world system theory: wst argument: aic’s ideology and power of capital are continually being...

World System Theory:

WST argument:

AIC’s ideology and power of capital are continually being reinforced in the decisions of the IMF, WB and WTO in order to maintain their core status.http://www.youtube.com/watch?v=tiav0V_F0bkOn song dynamite

Bretton Woods Institutions: 1944

Multilateral bodies:

• IMF

• World Bank (IBRD)

What is IMF expected to establish globally?

Global:• monetary cooperation

• exchange rate stability

• trade expansion as lender of last resort

- Lends to correct balance of payment deficits

From where does IMF get its money?

• Subscriptions from member countries ‘Quota’ (capital) that they pay when they join the IMF

What do Quotas determine?• Countries’ payments• Voting power• How much they can borrow

e.g.: U.S. has 16.76 %, Seychelles is 0.03 % of quotas (2011) http://www.imf.org/external/np/sec/memdir/members.aspx, oct 22, 2011

Who are IMF’s members?

• 188 countries (2012) - 44 original members.

http://www.imf.org/external/about/members.htm

Why are Western countries more powerful in IMF?• Western powers control through their voting

majority in the Executive Board (EB).• EB members have larger monetary share. • EB votes affirming the will of the US or

Europeans.

http://www.imf.org/external/about/members.htm accessed Oct 2011

8In 2012

http://www.imf.org/external/np/sec/memdir/eds.aspx (Oct 22, 2011)Appointed IMF Executive Directors and Voting Power - Top 5 members in voting power :

DirectorAlternate

Casting Votes of Votes by Country

Total Votes1 Percentof FundTotal2

Appointed

Meg LundsagerDouglas A. Rediker

United States 421,965 421,965 16.76

Mitsuhiro FurusawaTomoyuki Shimoda

Japan 157,026 157,026 6.24

Hubert TemmeyerSteffen Meyer

Germany 146,396 146,396 5.81

Ambroise FayolleAlice Terracol

France 108,126 108,126 4.29

Alexander GibbsRobert James Elder

United Kingdom 108,126 108,126 4.29

Criticisms of IMF & WB:

1. Washington Consensus and neoliberal policies imposed on DW by IMF & WB have been discredited (#7 Birdsall & Fukuyama).

2. To remedy the impact of 2008 global financial crash on developing countries, UN and development economists have offered policies that have been misdirected (DW #8 Easterly)

3. Although the West’s influence is diminishing (DW#6:Mahubani), the status quo is maintained in development policies due to the disproportionate power of Rich countries in WTO, IMF & WB.

Some countries in IMF Executive Board & their voting power:

% SDR Quota % of Votes

USA 17.09 16.77Japan 6.57 6.24China 4.00 3.81Canada 2.68 2.56India 2.45 2.34Mexico 1.52 1.47

SDR: Special Drawing Rights"http://www.imf.org/external/np/sec/memdir/members.htm#3", IMF. Retrieved on 2011 -Oct 22

http://www.imf.org/external/mmedia/view.asp?eventID=1153(accessed 16 Oct 2009)

% Gains in Quota for EMCs

http://www.imf.org/external/mmedia/view.aspx?vid=79161031001 accessed oct 22 2011 Video on voting structure

Susan George: http://www.youtube.com/watch?v=NQ952ba75Yk&feature=related7min 2011

Bretton Woods Institutions: 1944

Multilateral bodies:

• IMF

• World Bank (IBRD group)

The World Bank: a Bretton Woods institution (1944)

Original aim: post-war reconstruction of Europe• First loan of $250 million was to France (1947)

What is its aim today?• Reconstruction is WB’s important focuso Natural disasters, o Humanitarian emergencieso Post-conflict rehabilitation needs.

The World Bank• Owned by member countries• Voting power related to members’ capital

subscriptions • Quota is based on a country’s relative

economic strength• Raises most funds in financial markets• IBRD sells AAA rated bonds and other debt

securities• Charges interest that reflects its low-cost

borrowings in capital markets

IBRD: 188 members (2012)• World Bank provides long-term development

loans to LDCs

IBRD’s Board : 24 Executive Directors.

5 Exec Directors: appointed by the 5 largest shareholders (the US, Japan, Germany, France and the UK).

19 Exec Directors : elected by the Bank's other members.

The “World Bank Group”

1944 1960 1956 1988 1966

International Development Association (IDA)• Established 1960 to provide concessional assistance to

countries unable to borrow at commercial rates

What does IDA do? (March 2011)o Gives grants and interest free loanso Borrowers pay 1% administration feeo 52 countries contribute to funding ($49.3bil)o $12.6 billion – grants and loans to Africa and South

Asia, in education, health, social services, water and sanitation.

http://www.worldbank.org/ida/ida-factsheet.pdf oct 22, 2011

www.fieo.org/uploads/files/file/FIEOAug3020121.ppt

source for WB info:Check out this Link for WB & IDA

Mission

Help developing countries and their

people reach the Millennium

Development Goals by working with our

partners to alleviate poverty.

