Download Sabrina Raber from Whitefish Bay High School United Kingdom

Sabrina Raber from Whitefish Bay High School
United Kingdom
General Assembly
Reforming and Restructuring the IMF and World Bank
The World Bank and IMF bring stability to an already unpredictable global economic
environment. For example, in October 2008, when China decided to delay the release of funds
into the global market, it caused a ripple effect that was felt throughout the world, especially in
Europe.
Another example is with the US dollar being the current benchmark for the world
currency. Many countries, including most of Europe, are held hostage by the declining US dollar.
Our system is fine, and we don’t want to be brought down with the falling US dollar. There is
currently talk within the G-20 of replacing the US dollar as the world currency with a bundle of
funds made up of the US dollar, the Euro, the Chinese Yen, and a few others not yet determined.
This would attempt to create a more stable world currency, a currency that we, the United
Kingdom, would follow.
In response to the dynamic global downturn that was experienced in 2008, many
developed countries, along with G-20, have been diligently trying to implement strategies to
prevent that from ever happening again. And even though in 2009 many markets appeared to
experience healthy growth, there are still few indications that the market is able to continue to
substantiate such growth without market manipulation, such as quantitative easing (printing new
money than putting it back into the market to artificially prop up the market in an attempt to
create investor confidence.)
The United Nations is an equal representation of all countries involved, however the IMF
is a more unbalanced representation. Countries with emerging markets may have less say then
fully developed countries because of economic limitations. So it seems reasonable that different
countries should have equal input unbiased to their financial situation. Now though this doesn’t
affect us directly, we still believe it should be fair in the world market. All countries’ financial
strength is interconnected through the economic strength of the whole so our economic stability
is affected as well. As an example, if the United States market drops twenty percent, it will create
a ripple effect felt throughout the world, which is also felt here in the United Kingdom. The
strength of the pound is relative to the strength of the dollar, so without better control over the
economic decisions of countries such as the United States, it will directly affect the English
pound.
The loan packages aren’t as much ‘are they effective’ as far as ‘are they important.’
Emerging markets need to have access to economic resources in order to strengthen their
economies and the World Bank is a great resource for loaning an emerging market the necessary
capital. For instance, let’s pretend that a person wants to buy a car. They don’t have sufficient
funds in place and so therefore want to borrow money to buy that car. If there is no money to
borrow, then there is no way for the person to buy the car, and that situation is much like this.
We need the IMF loans for these emerging markets along with developed markets, because they
will be unable to jumpstart their countries without the essential funds in place. The challenge lies
with the emerging markets’ ability to repay the loan, like that of any borrower going to the bank
for a loan. Except that if an emerging market, or even a developed country, such as the United
States, may not have the ability to repay the loan, and the loan goes into default, it will create an
economic ripple that can affect all countries throughout our global economy.
Back in 1944, the international economies was made up of a handful of developed
countries. And though they worked together, the overall market effects were held closer to home.
If the United Kingdom had a bad economical day, it didn’t wipe out the entire global market.
Since 1944, the world economy has become far more globally interdependent, creating the need
for developed countries to help less developed or emerging markets grow their own economies.
The economic health of the international community can be severely affected by the actions of
one of its member countries, such as the before mentioned example of China not releasing the
funds back into the global market. Also, with the weakening of the US economy, less developed
economies are also at jeopardy and with the financial downturn in 2008, it created the necessity
for an organization such as the G-20, so that together we can better insure that this doesn’t
happen again.
The need to restructure the World Bank is eminent. There needs to be more
accountability within the various member banks and country controllers. It’s important that, as a
whole, the World Bank implements tougher restrictions even to the point of restricting the level
of international credit a country has access to. I bring up the United States, because I believe they
have a majority of the examples in this scenario, like the United States deciding, through
Quantitative Easing, to print their way out of their current recession, even though it will create
long term economic side effects such as increased inflation and interest rates that could affect the
level of GDP, Gross Domestic Products, that will be felt throughout the world. We don’t want to
be dragged down with another country because they have a problem in their system. Put it this
way, if the United States gets a cold, then a large part of the world will come down with lifethreatening pneumonia. The United Kingdom needs to have better control over their banking
system so that what happened in America such as the near AIG, one of the largest insurance
companies in the world, and many of the American banks failure doesn’t happen in the United
Kingdom as well. So therefore, it is of the utmost importance that the G-20 is allowed to make
the necessary changes to instill a greater economic outcome for all.