2 Global governance: political and economic

Key Concepts: NGOs; Structural Adjustment Programme (SAP); Key terminology: political The United Nations; Security Council; NATO; Key terminology: economic International Monetary Fund (IMF); World Bank; World Trade Organisation (WTO); G7(8)/G20; North-South divide; Dependency theory.

Key Content

2.1 Political

2.1.1 The United Nations (UN).

• Origins and development of the UN, including its 1945 charter.

• Role and significance of the UN to include the Security Council, General Assembly, Economic and Social Council, International Court of Justice including their strengths and weaknesses.

2.1.2 North Atlantic Treaty Organisation (NATO)

• Role and significance of NATO including its changing role, particularly since the end of the Cold War, and strengths and weaknesses.

2.2 Economic

2.2.1 International Monetary Fund (IMF) and the World Bank.

• Role and significance of these institutions, including their strengths and weaknesses. 2.2.2 The World Trade Organisation (WTO) and G7/G8 and G20.

• Role and significance of these institutions, including their strengths and weaknesses.

2.2.3 Significance of how global economic governance deals with the issue of poverty, including:

• The North-South divide and other measurements to include world-systems theory, dependency, orthodox and alternative measurements of poverty.

• Classical economic development theory, structural theory, neo-classical development theory.

2.3 The ways and extent to which these institutions address and resolve contemporary global issues, such as those involving 2.3.1 In particular to focus on:

• how the following prevents the UN Security Council from effectively addressing and resolving the issues above:

(a) the membership and structure

(b) the use of veto

• how the following prevents the IMF and World Bank from effectively addressing and resolving the issues above

(a) pressure for reform and criticism, including Structural Adjustment Programmes (SAPs), global economic crisis.

2.3.2 The role and significance of the global civil society and non-state actors, including non-governmental organisations (NGOs) in addressing and resolving the issues of conflict, poverty, human rights and the environment.

Global Governance:

UN; NATO; IMF; WB: WTO; EU; NAFTA; ASEAN: MERCOSUR; G7: G20: G77: impact on warfare/conflict/human rights/environment/global poverty and development. ​

History of UN – ​Foundation – ​24th October 1945 – 51 Original members, now stands at 193, the last being Southern Sudan – 2011;

ICJ (Sometimes called the World Court) – 1946;

role and composition of UN and its component elements: ​General Assembly, Security Council: ​5 permanent members and 10 on a rotational 2 year basis.

Question over reforms. See Stewart Patrick Video on Reform of the UN Security Council from Council for Foreign Relations; ​

Article 25 ​

The Members of the United Nations agree to accept and carry out the decisions of the Security Council in accordance with the present Charter.

A​rticle 42

The Security Council may take such action by air, sea, or land forces as may be necessary to maintain or restore international peace and security.

This v​iolates the principle of equality among states (Article 2.1 of the Charter) and therefore helps to perpetuate the great-power system.

The composition of the permanent members is widely criticised as being outdated, reflecting the great-power system of 1945 rather than the distribution of global power in the 21st Century. ​Some arguments are advanced that there is an uneven geographical representation with for example there being no Latin American or African representation amongst the permanent membership. ​

The veto powers enjoyed by the permanent members of the Security Council has been subject to criticism because it concentrates power in the hands of just five countries, giving them a broad range of control over the rest of the UN system. ​For example the lack of effective action on Syria was due to Russia and China exercising their permanent member veto after a resolution was put forward by the USA, France and the UK in February 2012. Multiple resolution on Syria have since been blocked.

Subsequent resolutions on Syria have also been vetoed.

T​here have been calls for the inclusion of ​Japan, India (​Endorsed by Obama)​ and Germany and Brazil into the permanent council due to their large growth since the end of the Cold War. This will allow the UN to become more representative of the power distribution in the international system. ​

Why might this argument be missing the point?

A​nswer: because there is already a place for wider geographical representations in the non permanent membership. The real point is whether the aspirants can make a significant contribution to global peace and security.

With regards to Britain and France some have even argued that they should ​relinquish their seats in favour of the EU which is now beginning to develop ​an embryonic foreign policy.

There is a  European Defence Agency and there was the creation of a High Representative for Foreign Affairs (Federica Mogherini) as well as the active role the EU have taken in regards to Libya, Syria and the crisis in Ukraine are evidence of this more activist foreign policy role. The EU also played a key role in brokering the JCPOA (Iran Nuclear deal) and the Paris Climate Change Agreement.

The candidacies for permanent security council membership of India and Japan were publicly endorsed by President Obama in 2012.

On the other hand, Russia do not support any changes that might dilute their power and China is resistant towards Japan or India candidacy. ​

John Ikenberry (2009) argues there may be a need to move from International Liberal Order 2.0 to Liberal Internationalism 3.0 in other words both the UN and Bretton Woods may need to be reconfigured. ​

General Assembly: ​United Nations General Assembly- Like a parliament – 193 members each representing each state party. Charter amendment requires 2⁄3 majority. ​

The General Assembly 11.3​.

The General Assembly may call the attention of the Security Council to situations which are likely to endanger international peace and security ​

Economic and Social Council: – ​UNECOSOC– responsible for MDGs (2000-2015) (now SDGs 2030) and UNDHR ​To ‘reaffirm faith in fundamental human rights’ with the adoption of the UDHR in 1948 and subsequent human rights conventions (status of refugees etc 1954, conventions on torture 1975/1984). ​

To ‘promote social progress and better standards of living’ – ​largely in the developing world with the adoption of the Millennium Development Goals (MDGs/SDGs) ​

I​nternational Court of Justice: ​ICJ – develops a body of international law. ​

Article 93.1 ​All Members of the United Nations are ​ipso facto parties to the Statute of the International Court of Justice.

Article 94.1

Each Member of the United Nations undertakes to comply with the decision of the International Court of Justice in any case to which it is a party. ​

ICC – An end to impunity:

The Rome Statute (1998) ​ convened an International Criminal Court (July 2002) to indict and try those accused of ​war crimes, genocide, crimes against humanity and ​wars of aggression (2010). ​

Also ICTY (Yugoslavia) and ICTR (Rwanda) and other ad hoc tribunals.

O​ther Agencies and  functions: ​

International Atomic Energy Agency ​(IAEA) This has played a key role in trying to find a ​diplomatic solution to the west’s concerns that Iran is processing uranium for military, as well as energy, purposes.

The OPCW (Organisation for the Prohibition of Chemical weapons) undertook the disarming of Assad’s chemical stockpiles in 2013. ​

The Intergovernmental Panel On Climate Change ​(IPCC and FCCC) issue various reports and most recently called for global immediate action on climate change.

There are also the Economic and Social Council (ECOSOC) and the International Court of Justice (ICJ), ​which has seen its caseload double in the last 15 years.

 

ICISS (2001) ​- Most notable is the development of the ​doctrine of R2P (2005) which has had a seismic ​impact on the sanctity of state sovereignty. ​Transition from absolute sovereignty to contingent or conditional sovereignty;

​Current General Secretary – ​Antonio Guterres.

R​ole and articles: ​

Article 1

The Purposes of the United Nations are​:​(1) to safeguard peace and security in order to ‘save succeeding generations from the scourge of war’; (2) to reaffirm faith in fundamental human rights; (3) to uphold respect for international law; and (4) to promote social progress and better standards of life. ​

Article 2.1

The Organization is based on the principle of the sovereign equality of all its Members. ​Article

Article 2.4

All Members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the purposes of the United Nations

Various protocols and Decisions of the ICJ and the UN: ​

  • 1948 – Atomic weapons a variety of WMD;
  • 1949 – Geneva Convention;
  • 1954 – Convention on refugees;
  • 1969 – Convention on racial discrimination;
  • 1975/1984 – Convention on torture;
  • 1997 – Ottowa convention on landmines; ​

UNSCRs (United Nations Security Council Resolutions):

  • UNSCR 242 (1967 Israel/Palestine)
  • UNSCR 687 (1991 Iraq Kuwait)
  • UNSCR 1441 (2003 – Iraqi non compliance with weapons inspections):
  • UNSCR 1973 (2011, imposition of no fly zone over Libya NATO exceeded its mandate):
  • UNSCR 2209 (2013) banned use of chemical weapons in Syria – clearly failed given the 2017 use of chemical weapons in Syria;
  • UNSCR 2268- 2016, ceasefire in Syria;

 

Performance of the UN – UN’s role and performance in maintaining peace and security peacekeeping; intervention within states; ​

UN PEACEKEEPING SUCCESSES AND FAILURES:

Somalia ​- The UN operation was the first time the peacekeeping force had been used for “humanitarian intervention”. However, the peacekeepers were met with a hostile reception in Mogadishu. Several of them were killed and the bodies of dead US soldiers were paraded through the streets on the orders of the Somali warlords. When an American Black Hawk helicopter was shot down as part of the Battle of Mogadishu, the US withdrew its troops. In 1995 the UN withdrew all peacekeeping troops. It was described at the time by one UN official as

“the greatest failure of the UN in our lifetime”. ​

The former Yugoslavia

Srebrenica On July 11, 1995, towards the end of Bosnia’s 1992-95 war, ​Bosnian Serb forces swept into the eastern Srebrenica enclave and executed 8,000 Muslim men and boys in the days that followed, dumping their bodies into pits. It was the worst massacre in post-Second World War European history.

The UN had previously declared the town one of the safe areas, to be ​”free from any armed attack or any other hostile act”. 600 Dutch infantry were supposed to be protecting thousands of civilians who had taken refuge from earlier Serb offensives in north-eastern Bosnia.

As Serb forces began shelling Srebrenica, Bosnian Muslim fighters in the town asked for the return of weapons they had surrendered to the UN peacekeepers but their request was refused.

The Dutch peacekeepers were obliged to watch as the killings began. The failure led in part to the creation of the United Nations Peacebuilding Commission and set the West on a new course of ‘liberal interventionism’.​

Rwanda – ​Another major failing of the UN peacekeeping organisation was not doing more to prevent the 1994 Rwandan genocide that left up to one million people dead. A 1999 inquiry found that the UN ignored evidence that the genocide was planned and refused to act once it had started. More than 2,500 UN peacekeepers were withdrawn after the murder of ten Belgian soldiers. In one case, the peacekeeping forces deserted a school where Tutsis were taking shelter – hundreds of people inside were immediately massacred. ​

 

Sierra Leone from 1999 to 2005 is hailed as a success.

It was created to help implement a peace agreement after the country’s devastating civil war. Mr Ban officially closed the UN offices in Freetown in 2014, declaring a ​“successful conclusion” to the organisations work in helping to bring peace to the country, calling it a “triumph for the people of Sierra Leone” after what had been a decade of warfare. ​“Our blue helmets disarmed more than 75 000 ex-fighters, including hundreds of child soldiers.

The UN destroyed more than 42,000 weapons and 1.2 million rounds of ammunition – a potentially deadly arsenal that is now itself dead,” ​Mr Ban declared.

Burundi – ​Burundi is also frequently cited as a success story for the UN peacekeeping operation, helping it recover from decades of ethnic war. Ban Ki-moon, UN secretary-general, hailed Burundi’s “substantial progress, overcoming formidable challenges since the end of the civil war”.

But in 2014 he extended the peacekeeping mission for a year to help the country through elections, that took place earlier in July, and cautioned that the gains made under the UN’s watch were not irreversible. UN’s economic and social role and performance development and environmental regimes.

NATO: ​NORTH ATLANTIC TREATY ORGANISATION

Washington Treaty (April 1949) – 12 original Members: USA, Canada, Iceland, Norway, Denmark, France, UK, Italy, Portugal and the BeNeLux Countries. ​

Why? -5 REASONS

1.Proximate cause – the Berlin Crisis of 1948-1949.

2. Fear of Soviet Expansionism

3. Euro-Atlanticism -tie the US and Western Europe together.

4. War is very catastrophic so NATO could therefore be seen as a collective response to the security requirements of the post war era.

5. In 1949 the Soviets became a nuclear rival to the United States. ​

Lord Ismay (First General Secretary of NATO) – ​

‘To keep the Americans in, The Soviets out and the Germans down”

Collective Security and ​forward defence.

A​rticle 4

The Parties will consult together whenever, in the opinion of any of them, the territorial integrity, political independence or security of any of the Parties is threatened.

Invoked after the Bataclan attacks in Paris.

Article 5 

T​he Parties agree that ​an armed attack against one or more of them in Europe or North America shall be considered an attack against them all and consequently they agree that​, if such an armed attack occurs, each of them, in exercise of the right of individual or collective self-defence recognised by Article 51 of the Charter of the United Nations, w​ ill assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, s​uch action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area. Any such armed attack and all measures taken as a result thereof shall immediately be reported to the Security Council. Such measures shall be terminated when the Security Council has taken the measures necessary to restore and maintain international peace and security .

C​OLD WAR – ​NATO expansion,

1952 Greece and Turkey, 1955 FDR (As A response to the formation of the ​WARSAW PACT ​END OF THE COLD WAR – 1989-1991:

LONDON DECLARATION – ​The London Declaration, 1990:​

“We are no longer adversaries and reaffirm our intention to refrain from the threat or use of force against the territorial integrity or political independence of any state.”

Neo Realist KN Waltz speaking before the Senate Foreign Relations committee in 1991

“​NATO is a disappearing thing…” 1991.

​Some argue that the raison d’etre had gone.​ ​

NATO 1991-2019. Transformation not demise:

The end of the Cold War brought fundamental changes in at least three areas: ​

a) The disintegration of the Soviet Union

b)Unification of Germany

c) Question Marks over the US commitment to the defence of Europe, a fear of an American return to neo-isolationism. (if NATO no longer exists). ​

HOWEVER – ​Most analysts and policy-makers within the Euro-Atlantic security community did not concur with these sentiments and the main issue in the 1990s concerned the transformation of the alliance rather than its demise. ​

a) August coup (1991) by military against Gorbachev

b) Stability and security threats as the SU began to unravel

c) the disintegration of the former Yugoslavia. ​

1994: T​he Partnership for Peace

In June 1994, Russia became the first country to join NATO’s Partnership for Peace (PfP), a programme of practical bilateral cooperation between NATO and partner countries.

N​ATO peacekeepers arrived in Bosnia and Herzegovina in 1995 ​IFOR (Implementation Force) and had already conducted air strikes. NATO’s SFOR (Stabilisation Force) replaced IFOR with a mandate both to maintain and where necessary enforce peace. Active in apprehending indicted war criminals and transferring them to the ICT for the former Yugoslavia in The Hague. ​

1997 – Founding Act:

NATO and Russia agreed to base their cooperation on: the principles of human rights and civil liberties; refraining from the threat or use of force against each other or any other state; respect for the sovereignty, independence and territorial integrity of all states; prevention of conflicts and dispute settlement by peaceful means. ​

The humanitarian crisis in Kosovo in 1998 and 1999

Belgrade had repeatedly violated and flouted UN Security Council resolutions yet the UN was unable to act – (Likely Russian Veto.) In the autumn of 1998, NATO and Russia both expressed support for diplomatic efforts to secure a political solution and to avert a humanitarian catastrophe and stressed the need for immediate, full and irreversible withdrawal of Serbian militia.

As the situation worsened in early 1999, NATO issued an Activation Order for a limited air response and phased air operation in an attempt to avert a humanitarian crisis and launched an air campaign lasting 78 days against Belgrade.

NATO was able to secure the following:

  • An end to the conflict;
  • Serbian Police and paramilitary withdrew from Kosovo;
  • The stationing of an international military presence KFOR with a mandate from UN security council resolution 1244 and an agreement between NATO and the Yugoslav Army;
  • Safe and unconditional return passage for displaced ethnic Kosovans;
  • Securing the disbanding of the Kosovan Liberation Front. ​

In 1999 NATO published a Strategic Concept – ​

“​the risks are multidimensional and difficult to predict” ​

I​dentified several security priorities:

civil conflict,

symmetrical warfare in the new independent former Soviet states

Nuclear Security.

NATO affirms power to take action ​without UN approval.

D​efence ministers in 2002 ​also Acting as a forum for consultation on security issues including:

  • Deterrence;
  • Defence;
  • Conflict prevention;
  • Crisis management;
  • Promoting wider partnership and dialogue in the Euro-Atlantic area
  • Developing the capability to defend against attacks using NBC weapons
  • Improvements in interoperability of forces (the troops strategy, the military rank, the protocols)
  • Improved mobility and deployability of forces
  • Increase the effectiveness of engagement
  • Ethnic conflict
  • Human rights abuses
  • Political instability
  • Economic fragility

1999 Expansion Poland, Hungary and the Czech Republic:

Regarding ​new membership, NATO has produced 5 criteria:

  • An established democracy;
  • Respect for human rights;
  • A market-based economy (cynically: a WTO, IMF-type market);
  • Armed forces under civilian control;
  • Good relations with neighbouring states​;

By 2004 Ten countries (Bulgaria, ​Czech Republic​, Estonia, ​Hungary​, Latvia, Lithuania, ​Poland, Romania, Slovakia and Slovenia) had joined NATO

​Partnership for peace countries​; Currently, there are 21 countries in the Partnership for Peace programme including: Ukraine, Belarus, Moldova. ​NATO PARTNERS not Allies – don’t have the protection of Article 5. ​2001 ​September – After 11 September attacks on targets in the US, Secretary-General Robertson invokes Article Five of the alliance’s constitution spelling out that an attack on one is seen as an attack on all. ​(Operation Eagle Assist) ​

2003 August – Nato takes control of the International Security Assistance Force (ISAF) in Afghanistan, its first major operation outside Europe. ​

Out of Area Operations (Operation Ocean Shield  – Piracy off the horn of Africa; Libya – Operation Unified Protector);

2008 ​March – ​Newly Elected President Medvedev warns against the destabilising effects of further Eastern NATO expansion in relation to NATO, overtures to Georgia and Ukraine. ​

2008 ​August – Nato says there can be no “business as usual” with Moscow unless it pulls its troops out of Georgia. Russia halts all military co-operation with Nato. ​

The Security Challenges as laid out in the Security Environment Report 2010.

  • Protect against conventional attack of any NATO member
  • Proliferation of nuclear weapons and other WMD (Weapons of Mass Destruction)
  • Security challenge in the form of terrorism
  • Instability or conflict beyond NATO borders
  • Transnational illegal activities such as trafficking in arms, narcotics and people
  • Cyber attacks from foreign militaries and intelligence services, organised criminals, terrorist and/or extremist groups can each be the source of such attacks.
  • Vital communication, transport and transit routes on which international trade, energy security and prosperity depend.
  • Environmental and resources constraints including health risks, climate change, water scarcity, increasing energy needs and defence and deterrence​. ​

2011 March – UN Security Council approves imposition of no-fly zone over Libya to protect civilians from Col Gaddafi’s forces. Nato agrees to take on responsibility for enforcing the no-fly zone.

2011 ​July Nato Secretary-General Anders Fogh Rasmussen says the Libya mission is extended for another three months and will continue to be extended for as long as necessary. He says the Gaddafi government should not try to “wait Nato out”.

2011 ​November – Pakistan halts Nato ground supplies to Afghanistan after a Nato airstrike kills 24 of its troops. ​

2012 ​March – Medvedev calls NATO ‘missile defense” a direct threat to Russia and a hostile act. Raising the prospect of the Security Dilemma. ​

2014-2016​: ​Responding to the Ukraine Crisis In March 2014, Russia illegally and illegitimately annexed Crimea, part of Ukraine’s sovereign territory. In response, NATO Foreign Ministers decided to suspend all practical civilian and military cooperation with Russia on 1 April 2014. ​2015 – ​As the Ukraine Crisis grows – the rhetoric between Moscow and NATO spokesmen escalates.

NATO announces the creation of a 5000 strong rapid deployment force to counter Russian ​“aggression and destabilisation” in Crimea, Ukraine, The Baltic states and the violation of the airspace of NATO members such as Turkey and the UK.

2015 ​October – NATO Planes bomb hospital in Afghanistan killing 22 civilians. ​

TRUMP 

“I think NATO’s obsolete. NATO was done at a time you had the Soviet Union, which was obviously larger, much larger than Russia is today. I’m not saying Russia’s not a threat. But we have other threats. We have the threat of terrorism and NATO doesn’t discuss terrorism, NATO’s not meant for terrorism.”

 

GLOBAL ECONOMIC GOVERNANCE:

Modes of Capitalism

1. Enterprise Capitalism – Neo Liberal/ Free Market Laissez faire Capitalism – related to Friedmanite Chicago School, neo-liberal economics i.e Thatcherism, Reaganomics. Sometimes also called Anglo-Saxon Capitalism; ​

2. Social Capitalism, Keynesianism, Managed Regulated Capitalism – Scandinavian / European Model.

​3. State Capitalism – China;

4. ​Oligarch Capitalism (Crony Capitalism/Gangster Capitalism). ​

5. Elite (Corporate Capitalism). ​

Multilateral governance – ​States have created multiple multilateral agencies of global economic governance such as the G8, (now G7) the G20, the G77 (of non aligned countries) regional trading blocs such as the EU, ASEAN, MERCOSUR and NAFTA and international organisations that promote development and stability in the global economy such as the IBRD, the WTO and the IMF.

Approaches

1. The Realist View ​- States Will Act in their own selfish economic interests ​

2. Liberal view ​- two contrasting views: The Neo-liberal view and the Keynesian view ​

3. Critical Approach – dominated by Marxist and Neo Marxist – economic theory.

Global Economic Governance and Sovereignty

There has therefore been a significant dilution of economic sovereignty such as the rapid rise of TNCs, abolition of currency controls and the spread of neoliberal economic policies through the IMF, the WTO and the World Bank. ​

Economic Globalisation

1. From the 1950s onwards National Economies became to be increasingly defined and driven by global economic trends. ​

2. Rise of TNCs ​- In 1970 there were 7000 TNCs. In 2009 there were 38,000. In 2013 there were 63,000 ​

3. Increase in volume in International Trade: ​in 1960 $629bn – In 2003 it was $23 trillion. Note that in 2014 it was $22.4 trillion. This shows the significance of the global economic crash.

4. Creation of the ​WTO in 1995 replacing GATT

5. Supply, Labour, Production and Marketing and Distribution chains increasingly transnational ​

6. The rise in ​Global brands​, marketing and advertising.

7. ​Creation of the ECB and the Eurozone – regional integration which may facilitate global integration ​

8. Abolition of currency controls in the 1980s.

Development and impact of global economic governance – Global economic governance refers to the framework of coordination and management that is facilitated by bodies such as the World Trade Organisation, the International Monetary Fund and the World Bank. The purpose of global economic governance is to provide a stable framework for sustainable growth in the world economy. However, questions have been raised over the effectiveness following the worldwide economic crisis in 2008. ​

Bretton Woods system, its aims and purposes; breakdown of Bretton Woods. ​

 

Washington consensus and its implications

 

Success and failures of global economic governance (stability and growth in global economy; have crisis tendencies been contained?). ​

EFFECTIVENESS of the Bretton Woods System:

Those who argue that it has been effective in respect to its stability function, make a number of points. One important point to make is that the Bretton Woods system was effective in the early post-1945 period in ensuring no return to the ‘beggar thy neighbour’ policies of retaliatory protectionism that had contributed to the Great Depression of the 1930s.

The Bretton Woods agreement was shaped on the fear that unregulated markets caused instabilities such as the Great Depression, therefore the agreement greatly promoted Keynesian ideas of ‘managing’ markets through government spending and taxation.

The influence of this was underlined by the adoption of many industrialised states of Keynesian techniques of fiscal management in order to aid growth and keep unemployment low.

In terms of fiscal stability the Bretton Woods system did work by helping to avoid the credit bubbles that led to the Great Depression of the 1930s and guiding the world economy to its longest sustained period of economic growth with the said ‘golden age’ of the 1950’s and 1960’s with OECD member states consistently achieving average growth rates of four or five per-cent every year.

The end of Bretton Woods: ​However, the end of the Bretton Woods system and the rise of market-orientated policies under the ‘Washington Consensus’ laid the foundation for the accelerated globalisation that saw a significant expansion of the world economy from the 1980s through to 2007-08.

Therefore, in a sense the Bretton Woods system was successful for a period of time but needed to be reformed due to the growth of globalisation and the change of the dynamics of world economics.

​It is sometimes argued that the Bretton Woods system did not fail. Rather it was the drive towards neo-liberalism which has created more volatility in the global economy.​ Each of the organisations of global economic governance aims to combine to manage the economics in the international system in the most stable and efficient fashion.

These three groups have been subject to much criticism and controversy due to their methods, however they have reformed in recent years in order to counter this criticism. ​

The World Bank – ​World Bank – performance and impact of World Bank – development and poverty-reduction programs;

SAPS; strengths and criticisms; how World Bank has responded to criticism; World Bank and global economic crisis and pressure for reform, etc; Membership open to all member states of the IMF, and at present this includes 189 states. It provides funds to government-sponsored development programs in member states that are middle income or ‘creditworthy’ poor nations.

It aims to encourage ‘development of productive facilities…in less developed countries’, and funding for ‘productive purposes.’

Originally concentrated on projects involving physical infrastructure (ie water projects). Now it deals with a whole range of issues related to economic development and so therefore has worked closely with the UN on the MDGs (now SDGs) – projects relating to population (birth control, HIV advice etc), education, health.

It makes loans to deal with public sector management corruption and legal and judicial reform; Decisions supposed to be made on purely economic, not political, grounds, and is not supposed to intervene in internal politics of member states. ​

Reforming the WB: has accepted the need for reform through the greater awareness of the environmental costs of industrialisation, urbanisation and major infrastructure projects, helping to convert the Bank to the idea of sustainable development.

The World Bank has also established a greater emphasis on good governance and anti-corruption policies with a willingness to act to ensure civil order and criminal containment. Additionally, the World Bank’s poverty reduction programmes since 2002 have incorporated greater negotiations with recipient states, accepting the need for greater accountability of the World Bank and helping to tailor poverty reduction projects to local needs.

This has reflected the overall consensus in the World Bank of the need for greater ‘partnership’ between developed and developing states with a greater willingness to take on board the ideas of the developing world.​Critics argued that the World Bank maintained its support for the ‘Washington Consensus’, despite its inconsistent record in reducing poverty, because of biases in its structure and decision-making processes in favour of the USA and other western interests.

  • It forced school fees on students in Ghana in exchange for a loan;
  • it demanded that Tanzania privatise its water system;
  • it made telecom privatisation a condition of aid for Hurricane Mitch;
  • it demanded labour “flexibility” in Sri Lanka in the aftermath of the Asian tsunami;
  • it pushed for eliminating food subsidies in post-invasion Iraq.

The World Bank has also been criticised for setting the threshold for absolute poverty at $1.90 in 2015 per day which is a purely economic definition of poverty failing to take into account civil liberties, human rights, gender inequality, infant mortality and access to education. Furthermore this threshold was last changed in 2004

 

Even at this level 1.9bn of the world’s population were in absolute poverty – 2008 figure). The UN MDGs report of January 2016 estimates that the global poor by this threshold number just 835m.

The World Bank is seen as conventionally being dominated by the US. The President of the World Bank is nominated by the US and therefore he/she tends to be American.

International Monetary Fund (IMF) – performance and impact of IMF (balance of payments crises; structural adjustment programs (SAPS); strengths and criticisms; how IMF has responded to criticism; IMF and global economic crisis and pressure for reform).

The formation of the IMF stemmed in part because many believed that the Great Depression and World War II were partly caused by inflation, lack of currency convertibility and other economic problems that characterised the inter-war period (1919-1939).

To address future economic problems the allies met in 1944 at Bretton Woods to set up the World Bank and the IMF. Almost all countries are now members of the IMF 189 – whose primary function is to maintain exchange rate stability by giving short-term loans to countries with balance of payments problems caused by trade deficits or heavy loan repayments or a sudden fall in commodity prices. ​

The primary mission of the IMF ​is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution’s 189 member countries.

Member states with ​balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate.

There are ​conditions on these loans, and much of the controversy surrounding the IMF has revolved around the nature of these conditions. ​Ha Joon Chang (Bad Samaritans, 2007) accused the IMF of ‘mission creep’ and a “one size fits all policy.”

That is, of gradually imposing more and more conditions on developing countries. In his view these conditions have limited connection to the ability to pay back loans – they just become intrusive, trying to micromanage aspects of individual states which should be left for them to determine. ​

IMF and ECB imposed austerity on Greece has come in for much recent criticism even from within the IMF itself. T​he accusation is that it unfairly undermines the national sovereignty, and right to self determination of a people.

This lack of faith in the currency causes instability because people both abroad and at home become less willing to accept the country’s money. To counter this instability the IMF loans a state hard currency (usually US Dollars) to support its currency or to restructure its international debt. ​

1970’s to 1980’s and the IMF: The rapid growth of global capital markets in 1960’s and 1970’s, plus funds from oil producers, led to loans to developing countries at cheap interest rates.

Sharp rise in interest rates in 1979 (to deal with inflation, in US particularly, also in UK), meant that the loans could no longer be repaid. IMF called in to prevent developing countries defaulting (ie not being able to pay)

New ‘neoliberal’ ideology dominant in US and UK particularly, or the ‘Washington consensus’ as it came to be known, around this time, emphasised the virtues of privatisation (radical reduction of state involvement/ownership in organisations), deregulation (reducing ‘burden’ of government regulation – ‘restrictive’ government laws).

The debt crisis meant that the IMF’s role in the world economy became that of ensuring indebted countries undertook ‘structural adjustment’ in their economies which meant immediate measures to reduce inflation, government expenditure, and the role of government in the economy – it required privatisation, and deregulation. ​

Critics of the IMF argue that the SAP violates state sovereignty ​and harms living standards by cutting social services and reducing growth in order to balance budgets.​

East Asian financial crisis (1997) – difficulties in financial markets in Thailand prompted massive outflow of finance capital. Contagion spread to other countries (Indonesia, Malaysia, Philippines, Korea). By the end of the year all the countries had to turn to IMF for funds in return for agreement to abide by tough conditions (conditionality), to reform aspects of their economies.

Liberalisation of financial markets (one of the hallmarks of globalization), has arguably led to a more insecure, unstable environment.

Capital can flow in and out of societies – danger of asset price bubbles (ie house price booms from easy availability of credit/loans in US, Ireland, UK, Spain etc) when capital flowing in, complete collapse on the way out.

The Recent financial crisis has highlighted these dangers. However, there are ​many critics of the IMF, and in recent years it has become a focus of the struggle between the North and the South. There are two main controversies; vote distribution and Structural Adjustment Programs (SAP).

The vote distribution of the IMF’s board of directors is based on member-states’ contributions to the IMF fund. Thereby, the US has 16.53% of the votes, the EU has 31% and Canada has 3%. This gives control to a few countries that constitute less than 10% of the IMF membership. Similarly, LDCs have little power in decision making. Defenders of the IMF counter such arguments by stating that the existing policies caused the monetary instability or crisis in confidence. It is only sensible, therefore, that the IMF requires financial reforms to address the underlying problems.

The Washington Consensus – ​There is a belief that western hegemonic dominance has allowed the USA and allies to accumulate ‘structural’ power in most institutions. The US for example has the largest voting bloc in the IMF (16.53%) and 85% is needed for a consensus.

 

The IMF has reformed considerably less than the World Bank ​in attempting to develop as a body, however, it has altered its governance to enhance the role of developing countries in it decision-making processes.

W​orld Trade Organisation (WTO​) – from GATT to WTO; role of WTO (‘liberalise’ world trade); performance and impact of WTO (‘Uruguay round’ of negotiations (1986-95); fate of ‘Doha round’); debating the WTO (strengths and criticisms; advantages and disadvantages of global free trade), etc. ​The General Agreement on Tariffs and Trade (GATT) emerged out of the Bretton Woods agreement. It was a (fairly weak) multilateral forum for tariff negotiations. Little more than a trade agreement among signatories.

Superceded by ​World Trade Organisation (WTO) in 1995​. WTO much more powerful. Organisation based in Geneva with, as of 2008, 164 member nations (crucially, China joined in 2001).

WTO aims to reduce tariff barriers on goods (focus of GATT) and, more recently, on barriers relating to services. It also aims to reduce non-tariff barriers. Each member state in the WTO has an equal vote. To a large extent the WTO is the organisation of these member states and not really a ‘supranational’ organisation.

Talks called ‘rounds’. So 1967-70 was the Kennedy Round, 1986-94 the Uruguay Round. Latest is the Doha Round, 2001-2015 (stalled).

Original rounds successfully reduced tariffs among OECD countries, although some would argue that decline in tariff protection has been offset by rise of various non-tariff barriers (ie direct government support for exporters; indirect barriers such as health and safety, or environmental regulations).

Until the 1980’s the trend toward greater openness among industrialized countries not matched in the developing world. Many developing countries were sceptical about the benefits of an open trading system, following protectionist policies.

From the 1980’s there was a change by developing countries. Widespread reductions in trade barriers, undertaken partly as domestic strategy but often under pressure from institutions like the IMF, World Bank and WTO. Issues with WTO relate to which kind of barriers they tend to concentrate on, and whether they have any real autonomous power to force change ie largely unsuccessful in persuading the EU to reduce agricultural subsidies operated through the Common Agricultural Policy (CAP). ​

Trade Related Aspects of Intellectual Property Rights (TRIPS) – ​Intellectual property rights (IPRs) are an increasingly important issue today and are a major bone of contention at the WTO. IPRs involve a wide range of intellectual property such as films, books, music, computer software, pharmaceuticals and technological innovations in general.

TRIPS were negotiated in the Uruguay Round (’86-’94) in order to create a global agreement rather than just piecemeal, individual national IPRs.

Contentious because there is global inequality in the generation of ideas with the result that developed countries tend to benefit from TRIPS. Critics suggest that it involves ‘kicking away the ladder’ of development. (Ha Joon Chang)

That is, in their early stages of industrialisation, developed countries ie USA, Japan became experts in ‘counterfeiting’ and copying all kinds of new technology. TRIPS prevent newly developing countries from doing this Particularly serious in areas such as production of ‘generic’ drugs (ie HIV/AIDS). Brazil has had a battle to try to produce these drugs more cheaply, in order that they can be afforded by poor countries with huge HIV issues. Big pharma companies in the developed countries have opposed this ‘stealing’ of their innovations. ​

Criticisms:

Global free trade has been seen to: widen economic inequalities by giving dominant powers access to the markets of weak states while having little to fear themselves from foreign competition.

Free trade, moreover, gives economies global markets rather than local needs, and tends to place profit before considerations of community, stability and workers’ rights.​

Environmentalists ​have made particular criticisms of the WTO, arguing that free trade and economic deregulation tend to weaken environmental protection.The WTO’s principles fail to take into account the environmental impact of free trade and economic restructuring, through structural adjustment programs.

Labour rights and other social protections are also often stripped away.

The WTO is often criticised for being undemocratic and for favouring the interests of rich and powerful states through forced liberalisation and opening up countries to global economic competition.

Protectionist practices in the developed North, particularly in agriculture, have often been tolerated while they have been fiercely criticised in the developing South.

The WTO has also been criticised for being ineffective, in that the task of decision-making in the area of trade practices has often been frustratingly slow. This is evident in the faltering progress of the Doha Round of negotiations, which has been hampered by tensions between Northern and Southern states in particular.

The WTO has also been criticised for dumping western products such as cotton in India and ruining the livelihoods of local cotton farmers.

It is also criticised for denying the world’s poorest access to essential generic drugs and medicines in order to protect the intellectual copyright of Western pharmaceutical corporations. (TRIPs) – Criticised by MSF. ​

Moreover, the WTO has reformed ​with economic rise of China and the BRIC countries who have altered the dynamics of the WTO as demonstrated by the stalling of the Doha round of negotiations in 2009 over agriculture and textiles.

This has led to the WTO becoming a more evenly-shared body, in turn becoming more democratic. ​

Group of Seven/Eight (G-7/8) – role and significance of G-7/8; criticisms of G-7/8; role and significance of alternative G-20, etc. The G8 emerged with the inclusion of Russia in the G7 in 1997. The primary objective of G8 was to ensure the overall coordination of the system of global economic governance. ​

Critics claim ​that the G7 is an elitist group of superpowers and that their interests are purely self serving. Many countries, including China and India, are not included in the G8.

The G8 has been a focus of anti-globalisation protests with criticism leveled at the perceived inability or unwillingness of G8 to deal, effectively, with poverty, inequality and climate change.

Protests and riots have occurred outside many G8 summit locations. In Italy in 2001, a major riot took place due to the G8 member’s strong support of globalization.

The shift in the world economy towards emerging economies has undermined the legitimacy of the organisation and the ability of the G8 to make meaningful decisions.

Moreover, Russia has been excluded from G8 due to their involvement in the Ukrainian crisis. ​

The G20

The emergence of the G20, with members such as India and Argentina has been the key focus for dealing with the global financial crisis, seems to have further weakened the significance of G8. The use of the G20 (19+1) as the principal vehicle for addressing the 2007-09 global financial crisis confirmed that the G8 has been replaced as the leading forum for global economic decision-making.

 

However, global economic governance has been criticised as ineffective on a number of grounds which have not been reformed yet. ​It has been viewed as inefficient as there are too many agencies involved in global economic governance with too little coordination among them.

Summary

The three organisations of global economic governance act almost as separate entities with their own functions and aims, however they do not combine often enough considering that they are all part of the same system that involves governing the economic health of the world. This causes instability and means that the global economic system is not a system but three separate bodies working towards the same overall goal of economic efficiency.

Furthermore, the agencies tend to impose a ‘one size fits all’, neoliberal blueprint, which does not allow sufficient flexibility to suit different circumstances. This doesn’t take into account the situations of the developing states and takes their health for granted.

Narrow-minded approach of the three bodies in their use of poverty reduction projects with the aim of installing structural adjustment programmes and benefiting economically through the imposition of free market-orientated policy. In line with its free market principles, global economic governance provided a weak framework for regulating the world economy from the 1970s onwards, allowing unsustainable global imbalances to develop.

This was most evident in the global financial crisis that started in 2007/08 that led to a sharp downturn in the world economy. This economic crisis is the most important reason for criticism of the global economic system as it was a complete collapse of world economics. Global economic governance had failed, in particular, to regulate financial markets and banking systems, allowing unsustainable debt to accumulate with dramatic consequences, some have therefore called for a ‘new Bretton Woods’.

However, this has so far led to little more than a change in voting arrangements on the IMF. Global economic governance has also been criticised in a wider sense for, for instance, promoting inequality, damaging human rights, lacking transparency and democratic accountability, and for being an instrument of transnational corporations and international banking conglomerates.Structural adjustment schemes have been seen as a tool for imposing free-market orientated policies on developing countries with economic benefit regardless of how it would affect the health of the developing state and whether it would fit to their circumstances.

This has been linked with the undemocratic nature of global economic governance of which is seen as a ‘rich mans club’ suited to developed countries, alienating developing states and ignoring their ideas in order to impose their own as a result of financial superiority. The decision of Venezuela to resist loans from the IMF shows the hostility against structural adjustment policies.

Overall, it is evident that many issues still lie in the global economic system, which justifies the criticism that it receives, however there have been leaps of development in terms of reform to counter these criticisms. The economic crisis of 2008 has shown that global economic governance is not very effective currently, however the reforms put in place are likely to improve this. ​

Summary of criticisms of IMF, World Bank, WTO

1. Undemocratic ​- smaller, developing states ‘locked out’ of discussion about policy – their voice is not heard. Forced liberalisation – states prevented from protecting local industries (agriculture, steel making, textiles etc) against international competition, and thus from protecting jobs. No self-determination. ​

2. Unjust ​– forced liberalisation is hypocritical. Firstly, developed countries grew by protecting their own industries. Second, developed countries still protect particular industries ie agriculture for strategic or cultural reasons.

​3. Unstable ​– liberalisation policies forced on states have made them less stable ie deregulation of financial markets in developing countries have often led to high levels of speculative activities (Mexican peso crisis, 1994-5; Asian financial crisis, 1997)

POVERTY AND DEVELOPMENT

Development and poverty have risen sharply up the global issues agenda since the 1960s. There are two proximate causes for this – (1) the failure of decolonization to trigger economic and social development in the former colonies (and exploration of the different and competing reasons for this) and (2) The contradictory rise of inequalities accompanied by dramatic increases global economic activity & volumes of world trade.​

Development is a controversial term referring to the process by which societies change over time. It is a highly contested term that often excludes the effects of slavery and colonialism on both the ‘developed’ world and the ‘developing’ world. Development is sometimes taken to mean that the developing world must model the developed world in order to develop. Finally some measures of development are purely economic whilst other measures focus on the quality of human life.

