Economic Reform Through International Financial Institutions

Several developing countries are sunk in debt and poverty because of the arrangements of global establishments, for example, the International Monetary Fund (IMF) and the World Bank. Their projects have been vigorously reprimanded for a long time and have been constantly blamed for poverty. Moreover, developing countries have been in constant expanded reliance on the wealthier countries, despite the IMF and World Bank's claim that their main goal is to fight poverty (Shah, 2013). During recent decades, the poorest nations on the planet have needed to swing progressively to the World Bank and IMF for money related help, because their impoverishment has made it unthinkable for them to acquire somewhere else. The World Bank and IMF connect strict

In came into vogue that economic theory could benefit Third World countries, so humanitarians began to evaluate the best ways to help Africa through the markets [Barnett 100]. Furthermore, leaps were made in bolstering the efficiency of aid efforts, and it was discovered that the most effective systems were conglomerations of the state and NGOs [Barnett 107-108]. This may suggest that humanitarian efforts were transformed into vehicles for disseminating governmental and economic agendas, but conversely, aid organizations wished to increase their impact by cooperating with governments and the markets. Humanitarians were growing to appreciate the codependence of these avenues and that “everything was connected to everything else,” so they leveraged this new insight to the Africans’ benefit [Barnett

Every year sub-Saharan Africa receives around $134bn in loans, foreign investment and development aid, according to the UN. Nonetheless, sub-Saharan Africa is still the poorest region in the world. For many years the international community has debated over the reasons why every year billion and billions of dollars are not taking sub-Saharan Africans out of poverty. Three major groups have prevailed in the discussion. First, the people who totally blame Africa for not doing its job right, completely forgetting that most of the funds are not administrated by Africans. Second, the people who believe that even though aids are not working, the international community should keep investing funds in Africa even if is failing; one day they will work.

Neoliberal globalization is an economic system that promotes free market policies of liberalization, deregulation, privatization, and the cutting of social support systems. The International Monetary Fund and the World Bank help promote these policies by making structural adjustment programs conditions for any aid or support. Unfortunately, once structural adjustment programs are put into place they tend to disrupt developing countries’ economies and end up making them even worse off than before. Before the 1980s, developing countries had a per capita growth rate of more than 3%, once these policies were put into place growth rates dropped to 1.7% (Hickel 2012: 7). This provides evidence that these programs are pushed at developing countries

The first locomotive aspect of contemporary globalization, offered by the IMF, is the movement of capital. The economies of nations have become increasingly interlinked due to the free flow of capital, and semi-unrestricted global trade via a reduction in protectionist measures (birdsall 2003). However, this movement of capital occurs in a highly asymmetric fashion across international borders. The post-colonial reality of countries of the Global South, which saw their resources plundered, has a profound effect on the ability of these countries to freely engage with and benefit from globalization in the same way as countries of the Global North. The wealth accumulated by highly industrialized nations from historical imperialism, has allowed them to produce a wealth of institutions which in-turn creates a reputation of stability and reliability for them. These institutions and reputation allow them to benefit

Over the past several decades, the adoption of neoliberalism in the global economy has created instability within developing countries while first nations benefit from this organizing principle. Neoliberalism is defined as the practice of “freeing” the market through deregulation and limited government intervention (Smith). National and international governments implement neoliberal policies, often have underlying detrimental effects in the long run. Regulations enforced by international and intergovernmental organizations like the International Monetary Fund (IMF) and the World Trade Organization (WTO) allow for the privatization of markets to occur, keeping third world countries less economically developed. Neoliberal policies reinforce unequal power relationships among developed and developing countries that have been in existence since colonialism. Governments use economic mechanisms such as land reform, multilateral trade agreements, and structural adjustment programs (SAPs), which benefit the global elite. These unequal power relationships came from a legacy of colonial power throughout Latin America, Africa, and Southeast Asia, driven by the extraction of wealth and control of resources.

Far from being seen as objective entities, the World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank are often conceptualized as instruments of the developed world. It is alleged that they are used to enforce crippling economic policies upon the developing world. To some extent, it is perhaps inevitable that these international institutions are seen as such. The memory of colonial exploitation in Latin America, Africa, and other developing nations runs deep, and the power dynamic of these institutions relative to the nations they are ostensibly helping often echoes the relationship of the colonizing to the colonized.

In this book, James Ferguson explores how Africa fares in the neoliberal world. He considers the whole continent but focuses on selected examples that shed light on how the current world order has impacted the continent and its people. Through eight essays, he explores paradoxes of African states and governments; the continent 's place in the new world order, modernity and development; and the “modernization” of mineral and oil extraction models. This set of disjointed essays examine the realities that continue to determine development and growth on the African continent.

The rise of globalization following WWII generated three important factors that define today’s world. McNeill and McNeill agree with Pollard, Rosenberg, and Tignor that multiple economic changes, such as the creation of financial institutions like the International Monetary Fund (IMF) contributed to the globalization of the world economy. Carter and Warren further this argument by claiming that globalization has caused shifts in the modern economy, namely the rise of Asian economic powers. However, all three historians agree that the rise of globalization goes hand in hand with the rise of inequality in today’s world. Gaps in power, wealth, and access to information have only widened due to the trend of globalization. The final key factor defining our world today are the ongoing processes affecting development countries. McNeill and McNeill argue similarly to Carter and Warren that the end of imperialism generated new nations who quickly realized the free market was a pathway to stability. However, Pollard et al. and McNeill and McNeill place importance on financial institutions like the IMF forcing developing nations to reform their economies to be subservient to the world’s economy. Together, these historians argue that the trend of globalization following WWII caused factors like the modern global economy, the rise in inequality, and the development of new, decolonized nations to be key determiners in the world today.

The three major international economic institutions are the International Monetary Fund (IMF), the World Bank and the World Trade Organization; this book mainly focuses on the IMF and the World Bank, due to the author’s first-hand experience with both institutions. The IMF, a public institution built as a guiding hand for economic stability around the world, has brought false

The world is undoubtedly Eurocentric and favors Western interests, with Western nations having a domineering advantage over developing nations in relation to politics and the global economy. For example, the World Bank’s voting power is distributed

Although Western donors may have had good intentions, the cycle of poverty has continued (28). Although the Marshall Plan was a successful aid program for Western Europe, it was short-lived, a package of US $13 billion over the course of 5 years, from 1948-1952 (12). African aid has been given for an indefinite period of time. She quotes Paul Kagame who summarizes, “While more than US $300 billion in aid has apparently been disbursed to our continent since 1970, there is little to show for it in terms of economic growth and human development” (28). Why is this the case?

Unfortunately the failed experiment of neoliberalism is not merely of historical or academic interest, since it is ongoing. The prevailing orthodoxy in the economics profession, finance and economic ministries in low- and middle-income countries, and the global media from which many policy-makers draw their inspiration and fears, remains much the same as it was twenty or even thirty years ago. The IMF, the World Bank, and the WTO are still largely pursuing policies in the same direction, and although they have met increasing resistance and have lost considerable clout in middle-income countries, they are still the most powerful and influential institutions of global governance.

Western countries went to third world countries and persuaded their citizens by blaming their economical and social problems on their technological backwardness rather than the exploitative nature of their political system. By accomplishing this, the western countries gain entry into the nations and trade technology for resources and labour force. This ultimately leads to westernization of the third world nations (James Ferguson 2001 [1990], 407).

The financial globalization is growing nowadays and it is important to know what its causes are and how they influence the world’s economics or one of the separate countries.