IMF and its Role in International Political Economy Essay

1983 Words 8 Pages
IMF and its Role in International Political Economy
Political economy is not a new word for us because of the close relationships between politics and the economy. The development in politics is due to the development in society and the development in society is mostly driven by the economy. The parallel existence and mutual interaction of ‘state’ and ‘market’ in the modern world creates ‘political economy’; without both state and market there could be no political economy (Gilpin, 2003, P9). Market allocates resources to a particular group, class or region where conditions are most favorable. As a consequence, market economies result in the uneven
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In July1944, the IMF, a multilateral institution, was created at the Bretton Woods conference. This institution was designed to provide stability to trade and monetary relations and oppose the ever-present potential for a rise of system-threatening economic nationalism (Goddard, 2003, P241). In the modern world, the basic functions of the IMF consist of surveillance of the stability of international financial market, lending money to countries temporarily loans to low-income countries. Under these objectives, this organization has been existed over 60 years and is irreplaceable part both in the post-world-war years and in the latest decades.
After World WarⅡ the immediate postwar objective, restoring and fixing exchange rate, was done well by all member countries and staff of the IMF. However, from 1973 to 1974, a new challenge came to the IMF which is known as the price shock. In 1972, the foundation of the Organization of Petroleum Exporting Countries (OPEC) became an influential factor in setting the price for crude oil. In 1973, the Arab Oil Embargo which was triggered by the Yom Kippur War quadrupled the oil price from $3 to $12 per barrel. This dramatic rise in price had a big effect on both oil exporting countries and oil importing…