 

Nature of poverty

absolute monetary definition $1.90 a day World bank measure from 2015. World Bank- $1.25 a day at PPP (Set 2004) whilst $2.50 a day puts 49% of population, 3.14 bn in poverty.

According to UN MDGs report January 2016 835m now in absolute poverty compared to 1.9bn in 2008. ​

Economic Growth – ​the growth of national income usually measured by gross national income and other measures such as gross national product. ​Gross National Income (GNI) – is the total value of goods and services produced in any particular year. But poverty is persistent The Bottom Billion (2009) – ​Collier’s term for the world’s poorest billion, sometimes ​also called Africa

Alternative approaches do not focus on income or GDP Versus capacity/opportunity-based definitions human development in the UN Development Reports;

MDGs (2000-2015) and SDGs. (2015-2030).  focus on access to clean water, healthcare, education, human rights and sustainable development. ​

MDGs: ​

  • Eradicate extreme poverty and hunger
  • Achieve universal primary education
  • Promote gender equality and empower women
  • Reduce child mortality
  • Improve maternal health
  • Combat HIV, AIDS, malaria and other diseases.​

 

Theories of development

​‘Orthodox’ theory of development as modernization  through economic liberalism, and the virtues of the free market and free trade;

linear process of development from ‘traditional’ to ‘advanced’ societies

Rostow 1960 Modernisation: A Non Communist Manifesto.

Modernization theory- states modernize from traditional, pre industrial, agrarian societies to modern, industrial, mass consumption ones. (Rostow, 1960).

There are Endogenous or Internal obstacles to growth. ​Primarily the developing world should follow the developed world’s path towards modernity. The barriers to 3r​d World development were internal;

  • b​ackward culture that discourages enterprise
  • autocratic rule etc
  • Corrupt Governance
  • Ethnic tensions

Alternative’ theories of development ‘human’ development model.

Development as freedom;

‘bottom-up’ development;

views from global South important not irrelevant.

Emphasis is on external exogenous factors such as slavery, colonialism, imperialism and neocolonialism

Neo-Marxist theoriesWorld Systems Theory ​Immanuel Wallerstein 1974 – ‘core’ states of global capitalism systematically exploit and oppressed ‘peripheral’ ones world systems theory; external obstacles to development neo-colonialism.

Core, Peripheral and Semiperipheral. ​

Dependency Theory – ​a Marxist influenced alternative theory of development.

 

This focuses on the external barriers to development such as colonialism and expropriation of resources.

​Underdevelopment – a term used by dependency theorists to describe the process of exploitation practiced by the North against the South. ​(Andre Gunder Frank) ​

Colonialism – ​a system of direct political control of another country with colonial administrators and governors ruling the country in question. ​

Neo-colonialism – ​an indirect form of exploitation of former colonies by their colonial masters through aid, trade and diplomacy.

Largely economic exploitation rather than political but Marxists would argue that political forms of oppression arise from the particulars of the economic base.

Cultural and economic,coca-colonisationWagnleitner (1994);

Glencore (Zambia) Copper.

G8 New Alliance on Food Security and Nutrition

Neo-liberal economic theory – ​promoted by ​Milton Friedman of the ​Chicago school from the 1960s onwards.

This became the dominant mode of economic policy making from the 1970s onwards. Favours deregulation, privatization and liberalization, low taxes and attacks on welfare.

These policies have been heavily promoted in the development by IGOs such as the IMF, The World Bank in the form of SAPs. ​

SAPs – structural adjustment programmes

These are neo liberal economic policies that are attached to any facilities for aid, loans and debt relief made to developing countries or CITs (Countries in Transition)

Tanzania and the water industry, Haiti and Telecoms privatisation. ​

Joseph Stiglitz (​Globalisation and Its Discontents, 2002) pointed out that SAPs often lead to greater poverty – the pressure to reduce gov. spending led to cuts in welfare, education, healthcare (privatisation of water supply in Tanzania) ​

Ha Joon Chang – kicking the ladder away ​Bad Samaritans (2007) ​one size fits all, too much micro-management.

SAPs are based on a flawed model of development, very low empirical evidence on whether they actually work – Based on the myth of free market development. Even the IMF and the World Bank admit that SAPs cause short term economic and social disruption.

International Monetary Fund – ​Key IGO established at Bretton Woods in 1944 the ensure global financial stability. It takes contributions from member states which it can then loan out if a country’s economy suffers shock or instability.

The World Bank – ​Full name the International Bank for Reconstruction and Development. Often accused of acting in the interests of the west, for example by granting loans at unaffordable interest rates and requiring policies that damage development.

The Washington Consensus (Williamson) – formed in 1989 to coordinate global development around the priorities of the three main institutions of Global Economic Governance, the IMF, The WTO and the World Bank. Transnational Corporations (TNCs) – ​large corporations which source, manufacture, employ and distribute goods and services on a global scale. There has been a staggering rise in the number of TNCs since the 1960s. 1960 -7000, 2007 – 38,000. 2013 – 63,000. ​

Trends in global poverty and inequality. North-South divide ​– from Three-Worlds model to North-South divide; Brandt Reports ​North South A Programme for Survival (1980) ​Common Crisis: North South Cooperation for World Recovery (1983);

More recently there has been a fragmentation of the global South which draws a contract between emerging economies and sub-Saharan Africa as the 4th World decline in between-country inequality and increase in within-country inequality; impact of global economic crisis on the global South. ​

Implications of globalization for poverty and equality – ​arguments that globalization reduces poverty and narrows inequality (provides inwards investment; TNC bring benefits (jobs, higher wages, new technology, training and skills development; career opportunities; economic restructuring and prospect of export-led growth; arguments against globalization (TNCs interested in cheap labour and have no long-term commitments; domestic demand ignored in chase for cash crops and export markets. ​

Cash Crops – ​developing world agriculture for the benefit of consumption in the West and North. Tea, coffee, sugar and even narcotics.

P​romoting development through Aid 

Many campaigns to increase international aid (work of NGOs and anti-poverty movement; Millennium Development Goals; G8 Gleneagles agreement. Jubilee 2000. 