Millennium Development Goals MDGs)

FY11 Top Ten IDA Borrowers($million, excludes regional projects)

Bangladesh 2,139

India 2,072

Pakistan 1,292

Vietnam 1,280Ethiopia  630Ghana 605Nigeria 535Kenya  490

Tanzania 420

Mozambique 413

New IDA Lending by Region:Sub-Saharan Africa...........43%South Asia...........................39%East Asia/Pacific..................10%Europe/Central Asia...............4%Latin America/Caribbean........3%Middle East/North Africa.........1%

http://www.worldbank.org/ida/ida-financing.html

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining• Neoliberal policies• Washington consensus• SAP• Conditionality• MFN

 Wto p1 6.36 min http://www.youtube.com/watch?v=aOE7Ve06tXA&feature=fvwrel  http://www.youtube.com/watch?NR=1&v=HbwZhCfO2GQ&feature=fvwpwto p 2 6.45 min

World Trade Organization (WTO) ( for expanding free trade)

It oversees and regulates:

• Global trade balance

• Monetary stability

WTO works on power-based bargaining

What do poor countries face?• Agricultural Protectionism• High Tariffs on Labour intensive goods• Anti-dumping

What do Rich countries reject?• Opening AICs’ agri market• Access to cheaper medicines• Lowering industrial tariff

WTO (cont’d)• From 1995-2010, declarations of WTO have

not advanced the trade related development in LDCs

• AICs rejected G-21 demand to cut their agri subsidies/ tariff barriers

• Widening disagreements between the rich and poor countries

Subsidies per Head per Year (in U.S. $)2006

Country Cattle Chickens Pigs Sheep

Aid per poor person in

developing world

EU 15 $179.28 1¢ $9.24 $28.93 $16.11

Australia $17.12 39¢ $6.49 94¢ 54¢

Canada $68.59 15¢ $18.99 0¢ 95¢

Japan $163.23 21¢ $3.92 0¢ $2.38

New Zealand $2.66 13¢ $2.14 19¢ 8¢

Norway $965.72 $1.48 $39.98 $94.06 83¢

Switzerland $987.58 $7.63 $139.62 $16.11 61¢

United States $29.06 58¢ $9.03 $4.12 $7.67

All $92.59 38¢ $10.58 $12.85 $29.17

http://www.foreignpolicy.com/story/cms.php?story_id=3547&page=5

Unequal trade relations:• Tariff barriers• Non Tariff barriers

Burkina Faso Cotton Production: Shares of Farmers Unions, French Holding company & the State

Burkina Faso cotton growers protest low prices, Apr 28, 2011

http://af.reuters.com/article/topNews/idAFJOE73R06L20110428

Davos: • World Economic Forum (WEF) – founded in

1971 by K.M. Schwab, a Swiss prof. • Annual meetings in Davos, Switzerland• Membership: top leaders in business & politics:

Presidents, PMs, Trade Ministers - a business forum - the richest businesses negotiate deals and lobby powerful politicians

What would be their real objective? • profit-making?

or• solving economic problems such as poverty?

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining• Neoliberal policies• Washington consensus• SAP• Conditionality• MFN

What are the Neoliberal policies? DOPE LD

Liberalize tradeDeregulate finance/currency Open up for foreign investment,Privatize economyDeregulate commercial activityEnsure property protection

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining• Neoliberal policies• Washington consensus• SAP• Conditionality• MFN

WASHINGTON CONSENSUS

• Liberalization

• Austerity

• Privatization

• De-regulation

LAPDog

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining• Neoliberal policies• Washington consensus• SAP• Conditionality• MFN

How does Structural Adjustment Program (SAP) affect the Developing countries?Impact:• Balancing the government budget• Weakening the Labour• Deregulating the economy• Reducing the State

BLeeDS

IMF’s imposition of SAP on Asian countries created a financial crisis of economic contraction and depression.

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining• Neoliberal policies• Washington consensus• SAP• Conditionality• MFN

Conditionality:

• Conditions placed on loans to LDCs

Conditions imposed to make aid effective in a recipient country – in reality could hurt the country’s economy or the country’s political stability

WTO: AICs commercial interests are embodied in the rules global trade, aid and loan imposed on the LDCs :

• WTO works on power-based bargaining• Neoliberal policies• Washington consensus• SAP• Conditionality• MFN

Most favored nation status (MFN) • An agreement between two nations to levy

tariffs on each other at rates as low as those levied on any other country.

• If one of these nations reduces tariffs on a third country, all of that nation's MFN partners also receive that lower tariff rate.