Regional and Economic International Organizations - Assignment Example

Regional and Economic International Organizations Term 2 Essay “The Bretton Woods regime is a product of the US-centred vision of world order.” Do you agree? I Introduction This essay will analyze the role of the Bretton Woods regime since its creation, and will look at how its institutions have influenced states through policies favoring the interests of the United States. The essay begins by analyzing the Bretton Woods regime, its institutions and structures and how its formation has favored the United States’ interests at a global level creating an American-centred vision of world order. Following the devastation of the Second World War, much of the global economy lay in total ruin. Old orders, ways of thinking, and systems had vanished into ruble and smoke. Many people lived lives of total despair. However, there were a number of brave men and women who decided to look at this crisis as an opportunity and to fashion something new out of the mess. The most important change to make involved the world economic system. And so the Bretton Woods regime was founded on July 1944, in Bretton Woods, New Hampshire, United States, by the delegations of the 44 Allied nations with the intent of creating a new financial and economic order, due to the shift of power occurred as a result of the Second World War. The Bretton Woods regime was a result of the events which affected the world economy and political system, starting from the great Depression to the rise of Nationalist dictatorships and finally the Second World War; its declared objective was to ensure prosperity to all nations, so conflict would never occur again, and can best be understood by this quotation: "The nations should consult and agree on international monetary changes which affect each other. They should outlaw practices which are agreed to be harmful to world prosperity, and they should assist each other to overcome short-term exchange difficulties." The lesson learned by the horrors of the war were that increased economic integration would stand a good chance of reducing the opportunities and incentives to go to war. If war cost the same amount to everyone there would be few advantages for any one country to start one. Economic integration and some standardization would be key to this. The policy of open markets first seriously pushed at this conference would have a major influence on the world economy to this day. II Keynes and White This policy however did not come out of the blue. There were a number of significant individuals who came up with the theories and principles that underlay and who worked hard to guide the process forward. Without a doubt one of the most important of these figures was the economist John Maynard Keynes, one of the most influential economists of the 20th century. During this conference Keynes represented the UK. He was instrumental in crafting a number of the institutions that were eventually agreed upon. For example, he developed the idea of an International Customs Union as a way for countries to regulate the balance of trade. He believed trade deficits were bad and that after the war it wouldn’t be possible for highly indebted countries to escape their debts. Trade would be measured by an international currency thus insulated the trade deficit from the vagaries of normal currency appreciations and depreciations. The idea proved quite influential. It was however blocked by the United States and its representative Henry Dexter White. The Americans wanted to ensure the domination of their own currency in the international marketplace. White famously said to Keynes on this issue: "We have been perfectly adamant on that point. We have taken the position of absolutely no." Instead of going with something fair like the ICU, the Americans pushed for what would eventually become the IMF and the World Bank, institutions that some has ensured American dominance of the international economy ever since. Both of these ensured that countries that owed money to America would continue to owe money to it. Keynes was upset by this; he strongly believed that government intervention and economic policies could be used to save the world. He wanted to see more involvement by the governments of the world in the economy. Many American officials opposed this view during the Bretton Woods conference. III Its institutions The most significant institutions to come out of the Bretton Woods system was the World Bank and the IMF. These two organizations continue to this day to play a huge role in the world economy. The IMF was to be the vital instrument of public international management; it was to advise countries on the central banking and how to maximize economic growth. Its approval would also be necessary for any change in exchange rates in excess of 10 per cent. It was the site of a number of ideological debates at the conference over whether a new international reserve currency should be established and held by the IMF, or whether the American dollar should be used (since many debts were owed to the Americans). The IMF couldn’t print money. It was funded by a series of subscriptions by different countries who paid into it using gold and their own currencies. This too was a subject of much debate at the time and pitted Keynes and his allies against many from the American administration. The other institution, which eventually became the World Bank, was called the International Bank for Reconstruction and Development. It was recreated help fund and help the poorest of the world whose lives had been ruined by the war. As the years went by it eventually shifted its mission to helping poor, developing countries. Much has been written about its policy of structural adjustment which forced many countries to maximize economic growth at the cost social services and health and education policies. IV US Imperialism The United States has been able to create a new world order since the end of World War 2 using a number of economic policy levers that drastically shifted the balance of power towards the United States government. Much of this was planned and orchestrated with the help of certain allies. It wasn’t very hard to do at the beginning because of how devastated and desperate much of Europe was and how much money they were already getting from the United States from the Marshall Plan. Beginning as early as 1944 with the Bretton Woods agreement, the United States found itself in a position of control of the institutions created in this meeting such as the World Bank, the International Monetary Fund and the World Trade Organization. Throughout their history the United States has used such institutions to pursue its interests at a global level. The United States ensures its control by loans through the Bretton Woods institutions to developing countries for projects which are then commissioned to United States corporations, benefiting US interests in the short and long term, and leaving only a minority of the borrowing state to enjoy the benefits of such transactions. This is called tied aid by some and is an international scourge. At this stage if the country is unable to repay its debt, the United States sends an ‘Economic hitman’ “John Perkins” demanding concessions which can vary from military bases within its country, resources available cheaply, a vote on a UN resolution or nationalization of its industries to US corporations. The dominance of these institutions and these methods of repayment would anywhere else be seen as abusive. Such behavior can be best seen in this quote by John Adams “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” These policies implemented by the United States has allowed it to be the world’s super power and to have a secret empire controlled by corporations. As a matter of fact 26 of 150 largest economic entities are US corporations. This means that such corporations can generate as much money as a developed state as Denmark. This outsized power makes them the true emperors of the secret US empire. They are the ones with the influence to determine its government’s policies as they control the media and politicians as well through founding. An example of such influence can be seen in Bolivia in 2000, where the United States through the World Bank applied pressure on the Bolivian government to sell the water supply of Cochabamba (Bolivia’s third largest city), although failing after riots from local citizens due to the increase in prices. Another method used by the United States to create a world order at its command, is through trade liberalizations, consisting of removing restrictions on foreign trade allowing transnational corporations to exploit markets due to its mass production which makes its prices unbeatable cutting out indigenous local economies. This is a manipulation of the open markets ideology first put in place in Bretton Woods. A good example can be found in Jamaica where after receiving loans and conditionalities from the World Bank, Jamaica lost its largest cash crop market due to competition with international corporations. Competition is bad when it is driven by hypercapitalism imposed by the United States and its cronies. V The system’s failure In the past decades the World Bank has proved itself to have favored developed states rather than developing states, contrary to its original meaning. This can be seen in the way that poverty at a global level has actually increased rather than decreased. Here are some important statistics: -The income gap between 1/5 of the poorest against 1/5 of the richest was in 1960 30:1 and in 1998 74:1 - Poverty increased of 17% -People living with less than 1USD a day increased of 18% in the period from 1985-2000 -World Bank intervened in Ecuador with large loans, in the period of 1968-1998 resulting in an increase of poverty from 50% to 70%. Under/unemployment grew from 15% to 70% Public debt rose from 240M to 16B USD Resources for the poorer decreased from 20% to 6% In 2000 50% of its national budget went to pay its debt. Since its creation the World Bank is referred to some as USA bank, as it has always supported its interests at a global level due to the USA’s influence within the organization by being the largest provider as well as having veto powers. As Jim Garrison, president of the state of the world forum, has said: Taken cumulatively the integration of the world as a whole, particularly in terms of economic globalization and the mythic qualities of ‘free market’ capitalism, represents a valuable empire in its own right…four have been able to escape the ‘structural adjustments ‘ and conditionalities’ of the world bank , the IMF or the arbitration of the WTO, these IFI’s that however inadequate, still determine what economic globalization means…. Such in the power of globalization that within our lifetime we are likely to see the integrationm even unevenly, of all national economies in the world into a single g;lobal, free market system. VII A new Bretton woods? It doesn’t have to be this way. The world can be dramatically improved by altering these regimes and itstitutions. And to be honest the time has never been more ripe for wholesale change. The world financial system is in meltdown following the huge greed splurge that caused the housing bubble and the collapse of American banks. Now is the time to come together for a new Bretton Woods which will finally work to alleviate poverty through more socialism. VIII Conclusion Few conferences changed world history as much as Bretton Woods. Today we live with the consequences and implications of the decisions made there. Many of those decisions engrained American capitalism and American power and the cornerstone of the world economy. This has had a very negative affect on the lives of billions of people. The IMF and the World Bank have been little more than tools of American global domination, and few if any countries have stood up to America. The positive side of this is that it may now be possible to change these institutions for the better. America has rarely been so weak. Now is the time to pounce and to establish a new world order that promotes fairness and equality and reduces America’s power in the world. Bibliography http://news.mongabay.com/2005/0718-worlds_largest.html John Maynard Keynes (Great Thinkers in Economics), Paul Davidson, Palgrave Macmillan, 2007 The Commanding Heights: The Battle for the World Economy, Daniel Yergin with Joseph Stanislaw, New York: Simon & Schuster, 1998 John Maynard Keynes: The Economist as Saviour 1920-1937, Robert Skidelsky, Papermac, 1994 Van Dormael, A.; Bretton Woods : birth of a monetary system; London MacMillan 1978 Michael D. Bordo and Barry Eichengreen; A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform; 1993 Harold James; International Monetary Cooperation Since Bretton Woods; Oxford University Press, USA 1996 Michael Hudson, Super Imperialism: The Origin and Fundamentals of U.S. World Dominance, 2nd ed. (London and Sterling, VA: Pluto Press, 2003) Mason, Edward S.; Asher, Robert E. (1973). The World Bank Since Bretton Woods. Washington, D.C.: The Brookings Institution. pp. 105–107, 124–135. Dooley, Folkerts-Landau, and Garber (2003): ‘An Essay on the Revived Bretton Woods System’ NBER Working Papers; for a critique, Eichengreen, Barry (2004): Global Imbalances and the Lessons of Bretton Woods NBER Working Papers Hancock, G. (1991). Lords of Poverty: The Free-Wheeling Lifestyles, Power, Prestige and Corruption of the Multi-billion Dollar Aid Business. London: Mandarin. Rapkin, David P. and Jonathan R. Strand (2005) “Developing Country Representation and Governance of the International Monetary Fund,” World Development 33, 12: 1993–2011. Read More