Each Response will be 250 words each:
Response 1:
I believe that the IFI’s, such as the IMF, World Bank, and WTO, are run by their executive boards and bureaucratic staff, but are accountable to their member states. Through political ties and the United Nations, barrowing states can try to hold the IFI or lender states accountable, but unless a very large number of them band together, or the infraction against them was especially egregious, they are unlikely to receive any recompense from the international community. According to our lesson this week, the smallest 178 member countries of the IMF make up 32 percent of voting shares, while the largest five make up 39.39 percent. That makes it very difficult for a single small state to have much influence over who the IMF lends to, only by their combined strength do they make a significant impact on lending decisions. Unfortunately, it is very difficult to get 178 different countries to agree on anything. It can be argued then, that the IMF is accountable to the five largest states, or to the ten largest states who collectively make up 62.28 percent of the voting shares. It can easily be argued then, that the IMF primarily represents the interests of those ten richest states. Because any issue that comes before the voting board, or any request for a loan that the board must vote on, will almost inevitably go in favor of the big states’ interests, it can safely be said that they control the IMF. That influence can then be used by states as political leverage too. Copelovitch pointed out that states who vote with the five largest states on issues in the UN are more likely to receive larger IMF loans than states that do not vote with the top-five (G5) in the UN. (2010, 66). IFIs are therefore accountable to all member states in theory, but only some of those members have the power and authority (via their voting shares) to actually hold the organizations or their staff members accountable for their actions.
Despite the significant power wielded by states in voting for which requests the IMF (or other IFIs) will take action on, it is up to the massive bureaucracy of the IFI to execute that action. The staff of the IFI, therefore, wields significant power and influence as well, and sometimes acts in the interest of its bureaucracy’s own self-preservation. Copelovitch also pointed out that IMF “staff enjoys substantial autonomy, given its lead role in negotiating, designing, and proposing loans.” (2010, 50) The staff’s interests may sometimes then be at odds with those of the G5 states, but since they are not accountable to any one state they can execute an action in a way that is best for the bureaucracy at the large. This autonomy presents an accountability challenge, since one organization has multiple competing interests within it that may erode the efficiency of the organization.
The UN could theoretically also hold IFI’s accountable, but it suffers from the same accountability issues that the IFI’s themselves do.
Response 2:
At a United Nations conference, it was decided to create an institution to stabilize the international financial system and preventing economic crises such as that of the 1930s. The following year, the International Monetary Fund (IMF) was created for this purpose. In the same year, the World Bank (WB) was born. Although in its beginnings it was created to help the European governments affected by World War II, over time it became a financier of the so-called developing countries (Copelovitch 2010, 75). During the 1980s, the IMF and the World Bank were in charge of seeking a solution to the debt crisis of the countries of the South. The main consequence was decades of structural adjustment programs, neoliberal policies and social crises throughout Latin America, Asia, Africa, and Eastern Europe, without solving the debt problem.
However, the Mexican (1994–95) and the Asian (1997–98) crisis showed that without macroeconomic coordination, an accounting arrangement for solvency markets and global supervision or regulation, incentives could be harmful in some cases by developing financial products that introduced a strong opacity in the market. The immediate result was the need to strengthen, modify or rebuild the system through the creation of a “new international financial architecture” (NIFA), conceived as the structure of financial procedures and standards that define the scope and operations of the international financial markets (Kenen 2001). This initiative, which is the key to recovering market confidence and avoiding making the same mistakes of the past, requires a solid institutional framework in which the private sector overcomes the failed business models of the past, and in which the public sector improves its ability to supervise and regulate the financial global market (Copelovitch 2010).
Since 2008, the IMF has been in charge of managing aid and defining measures to deal with the financial and economic crisis, also in Europe, with similar consequences: increased debt, austerity and social crisis (Urbaczka 2013). It cannot be ignored that the IMF and the G – 20 have been consolidating two reference institutions in financial regulation. The so-called “global governance” has the advantage of externalizing, a useful program through which the authority of multilateral institutions such as the World Bank or the WTO can be evaluated, or how they overlap with the States. (Serin and Oktay 2012). But it goes far beyond this task and raises the difficulty of accurately identifying emerging global rules, the action of certain unofficial forums, and the continuing interrelationships among the various actors in international finance (Keohane 2003, 132).
Finally, the IFIs far from improving the global situation of the Southern countries, are the tools that economic elites and Northern governments use to force them to implement neoliberal macroeconomic and social policies. These weaken national and local governments and seek the entry of these countries into the world market, with clear winners: transnational corporations, most of which are from the North. As a result, unequal relations between rich and impoverished countries are maintained and deepened, and the distance between the richest and the most impoverished increases. Both the projects for which multilateral credits are granted and the policies imposed that accompany them reduce the sovereignty of the peoples of the South. These countries, to access the financial resources of IFIs, have to direct their economy towards the export of products with little added value (mainly agricultural products, oil, gas, and minerals), and favor the construction of large infrastructures that do not respect the rights of the people or the environment, and with this, they reinforce the oligarchies of the South in collusion with the governments and companies of the North.