Aid – ​refers to economic, military, technical and financial assistance given (or loaned) to developing countries. ​

Bilateral Aid – ​aid between two parties – the donor and the recipient. ​

Multilateral Aid – ​pooled or shared funds acting as aid banks (World Bank, IMF etc). ​

Arguments in favour of international aid​-humanitarian relief;

  • Infrastructural projects build economic capacity;
  • counters dependency;
  • More level playing field (developed countries commit to 0.7% of their GDP for IAD);
  • Some further argue that there is a moral duty to provide international aid to heavily deprived countries; The prosperity of the North has been built in substantial part on mistreatment of the South, Slavery, Colonialism, Neo Colonialism,
  • Debt Relief;
  • Builds domestic capacity – increasingly targeted in long-term projects and it is orientated around capacity building for the future MDGs;
  • The effectiveness of aid is evident in the fact that countries such as China, India, Brazil and Thailand – major recipients of aid in the past are now developing strategic aid programs themselves.

 

Emergency relief from aid – the idea that a growing proportion of aid is now so-called humanitarian aid provided for purposes of emergency relief.

The need for emergency relief has grown as humanitarian crisis have become more common (because of movement towards asymmetrical Wars, (Syria) Natural Disasters (Pakistan Floods, July 2010, Haiti Hurricane Mitch 1998) Famine (Ethiopia and Eritrea 1984/85)

The international community broadly agrees that it has a moral obligation to act in circumstances such as these. ​

Arguments against international aid

  • creates dependency;
  • Avoids tackling root causes
  • Perpetuates poverty;
  • Aid does not work;
  • corruption and oppressive government prevents aid getting to the poor;
  • donor self-interest;

Debt crisis and debt relief – nature of debt crisis of 1980s.​

The Debt Crisis – ​refers to the specific debt crisis of the 1980s and now any situation in which punitive interest forces a country to default on its loan repayments.

Debt repayments are a form of bondage which allows Western banks and countries and agencies such as the IMF to implement structural adjustment policies which many argue impede (and in fact reverse) development.

Debt boomerang – ​George ​argues that the many negative effects of debt are such that it would be in the long term interests of those banks and countries to whom money is owed to write off that debt. ​

HIPC (Heavily Indebted Poor Countries) Initiative (1996) – ​refers to a system whereby heavily indebted poor countries can write off debt if they conform to certain conditions.

 

 

https://www.worldbank.org/en/topic/debt/brief/hipc

Conditionality – t​he setting out of certain conditions on which aid or assistance is granted. These ‘conditions’ usually reflect the priorities of the neo-liberal Washington Consensus of the IMF, the World Bank and the WTO and involve privatisation and deregulation, access to markets by foreign corporations and cuts in government spending and subsidies. 

The debt crisis developed in the 1970s and 1980s, as poorer countries (starting with Mexico in 1982) announced that they could no longer service their debts, meaning that many Northern Banks were faced with the possibility of collapse. More seriously, Southern countries due to the size of their debts and their poor economic performance, channelled more and more money into their escalating debt repayments at the expense of building schools and hospitals, investing in the economic infrastructure and helping to alleviate poverty. ​

Advantages of debt relief:

  • A lot of the debt is not voluntary, rather they are forced to take the debt –
  • global or regional economic volatility such as the collapse in the global price of an export commodity, thus it is the global market that plunges countries into economic chaos rather than mismanagement.
  • interest on the debt it in fact has been paid back multiple times.
  • Money on debt can be better spent on infrastructure, education, health.
  • Northern hemisphere banks have made enormous profit on this.
  • The debt that the developing world has gives the IMF and the World Bank influence over developing countries that are in debt to them.
  • The boost given to African countries following cancellation of the debt (Gleneagles 2005),
  • World systems theory. Wallerstein (1974) SAPs. Poor countries are poor becuse of Neocolonialism
  • Canceling debt would help countries reach the MDGs. ​

Disadvantages:

  • it sends a bad message – you can borrow without paying back.
  • The loans have to be funded;
  • A cycle of debt is created by cancelling the debt (more demand would be created);
  • Cancelling the debt allows corrupt governments to misuse the loan.

Attempts to resolve the debt crisis include the provision of loans by the IMF and the World Bank, often linked to the implementation of structural adjustment programs, designed to promote growth and enable debtor countries to pay off their debts, and the writing off of debt through so-called ‘debt relief’.

For example, in 1989 the USA launched the ‘Brady Bonds’, which underwrote a proportion of Latin America’s debt overhang from the 1970s and 1980s.

Under the HIPC (Heavily Indebted Poor Countries) initiative, negotiated in 1996, the World Bank and the IMF agreed to extend the opportunity for debt relief to 40 of the world’s poorest countries; by 2006, 29 countries were enjoying debt relief.

G8 2005 Gleneagles; The Year of Africa: Make poverty history 

Debt cancellation significantly accelerated the pace of debt relief, through the agreement to provide 100 % cancellation of debt owed to the IMF and the World Bank; by 2006, this covered 21 countries, with plans to include up to 43 countries. ​Environmental Implications of Development. Sustainability ​– maintaining a constant balanced ratio between resource depletion and resource renewal so that the resource can be utilized in perpetuity. ​Sustainable Development – ​development that sustains resources to allow for sustainable use by future generations. ​Brundtland Report (1987) ​Our Common Future – highlighted the importance of sustainable development in the developing

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world. ​Global Warming – ​refers to the rise in global temperatures now acknowledged to be caused by human activity. This is likely to lead to rising sea levels and increased desertification. Deforestation – ​refers to the deliberate clearance of forests for development, agriculture or industry (logging). Has a unique and catastrophic effect on biodiversity. ​Desertification – ​the spread of the deserts to erode vegetation and topsoil. ​Biodiversity – ​refers to the number and variety of species on the planet and the human contribution to loss of biodiversity ​Non renewables – ​natural resources which are finite and cannot be replaced such as coal and oil. Renewable resources – ​hydro-electric, wind and solar power​. Exhaustible Resources -​resources that are renewable but also capable of being exhausted. Fish stocks and forests are good examples of these.​Shared resources – ​resources that are not privately owned and sometimes referred to as public goods. ​Realism, Liberal and Critical Perspectives on Development. Realist Theory largely draws on Mercantilism, the idea that economics requires a degree of political management to maximise opportunities for the state. This is bound to lead to protectionism which serves as both advantage and disadvantage to developing countries. Neo realists however would stress the tendency towards the domination of the economically weak by the economically powerful. ​Economic Liberalism. Human beings are primarily motivated by the desire for material consumption. Liberals provide the basis of ‘orthodox’ development. The market is therefore, a self-regulating mechanism (to promote economic prosperity). ‘Development failures’ (e.g. corruption, culture rivalries, authoritarian institutions); Can be solved through ‘Market Reform’ (e.g. privatization, financial deregulation, tax cuts,..) ​Critical – ​Dominated by neo-Marxist. Post-1945 period, imperialism gave way to economic/ ‘dollar’ imperialism. States developed through economic dependency (Rise of TNCs, IMF and World Bank), leading to exploitation of ‘core’ to ‘peripheral’ areas. (e.g. low wages). Green politics challenge the idea of ‘development as sustainability’. They believe it takes a healthy environment for meaningful development. For feminists, development through changes of social structures, institutions and cultural practices in developing world . (‘development as growth’)