Globalisation is not the real problem

The IMF (International Monetary Fund)

The IMF is a fund designed to stabilise exchange rates and provide a pool from which member countries could borrow. Originally there were 44 member countries; this has increased to 185 today.

There is a system of monetary quotas imposed on IMF members that also relates to the voting rights of member nations. The USA holds 16.97 per cent of the voting power. Japan has 6.02 per cent of the voting power, but various agreements between America and Japan, including America providing a “Nuclear Umbrella” for Japan, make it unlikely that Japan would vote against America. This means the US effectively has 22.99 per cent of the voting power with the remaining nations having 77.01 per cent of the votes split between 183 nations.

Member nations have to provide 25 per cent of their contributions in gold, or a gold backed currency (read US Dollars). This makes the US dollar the de facto world currency. This, together with the US voting block, means that nobody is ever going to win a vote against the US. Effectively the US runs the IMF.

There is also the controversy surrounding the economic support given to dictatorships. Should the IMF be involved with human rights issues? Detractors say it already is, especially if it supports dictatorial regimes which are friendly to US or European corporations. If a country is falling apart economically and it is affecting the bottom line of a US corporation would the US-controlled IMF intervene to save it?

In return for loans, member countries are often forced to make economic adjustments that might increase economic viability but often increase poverty. These issues are generally perceived shortcomings that may or may not be always or sometimes true. The real problem is that there are no transparent systems, checks or balances that ensure that these criticisms are not true.

The IMF does not have any code of economic conduct to go with membership. Thus the US can engage in practices of unbridled greed that back-fire and plunge the world into recession. An effective organisation designed to promote economic stability must have mechanisms to divorce rogue economic behaviour from the well being of the rest of the world.

The World Bank

The World Bank consists of two organisations, the IBRD (International Bank for Reconstruction and Development) and the IDA (International Development Association).

The World Bank came into being as part of the Bretton Woods conference and is supported by member states in the same way the IMF is supported. Originally the IBRD was created to help reconstruction of Europe after World War II. In this it was largely ineffectual because of US policy towards Germany (reducing it to a pastoral economy) that did not allow Germany to trade. There were European countries that produced surpluses that they had to destroy meanwhile Germany suffered from severe deprivations and many died from freezing to death in the harsh European winters.

America changed policy and through the Marshall plan gave help directly to Europe. Thus the IBRD was bypassed and Europe became indebted directly to America. The IBRD then changed its policy to become an institution to aid developing countries fight poverty. Funding is through issuing bonds on international markets, backed by the guarantee of member nations. All loans require a sovereign state guarantee.

The issues surrounding the IBRD are much the same as the IMF: voting powers, transparency and the self interest of member nations.

The IDA grew out of the IBRD. The IBRD lends to “middle class” countries while the IDA gives interest free loans to the very poor. Criticisms include a perceived improper use of funding; a voting structure dominated by the US; and the policy of promoting free trade that is often seen as detrimental to the country receiving the loan.

There is a larger group called the World Banking Group that includes the IFC (International Finance Corporation), the MIGA (Multilateral Investment Guarantee Agency and the ICSID (International Centre for Settlement of Investment Disputes). These are later “add-ons” and not part of Bretton Woods.