Response3:
This week’s assignment requires students to analyze the interests and accountability of several IFIs organizations. Each of these financial institutions reflect on our financial system. In some ways the IMF, World Bank, and WTO share similar interests. They have a meeting of the minds every year, and “maintain control of organizations” (AMU 2020). As global resources, they are imperative to international financial stability. Having a large network of Countries, they have the tasks of allocating loans. Finally, since the structure of accountability in these IFIs operates by way of representatives of governments, the Boards of Governors compose the top of the system. Now let’s take a look at each of these IO’s individually.
To begin, the International Monetary Fund (IMF), “refers to the system and rules that govern the use and exchange of money around the world and between countries” (Investopedia 2020). The goal of the IMF, is to encourage international trade, financial stability, and reduce poverty” (Kenton 2019). In furtherance, the monetary system has not been updated since, the Brentwood Agreement in 1945. Nonetheless, the IMF is met with much controversy surrounding accountability, voting, and The implication of this is poor communication amongst member states and the existing structural hierarchy. This gap also exists within the World Bank. Second, its monetary system has not been updated since, The Brentwood Agreement in 1945.
When it comes to the IMF, and accountability the idea of predatory lending comes to mind. I make this reference because Urbaczka and Vaubel states that, “The IMF imposes policy conditions on its borrowers. Conditionally is the main price of entering an arrangement (Vaubel 1991: 233-35), but it does not eliminate the subsidy” (Urbaczka and Vaubel 233). IMF’s usually lend to countries already suffering financial crisis; in order to prevent economic downfalls. The challenge lies along the lines that, “preventive lines of credit are likely to increase moral hazard, while efforts to force losses on the private sector may precipitate the very crises they intend to prevent” (Vaques 1999).
From a liberal perspective, (I think) the functionality of the IMF, differs from the other IFIs is their subsidized lending habits, and a mis-match of cross-currency. Greece is an example of such: “to quantify the subsidy in IMF arrangements, we convert the SDR-denominated cash flow stream of each arrangement, and thus the all-in internal rate of return, into dollars and that of Greece into euros. We find substantial levels of ex post subsidization in all 23 IMF arrangements” (Urbaczka and Vaubel 233). When the IMF was first created, their focus was solely on short-term lending, although today the IMF has undergone some reforms.
When analyzing the World Bank, there is also a concern regarding accountability regarding who they answer to. This is also found in their structure. Accordingly, “IFIs operate by way of representatives of government, the Boards of Governors compose the top of the system” (AMU 2020). As noted, both the World Bank, and IMF, share some of the same functionalities. Perhaps the major difference between the IFIs, is their purpose. As per this week’s lecture, “Individually, each represents a specific nation-state or group of states. Collectively, they perform management functions and appoint the head of the organization, who then oversees management and staff” (AMU 2020).
Finally, WTO has its own system of addressing the global economic crisis. Currently, the World Trade Organization is, “the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments” (WTO 2020). The World Trade Organization, distinguishes itself from other organizations because it responds to, matters of global peace and economics. WTO is significantly, different from other IO’s because; “The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who usually meet at least once every two years) or by their ambassadors or delegates” (who meet regularly in Geneva). (World Trade Organization 2020). This distinguishes WTO from IMF and the World Bank who “enjoy direct representation via their own executive directors” (AMU 2020).
Perhaps the biggest challenge I see to each of these organizations is how their voting shares are unevenly divided. Once again, superpowers maintain a monopoly on the decision-making process. Whereas other prominent members still have very little voting power. One example of states with little international influence are the African member states. Vaubel states, “21 are represented by one single executive director and have a collective voting share of 3.26% (in the World Bank, the voting share among this bloc raises slightly to just over 4%).(Urbaczka and Vaubel 233).
To the best of my opinion, IFIFs are very similar to other IO’s we studied throughout this course. They are run by member states like; the United States, France, Germany, Japan, the United Kingdom, Russia, China, and Saudi Arabia” (AMU 2020).
As a realist, I have always been taught that, if you follow the money, you definitely find the problem. One reporter from the Guardian identified this problem from a different perspective. Peter Preston says; “follow the money and you will find the future of news” (Guardian 2019). Both of these imply the truth is being hidden under corporate, government, or state, dollars. The more money members invest in an organization, the more control they can exhibit. These decision-makers whether moral or inhumane, become the Masters while smaller recipients become the servants. So as Copelovitch points out, “thus, to accurately explain variation in IMF lending, we need to know the conditions under which G5 governments exert the greatest influence, as well as those under which the Fund staff enjoys the greatest amount of ‘‘agency slack.’’(Copelovitch 2010. 49).
