Download Global Economic Institutions

The World Bank
Training Session 27 feb 2015
Roadmap
• General facts
• How does it work?
• Goals
• The Washington Consensus(reforms)+criticism
• Free Trade basics
• Failure examples
• Successes examples
The World Bank
General facts:
• Financial institution of the UN
• Based in Washington, DC
• 188 countries are members
• Gets its money off financial
markets/from member countries
• It is part of the ‘World Bank Group’
World Bank Group
• International Bank for Reconstruction
and Development (IBRD)
• International Development
Association (IDA)
• International Finance Corporation (IFC)
• Multilateral Investment Guarantee
Agency (MIGA)
• International Centre for Settlement of
Investment Disputes (ICSID)
The World Bank
What does it offer?
• Loans
• Guarantees
• Risk management products
• Analytical and advisory services
Examples of borrowers:
• Argentina, Chile, Belarus, Botswana,
Brazil, Jamaica, Ecuador, Vietnam etc.
Countries by voting power:
1. USA-also veto power
2. Japan
3. China
4. Germany
5. France
6. UK
7. India
The World Bank
Goals:
• Eradicating extreme poverty and hunger
• Achieving universal primary education
• Promoting gender equality and empowering
women
• Reducing child mortality rates
• Improving maternal health
• Combating HIV/AIDS, malaria, and other diseases
• Ensuring environmental sustainability, and
• Developing a global partnership for development.
The World Bank
Often, in return for the loans, the World
Bank demands of the recipient to put in
place certain reforms such as:
• Austerity
• Devaluation of currencies
• Trade liberalisation (lifting import and
export restrictions)
• Removing price controls and states
subsidies
• Improving governance and fighting
corruption
The World Bank
Criticism:
• Regressive conditions(shock therapy criticism)
• Lack of institutional framework to apply the reforms
• Majoritary decisional power held by the USA
• Unfair conditions(e.g. Ghana, Tanzania, Iraq)
• Sovereign immunity
• Requires certain level of government to implement
reforms-this is simply not in place
• Reforms too concentrated on GDP growth rather than
quality of living of the people
The World Bank
More on Trade Liberalisation (useful in general)-make sure you take into
account the stage the economy is in when you impact these arguments
Good stuff:
• Enables specialisation(comparative advantage)
• Lower prices for consumers(resources imported cheaperlower
costslower prices)
• Increased competition between firmsefficiency
• Enables economies of scale
The World Bank
More on Trade Liberalisation (useful in general)
Bad stuff:
• Structural unemployment short run(shift between
industries). Hard for people to specialise in new
industries.
• Environmental harm(if legislation if poor)
• Uncompetitive economies are at a
disadvantage(protectionism required)
• Dependability of international marketsincreased
risk
The World Bank
Failures:
• Brazil – road building project set a significant proportion of
the Amazon on fire
• Latin American Crisis and default of Mexico(1982)
• East Timor
• Failed to relaunch education and medical sectors
• Urged country to save a large part of petroleum revenues
• Poverty rose significantly until the state decided to go against the
Bank’s advice
The World Bank
Successes:
• Rural water project in Kerala(south-west of India) 
women don’t have to walk hours to get water. State
has now dependable supply of running water.
• Diseaster management programs in Vietnam or
Bangladesh
The World Bank
Motions that have come up:
THBT the IMF and the World Bank should not
make debt relief for highly indebted poor
countries conditional on trade liberalization
THBT The World Bank and Other Bilateral Donors
Should Tie Developmental Aid to Investment in
Agriculture
THW Substantially Reduce the IMF and World
Bank Lending Programmes
THBT The World Bank chairs should be selected
on a rotational regional basis