IMF

1
IMF World Bank
2
Formation of global institutions (1945-1950)

• international economy viewed as one cause of
  war
• Why the US took the lead
• - rivalry with USSR
• - USA dominant (50 of world income)
• - dollar world currency
• - changing US views after WWII
• ? experience as international actor
• ? rise of outward oriented industries
• e.g. shipbuilding, aircraft
• ? rise of Pacific coast economy
• post-war institutions
• - United Nations on political, economic, social
• - IMF on macroeconomics
• - World Bank on development
• - GATT on trade

3
IMF International Monetary Fund December 1945

• gtOriginally part of UN (today no longer so)
• Macroeconomics objectives
• -promote international monetary cooperation
• -facilitate the expansion and balanced growth
  of international trade - promote exchange
  rate stability
• -make its general resources temporarily
  available to its members xperiencing balance
  of payments difficulties
•  
• Organization
• 184 members
• each contributes a quota
• - proportional to size of economy
• - US quota 17.5 of total
• voting power roughly equal to quotas
• G7 (US, UK, France, Germany, Italy, Japan,
  Canada) 49.5 of votes
• Managing Director traditionally European

4
IMF Operations

• surveillance
• official commentary on all members policies
• technical assistance
• examples
• - tax administration
• - design of statistical procedures
• financial assistance
• crisis management
• - lends to member countries with problems
• - at low interest rates
• conditionality
• - on macroeconomic policies
• - on foreign borrowing
• - trade restrictions

5
Commentary on IMF

• Problems identified by critics
• narrow view of appropriate economic policies
• "austerity", free markets, globalization
• influenced too much by Western financial
  interests
• "moral hazard" problem
• conditionality selectively enforced
• - political reasons e.g. Russia

6
World Bank

• World Bank Group set of related institutions
• sister institutions of IMF
• membership, organization, and voting as IMF
• usually World Bank President is from US
•  
• Objectives
• to help each developing country onto a path of
  stable, sustainable, and equitable growth in the
  fight against poverty
•  
• Resources
• contributed capital by members
• funds borrowed from world capital markets

7
World Bank operations

• technical assistance
• examples
• - designing development projects
• - building capacities of governments
• lending
• to governments
• long-term (30-40 years)
• no interest for poorest countries
• low interest next poorest
• two types of loans
• 1. developments projects
• 2. countries in crisis
• facilitating international investment
• insurance against political risk
• International Center for the Settlement
• of Investment Disputes

8
Criticisms

• straying too far into the IMFs area
• - crisis loans
• - conditionality
• from "left"
• - not sensitive enough to environment, human
• rights, democracy, etc
• from "right"
• - too socialist, interventionist
• from both
• - willing to deal with corrupt, incompetent
• governments
• - aid has not produced a large effect on growth