Globalization & Third World Development

1. Globalization & Third World Development April 3rd, 2003

2. The World Bank -- Functions • International Bank for Reconstruction and Development (IBRD) • ensures access for middle-income and credit-worthy poor countries to low-cost borrowing in capital markets • funds are raised on the international capital markets • $11.5 billion (2002), $371 billion cumulative • International Development Association (IDA) • long-term (35-40 year) interest free loans • aimed at poorest countries • funds are raised by contributions from richer member countries • $8.1 billiion (2002), $135 billion cumulative

3. The World Bank -- Structure • corporation-style institution • owned by 184 member countries • corporate structure • CEO, Board of Directors, shareholders • President – American • US is single largest shareholder • executive directors • top five shareholder countries appointed • rest by election • votes by number of shares

4. World Bank, Votes by Country, 2002

5. The IMF -- Function • functions – to promote... • international monetary cooperation • expansion of trade • exchange rate ($$) stability • allow member countries to correct maladjustments in balance of payments • balance of payments=exports-imports • to allow countries to continue paying for imports without imposing import controls • provides short-term loans at market-related rate of interest • lower interest rates for poor countries (as of mid-1980s) • requires structural adjustment plan

6. The IMF -- Structure • all loan arrangements must be approved by Executive Board • fund is based on quotas on members • based on the relative size of their economies in the world economy • votes based on size of quota contribution

7. IMF, Votes by Country, 2002

8. The Washington Consensus • principles underlying the policies of World Bank and IMF • new model of neo-liberal economic development • market liberalization • privatization • economic stabilization • deregulation • World Bank and IMF structural adjustment policies (SAPs) • argument that loans were ineffective in fostering development without changes to ensure a healthy economy • countries had to be able to pay loans back • countries had “to get the basics right” • SAPs -- conditional loans issued to countries to pursue policy reforms in keeping with 4 goals above

9. The World Bank, IMF and Structural Adjustment • the critique • “In who’s interest? Just ask...who set it up?” former Jamaican President, Michael Manley • World Bank • allows rich western industrialized countries to dictate the path of development in their own interests • project their preferred model of development on the domestic policies of developing countries • wield imperialistic power over developing countries through the mechanism of debt • IMF • as above, plus... • allows rich western industrialized countries to expand their markets • ensures that debts of developing countries (to interests in developed countries) are paid

10. The World Bank, IMF and Structural Adjustment • the defense • capital (necessary for development) would not otherwise be available on the open market • however, cannot simply give money away... • countries must be able to show that they will be able to pay it back • best way to do so is to “get the basics right” – create conditions for economic development • basic problems of poverty and underdevelopment are not created by World Bank and IMF