IMF, WTO and World Bank: Role and Objectives

This essay aims to analyse and evaluate the roles of three international institutes namely the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO). These organisations play a pivotal role in global health and their legitimacy and accountability have attracted a lot of debate and criticism. In the essay, the roles, functions and organisation of these three institutes would be discussed followed by critique relating to presentation, influence and impact on global health/wellbeing and finally concluding with a critical evaluation and considerations of possible alternatives and improvements.

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The International Monetary Fund (IMF) was born in July 1944 out of the Bretton Woods Conference in New Hampshire, U.S.A It began its operations on the 1st of March 1947 in Washington D.C. Its purpose was to rebuild the international economy and prevent the economic crisis such as the Great Depression. The ideas of Harry Dexter White of United States and the British economist John Maynard Keynes were pivotal in the establishment of the IMF. They suggested the need for a co-operative organisation that would oversee the international monetary system and also be responsible for promoting a balanced global economic trade. Membership to the IMF is voluntary and a country has to deposit a “quota subscription” which determines the voting power of that country and also how much that country could borrow from the fund in terms of financial crisis. The highest decision-making body in the fund is the Board of Governors who are not involved in the day to day running of the Fund and they meet once yearly. Currently with a membership of 187 countries the IMF provides systematic mechanisms for foreign exchange transactions in order to promote balanced global economic trade. The IMF advises and focuses on member countries’ macroeconomic policies to ensure its own wealth and that of its members are safeguarded. It does surveillance of the member countries policies to ensure they do not have a negative effect on the exchange rates and trade markets. The IMF also does periodic consultations to check member countries overall economic positions and advises them on how to improve their economy. The IMF also provides loans to countries that have problems with their balance of payments. The loans have conditions attached to them and the borrower countries must implement the economic reforms as determined by the IMF. These structural adjustment programmes are meant to help the countries to overcome the problems of their balance of payments.

The World Bank, also a product of the Bretton Woods Conference was established in 1944 to play a role in the reconstruction of post-war Europe. It has a similar governance structure as the IMF, with a board of Governors with representatives from all member states as the highest decision-making body and the voting system is the same as that of the IMF. America holds the largest share of votes and the president is also by tradition a US citizen, (Peet, 2003).

The World Bank group consists of five organisations, the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the International Development Association (IDA), the International Centre for the Settlement of Investments Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). The IBDR and the IDA are the two that are usually referred to as the World Bank and for the purpose of this essay we will restrict our attention to the two,( http://go.worldbank.org/3QT2P1GNH0). The IBDR provides long term loans and aid for economic development. The IBDR is financed from the sale of bonds on international finance markets and fro interest gained from loan repayments, (http://go.worldbank.org/LAG4BZ1VD1). IDA focuses on giving credits and grants to poor countries. These grants are interest free but have a 0.75 percent administrative charge per annum. These grants are aimed to assist programmes of economic growth, reduce inequalities and improvement of living conditions. IDA is funded from contributions from richer member countries and from income earned from IBDR financing, (http://go.worldbank.org/7ARHOU1WK0) . Like the IMF, the World Bank has conditions attached its loans.

The bank does not only provide loans but also provides technical assistance on development issues. It provides knowledge through education and analytical services. Since its establishment, the World Bank has become more engaged in issues of institutional and policy change in borrowing countries. The bank defines what would be the best development approach on different projects at a particular time. Currently the Bank defines its mission as reducing global poverty and also taking into account the environmental issues by helping member countries through ensuring economic growth by “capacity building” and helping to create “infrastructure”, ( http://go.worldbank.org/3QT2P1GNH0).

Although the IMF and the World Bank are two separate institutions, sometimes the two are often confused as one or used interchangeably by many people. Both products of the Bretton Woods conference face a lot of criticism on a variety of issues but mainly centred on their approaches in formulating their policies. The governance of the two institutions is dominated by the industrialised countries mainly the G8 whom due to their voting power act without much consultation with poor /developing countries who are under represented in the two institutes therefore they hold little voting power to be able to influence change in the policing. Critiques of the World Bank and the IMF have accused them of promoting the top-down approach in development which has made them to be regarded as the experts in the field of financial regulation and economic development. Their prescriptive rules are viewed by many as able to undermine or eliminate alternative perceptions on development to the benefit of the two.

The IMF and the World Bank’s policies have had negative economic and social impacts on many countries that have had financial assistance from them especially the developing countries. They impose conditions on their loans based on what is termed the “Washington Consensus” which is criticised by many as a neoliberalist approach of trade liberalisation and development, investment and the financial sector, deregulation and the privatisation of nationalised industries, conditions that are not flexible to individual countries circumstances and the prescriptive recommendations by the World Bank and the IMF fail to address the economic problems within countries thereby promoting massive global economic inequalities. While it is argued that each individual country is responsible for its own social and economic policies, national policies are overridden by the conditions of the structural adjustment programmes thereby leaving such countries indirectly losing their governance to the World Bank or the IMF, ( ). The prescriptive nature of the structural adjustments has proved to be failing to address the economic problems within countries leaving them in serious financial and economic problems which many fail to recover from.

The World Bank has been criticised for they types of projects it funds many of which are said to have social and environmental implications for the affected areas, eg…… Its emphasis on privatisation has led to states losing control of providing essential goods and services such as health care and education resulting in the collapse of such services.

The World Trade Organisation (WTO) was established in 1995 as a development to the previous General Agreement on Tariffs and Trade (GATT) which was established in 1947 after failed attempts to establish an International Trade Organisation that would regulate trade. The idea of the ITO was discussed at the Bretton Woods Conference as necessary to complement the IBDR and the IMF. Due to the nature of the policies of the ITO, the US was not willing to commit itself to trade policies where each member state had the same voting power hence efforts to establish the ITO failed, ( ). The WTO’s function is to promote free and fair trade between member states with a view of promoting economic prosperity and contributing to international peace. This achieved through the administration of trade agreements and acting a forum for trade negotiations, helping to settle trade disputes, reviewing national trade policies, providing assistance to developing countries in trade policy issues through technical assistance and training programmes and cooperating with other international organisations such as the IMF and the World Bank, (www.wto.org).

Unlike the IMF and the World Bank, the WTO is a more member driven organisation where all major decisions are made by member states by reaching a consensus and the Secretariat has very limited powers. The WTO operates a one country one vote system. Members of the WTO agree to abide by the rules of the organisation.

Although the WTO appears to be a more democratic organisation, its critiques see it as a more closed organisation where many meetings are informal. These informal meetings are crucial before negotiations reach the more formal levels before a consensus can be reached between member countries. This raises concerns over the transparency of the organisation. Although all member states are formally equal, the WTO is to a large extent controlled by certain groups of states while others have very limited influence and ability to keep up to date with all issues.