing the example about Brazil and how they gave up their natural resources like the rainforest to international corporations. It is disgusting to see this much exploitation under the IMF, an institution that was meant to help restore order globally.

Michelle Bounkousohn

3/26/2016 09:31:15 am

The IMF is intended to be a global financial cohort seeking to address international trade and development, the World Bank is a financial institution that loans money to developing countries (video 2), and the World Trade Organization exists to facilitate international trade. Their functions overlap largely in that international trade and development are interconnected as facets of international commerce, and that international trade is often dependent on the labor and natural resources of developing countries. While the desire to loan money to developing countries in order to help them seems like a great idea, especially for the countries who are recipients of these loans (video 3), these loans can prove to be overwhelming in the long run for developing nations who are unable to pay them back in full, even with "low or no interest rates" (video 1). For example, in Mexico, the IMF would only allow a loan to Mexico if the country's government allowed Mexican wages to be frozen for 10 years. In this sense, these international financial organizations can perpetuate inequality in the name of "international trade and development," and display an imbalance of power in that it's pretty much more developed nations that take on leadership roles in international organizations. It is slightly problematic and hypocritical that these organizations exist to address poverty and international development when it is essentially the same system of hegemony present during colonial periods, which, ironically is when many of these developed nations accumulated their wealth, and where many of the now-developing countries were thrown into periods of instability.

Week 10 - The World Bank & the IMF

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Week 10 - The World Bank & the IMF

Leave a Reply.

Poli 3 - DeAnza

THE BEAUTYOF BLACKCREATION

ABOUT USJOURNALS​​SUBMISSIONS

THE BEAUTY

OF BLACK

CREATION

ABOUT US

JOURNALS

SUBMISSIONS