First Conceptualised By Keith Hart In 1973, The Notion

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

Over 75 years later, we still do not have the freedoms President Roosevelt wished upon us. A specific freedom that still does not exist is “economic understandings which will secure to every nation a healthy peacetime life for its inhabitants.” There are still dozens of poverty stricken countries, known as Heavily Indebted Poor Countries (HIPC). These are countries that have a national debt that is unmanageable with traditional manners alone. The good news is that the Heavily Indebted Poor Countries Initiative began in 1996 to address this issue. The World Bank, the International Monetary Fund (IMC), and other creditors teamed up to reduce the debt of 36 countries that met strict criteria.

In Poor Economics, Esther Duflo makes a cutting statement: “even the most well-thought-out policies may not have an impact of they are not implemented correctly”. She draws a distinct line between policies and politics and exposes how the latter can affect the implementation of policies. This post will exemplify such scenario with the implementation of the Washington Consensus (WC) in Latin America during the 1980’s. Latin America was immersed in a severe debt crisis. Governments were defaulting on payments owed to the IMF and the United States. Convinced there was a huge problem, policy-makers from Washington and the IMF decided to draft a 10-policy document that Latin American countries must follow if they wished to borrow more money in

Loans were taken from the current oil surge from the middle east in hopes of obtaining money to further develop their countries and modernise their technology. Once the oil crisis happened interest rates on the loans grew and coincidentally these military dictators began to slowly lose their power in large part due to the economic imbalances occurring. The increase in plebiscites--which is a public decision voted for by the people instead of representatives or delegates--slowly gave less power eventually allowing democratic election to occur once again. Many argue that the debt accumulated by Latin America should not be held accountable by the new governments as the dictators made those decisions independently without consolidating their people. These arguments did not help the world bank gain back lost money, therefore a shift in politics needed to happen in order to fully pay this

The second strand comprising the Golden Noose was the introduction of neoliberal reforms that emanated from a shift from Keynesian-led economic policy formation to market-led restructuring in the donor states and, in turn, accompanied all loans from the IFIs in the form of structural adjustment programs (SAPs). (Soederberg, pp. 935-939) These neoliberal policies were what many analysts have called Washington consensus. SAPs were largely homogenous in nature fiscal discipline, reordering public expenditure priorities, tax reform, liberalization of interest rates, competitive exchange rates, trade liberalization, privatization, deregulation and property rights.

Bolivia is one of South American’s poorest countries, with almost two-thirds of the population living in poverty. Suffering from inflation and a large foreign debt, structuralist measures were put in place, to help the country’s economy, but these failed to bring stability. In 1981 the World Bank and IMF program of the structural adjustment had also failed, causing a negative GDP growth for many years.

The IMF and World Bank providing loans to impoverished and financially unstable countries is not only irresponsible, it's unethical. I intend to use the example of the loans provided to Mexico during the Mexican peso crisis, also called the Tequila crisis or December mistake crisis to illustrate this, and then provide what I believe would be a better solution

One of these three was Argentina, a nation whose trusts of monetary salvation through money related integration with the world economy now lie in remnants. A second was Uruguay, likewise in a bad position. Just Chile resembles a long-term victory. Among the previous communist economies, genuine yield still stands beneath 1990 levels taking all things together be that as it may, four of them. Furthermore, destitution rate s stay higher than in 1990 even in Poland, obviously the best of the East European nations. In sub-Saharan Africa, results stay extreme disillusioning, and far more terrible than those got preceding the late 1970s.(Rodrik 2002)

To begin, Latin America is indeed one of the most poor regions in the world. Due to bad leaders, poverty, natural disasters and debt this region is facing a lot of problems due to unsustainability. The problem that seems most sensible to fix is debt. Debt by definition is something typically money that is owed or borrowed. In Latin American’s case the problem is that they borrowed to much money; that in the end was supposed to be payed off but wasn’t. This problem continued when Latin America borrowed money from other countries to repay the US, yet the money unfortunately just kept adding up.

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

In Robert Neuwrith’s TED Talk, The Power of the Informal Economy, he explores the concept of the informal market and how important and relevant it really is. It is so relevant that if it were a country the vale of the informal economy or System D as it is mentioned would be worth 10 trillion dollars a year (Neuwrith, 2012). This would mean that it would be the second largest economy in the world behind the U.S. and at the rate it is growing if it were a country it would probably beat out the U.S. in a couple of years (Neuwrith, 2012).

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

International institutions reflect the interests of core capitalists and therefore do not essentially alter the economic positions of core and periphery countries. Global institutions and organizations are usually created by core countries and often refrain from undermining the authority of the core. Instead, IGOs and NGOs tend to perpetuate the power of the core by encouraging policies that align with the interests of wealthy countries and consequently exacerbate underdevelopment in peripheries. A significant example of mistreatment against Chile is the debt crisis it faced since the late 1900s. The USA and lending agencies such as the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) declined

The United States, Italy and other countries in 80’s were heavily involved in aid to the government of Somalia. The IMF involvement during the same period came from direct aid, but also the enforcement of Structural Adjustment Programmes (SAPs) within the country. The purposes of the SAPs, dependent upon loans from the IMF, reduce government spending, deregulation, devalue currency, control inflation, open economy to trade, convert state business to private sector, and end government food subsidies. These types of policies were part of the IMF ideal and pathway

Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs.