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Politics of the Global Economy International Relations

Executive Summary

It has been an addition to the central position attained by the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) at the cost of the United Nations economic organizations in the scheme of global economic authority and the control of the philosophy of neo-liberalism. At the International Monetary Fund (IMF), for example, the rich nations have dissatisfied all endeavors to restructure the decision-making framework to allow developing nations more authority in formation of the strategies of the organization. This policy disconnectedness is a sign of too little global governance of both trade and sustainable growth. Even though developing nations are intensely affected by the declarations of global financial agencies such as the IMF, World Bank and WTO, they have modest authority in their process of decision-making. Secondly, the authority of developing nations within the organizations should be improved. Global economic authority is in complete disorder and simultaneously reform processes are much required.

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Introduction

The wearing down of the United Nations management has turned out to be a common subject matter in the contemporary world order. It is also unthinkable but very much a fact that the Bretton Woods arrangement of multilateral establishments is also caught up in a very serious crisis. The impairing authority of the International Monetary Fund (IMF) has stumbled upon the depths of despair, with many prominent voices across the levels of authority demanding its closure. In addition, after the failure of the third ministerial in Seattle, the prospect of even the World Trade Organization (WTO) is under constant threat of being doomed. Restructuring of both foundations is now the demand cropping up from all directions to the extent that it is perhaps obscuring the previously powerful stipulation for UN transformation.

Discussion

It is often said that the dreadful terrorist assaults of September 11 symbolize the closing stages of the post–cold war epoch. In a short span of time, a wide range of rumbling global tests materialized, and the global society found itself caught up in an untried and different territory. Initially, just in early hours following the attacks the anticipation was that the common tragedy would get the world together as a unified unit. In a number of ways the anticipation has been translated into actuality. The March 2002 UN Conference on Financing for Development, in Monterrey, Mexico, upturned the post–cold war turning down the proposal of holding out assistance to developing nations. A agreement at the World Trade Organization (WTO) ministerial conference in Doha, Qatar, held in the recent times provided multilateral trade discussions with a new approach towards life, keeping away from the stalemate that blocked up the prior ministerial assembly in Seattle, Washington. (Waters 2004)

These advances put forward optimism that the forthcoming times will show a new age for international decision- making. However, on the contrary, there are also causes to catch even larger global disintegration and even weakening of global establishments to a greater extent. The global confrontation with terrorism and ever increasing aggression and instability in the Middle East and similar risks are giving rise to new-fangled global fissures. The most influential and authoritative nations in the international scheme of things are not always on the lookout for multilateral solutions and increasingly expressing their disregard for international security concerns. And even happenings that are not linked events, for example, the falling down of Enron in the United States and the instability in Argentina are causes for concern. Events such as these worsen the global discomfort about the policy, regulations and foundations fundamental to the concept of global commerce. Economically and politically, dissatisfaction amongst developing nations relating to the imbalanced spread of global supremacy has reached its peak. (Mander 1996)

Political economy and international security

It should be clearly understood that political economy and international security are two issues which are essentially linked. Prevention of deadly conflict must be the fundamental initiative and should be reflected in all efforts made by international agencies. From fighting poverty and endorsing sustainable growth; through strengthening of national capabilities to deal with conflict, fostering democracy and the regulations professed by law, and restricting the trade of small armaments and light weaponry; to controlling prevention operational activities, for example the exploitations of good offices, Security Council operations and precautionary deployments. There is a mounting consent that economic progress, peace-making, and conflict avoidance must be embarked on at the same time if ideas relating to peace and security are to appear and be sustained. However, this consensus has been reached only at the micro level. Regrettably, at the international, macro level, developments indicated the momentum in the reverse direction, towards increased decline and thus greater human anxiety. The menace brought about by worldwide terrorism is one of the major concerns, as is the deteriorating of the multiparty command over nuclear arsenal. In addition there are other extremely intimidating developments, which unfortunately are either overlooked or underemphasized by the international community. (Stiglitz 2006)

Neo-liberalism

A macro trend offsetting positive trends in reality has been the subverting of advances made by the influential multilateral economic establishments. In the recent past, particularly during the last two and a half decades, the affirmed objective of employing trade policy to encourage progress, which was very well expressed by Raul Prebisch, the first secretary general of the United Nations Conference on Trade and Development (UNCTAD), has been substituted by the hyponymy of expansion to free trade, corporate prosperity and the economic welfare of the authoritative nations. This has been an adjunct to the central position attained by the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) at the cost of the United Nations economic organizations in the scheme of global economic authority and the domination of the philosophy of neo-liberalism. (Bhagwati 2004)

More dearth, inequality, and financial stagnancy have been the cost of the neo-liberal exemplar, leading to its failure in upholding integrity and legitimacy. However, neo-liberal guidelines carry on reigning in all quarters. But the crisis is not only founded on principles, that is, a case of unenthusiastic upshots as a consequence of courses of action directed by the wrong theory. The strategies themselves are ever more adhered to so as to deliberately undermine the welfare of developing nations.

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At the International Monetary Fund (IMF), for example, the rich nations have let down all activities to restructure the decision-making framework to allow developing nations more authority in formation of the strategies of the organization. Similarly, an already very placid tender that would have permitted developing nations to insure themselves from creditors while reforming their outside debt, the Sovereign Debt Restructuring Mechanism (SDRM), was prevented by the US.

At the World Bank, the selection of Paul Wolfowitz, whose name is equal with unilateralism, ushers a new era in which the strategies of the World Bank are expected to be inclined even more strongly towards what the American constitution illustrates as the national welfare of the United States of America.

At the World Trade Organization (WTO), the supposed “July Framework Agreement” that plays the role of the negotiating manuscript of the approaching ministerial summit in Hong Kong boldly upholds the high intensities of subsidization of agriculture in the European Union and the United States while calling for better access to the economic markets of developing nations with the intention of unloading subsidized supplies. (Garnaut 2007) Because these negative drifts in the global economic framework give rise to more scarcity and discriminations, they may be perceived as a risk in relation to global security. (Stiglitz 2003)

G8 venture

Another worrying concern is the taking over of the responsibilities of the United Nations in guiding the endeavor to deal with global issues by the Group of Eight. At the latest G8 Summit in Scotland in early July, the G8 ventured out to assume international leadership in the quarters of debts, commerce, assistance and climate change. This is immensely awkward on two accounts. Firstly, the G8 is an entity which is unofficial, unelected, and free from control or responsibility. Secondly, it corresponds to the benefit of the world’s most influential nations, so that the suggestions it has surfaced in order to deal with some of the planets most critical tribulations are customized perfectly to fit principally the wellbeing of the prevailing welfares in those nations.

What is rising to all intents and purposes is a framework of global governance wherein the G8 takes the crucial decisions relating to the issues of international significance, which are subsequently put into action by organizations such as the IMF, World Bank, and WTO, circumventing the UN framework of governance and administration. The thing that makes these developments in the echelons of power so dangerous is that it is being embarked on with the expression of accomplishing the UN’s Millennium Development Goals and advancing initiatives with regards to global poverty lessening. These are some of the alleged negative movements at the macro, international level which can without difficulty undercut the achievements recorded at the local, micro level by more organization of development, peace-making, and conflict avoidance initiatives. (O’Riordan 2001)

In the example of the IMF, along with that of the World Bank, throwing overboard the model of adjustment of the framework of operations has left them directionless, in the observation of scores of its critics, with merely the expression and wide ranging objectives of plummeting poverty, but devoid of an imaginative macroeconomic take on the various issues. Experts in the field and proponents of the organization refer to notions such as “bringing together” the “macroeconomic” and “social” features of growth, but Bank representatives are unable to point out a broad scoped policy reaching beyond growing tendencies of provide for health, population, sustenance, edification and social safeguarding to 25 per cent of the Bank’s overall lending capabilities. (James 2006) It is not unanticipated that, under such circumstances, the previous structure would reemphasize itself, with, for instance, the IMF directing the Thai government, by now one of its most compliant associates, to slash its economic shortage in spite of a very frail revival or perhaps the Fund’s forcing Indonesia to release its retail trade market to foreign financiers regardless of the penalties in the form of higher rate of unemployment. In addition, the problem of accountability is also a major concern. The Bank and the Fund have been accountable for remarkable financial and collective damage produced on Third World nations for more than two decades.

Case Study Of Wto

Third WTO Ministerial

The crumpling of the Third WTO Ministerial in Seattle in near the beginning of December 1999 branched out from the lethal permutation of enormous street remonstrations, an in-house rebellion in opposition to non-apparent decision-making by the developing nations, and the incapacity of the WTO’s two supreme authorities in the form of the United States of America and the European Union, to reach an conformity on major trade and commerce related issues. Seattle was, in a nutshell, the terminating point of antipathies and divergences that had been strengthening from the time of the Uruguay Round that had been covered by a apparent triumphalism (Kiely and Marfleet 2005) with regards to the WTO’s being the advance guard of an to be expected globalization. At the back of the falling down of the Seattle Ministerial, there has materialized the judgment that restructuring of the WTO is now the initiative that various NGOs, administrations, and citizens must embark on. The crumpling of the WTO Ministerial is said to present a distinctive gap of opportunity for a restructuring outline to enhance the in-house transparency and addition to have room for a bigger and more varied membership base. (Kiely and Marfleet 2005)

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WTO Doha Round

In this context, a case study of the WTO Doha Round negotiation is carried out. The abatement of the World Trade Organization (WTO) Doha Round negotiations in July 2006 may imply that the trade discussion have buckled down completely or that they may tread along on a much less motivated path than before. In both the cases, the confines of the WTO framework have become gradually more evident. Even though the round continues to endure the WTO will almost definitely be unsuccessful to deal with scores of of the key issues on its list of items.

The pressing reason for the predicament is the disagreement over agriculture liberalization. Agricultural course of action is a very intricate sphere of decision making that comprises of benefits with regards to food security, rural improvement, environmental health, employment and general health. Pronouncements relating to the extent of liberalization are in essence about the level of government participation there ought to be in this sphere—as for instance, in subsidizing or shielding manufacturers. This is a testing reckoning to go with even during the most flourishing periods. It is exponentially more complicated to mull over calculations when agricultural liberalization is swapped with other ideas entirely isolated in relation to agriculture, for instance market admittance for industrial commodities. (Steger 2003)

Even though this technique of negotiating, which is a distinctive trait of the WTO ‘single undertaking’ method of bargaining, may at times facilitate the reaching of an agreement, it is not all the time unbeaten. And even if consent is achieved, there is not anything in the course of action to make certain the value of the upshot. In a nutshell, what is absent is a substantial —and incorporated outlook of what agricultural guidelines should try to realize, and how the WTO conciliations can sustain that. Put in this way, the WTO conciliation route would have a better sense of direction and a clearer idea with regards to which essentials of global governance it encompasses, and which are influenced by various international establishments. This is relevant not only to agriculture, but also to a broad spectrum of strategy spheres with which the WTO is associated. One such guideline determining quarter is the health of the environment. Scrutinizing the WTO dialogues on the issues pertinent to the environment can be of assistance in throwing some light on what is capable or what isn’t possible to be realized in the organization. (Kiely and Marfleet 2005)

Environmental concerns are presided over by a huge number of global pacts, agreements and treaties, many of which also involve trade dealings. The WTO has been taking into consideration the connection between its set of policies and multilateral environmental agreements (MEAs) from the time when it was established in 1995. For the period of the greater than four years of the trade conciliations coming under the Doha Round, there has been modest or practically no mark of advancement in the discussions on the WTO–MEA correlation under Doha Ministerial Declaration (DMD) para. 31(i). Although the remission of these concessions does not take the most intricate portions of the involvement into account, WTO affiliates are essentially at odds over the scale of and perception of the 31(i) conciliations, and some proponents of sustainable progress had begun to justify those negotiations to be discarded on the whole for the reason that they dreaded a pessimistic end result. (Steger 2002)

In addition, while WTO constituents toiled with the WTO–MEA connection, many of those same administrations have unrelentingly concurred with new MEA obligations that have to do with trade guidelines with no clear cognition of how the plan and execution of those obligations are influenced by WTO policies. This policy disconnectedness is a sign of inadequate global governance of both trade and sustainable growth. The understanding of the recent past corroborates that the WTO by itself is not capable of bringing about a solution to this issue. As a matter of fact, global governance establishments are increasingly failing to conjure a common consensus resulting in annoyance of already worsening issues. Thus, major reform initiatives have to be carried out efficiently in order to revive the global governing process and stabilize international affairs. (Kiely and Marfleet 2005)

Multilateral establishments

Although internationalization has very much heightened the weights on global agencies, it has also increased a predicament of legitimacy and efficiency. A major section of the public no longer trust that their well-being are corresponded to in organizations such as the IMF, World Bank, UN Security Council and WTO—or that the agencies are satisfactorily responsible for their actions. Representation and answerability have at all times been feeble in such multilateral establishments. But at the moment the limitations are obvious for the reason that the agencies are being summoned by their influential affiliates to encroach much more intensely into spheres formerly the safeguard of national regimes— particularly in developing nations. In the recent past these organizations have ever more stipulated and required morphologic and institutional reorganization. There may be many options and suggestions which may be exploited to carry out reforms and restructuring activities within these institutions. (Kynge 2006)

If neither the WTO nor the UN or similar global agencies are able to approach or bring about a solution to these concerns by itself alone, an inter-institutional method of dealing with the situation might be a viable option. Any combination or permutation relating to both the WTO and the UN framework could possibly facilitate a constructive liaison between the various globally governing agencies. The thought process underlying this approach suggests that no particular organization has the authority or perhaps proficiency to deal with the various issues on the whole. For instance, an inter-institutional proposal intended at enhancing WTO–MEA synchronization could be a combined WTO–UNEP cooperative environment to manage and control either general concerns or specific problems relating to an issue or segment basis, possibly comprising of UNCTAD, World Intellectual Property Rights Organization and the FAO, in addition to the MEAs. (Murray 2006)

Affects of multilateral establishments

Even though developing nations are intensely affected by the pronouncements of global financial agencies such as the IMF, World Bank and WTO, they have modest authority in their process of decision-making. There is an obvious egalitarian insufficiency in global institutes given the fact that citizens do not have the right to straightforwardly elect or overthrow their administrative bodies. This would be factual even if all component nations of global organizations were prosperous democracies. Under existing provisions, people cannot exercise their votes to persuade, control or hold responsible their regime in its dealings in a global institution. Nor can people fall back on their legislative bodies and political leaders to hold global organizations answerable. However, the democratic dearth does not discard enhancing the representation in global organizations. (Smith 2007)

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Redemption

There is now larger acknowledgment of the call for the World Bank and the IMF to enlarge the representation of developing nations. This could be done in several ways. Firstly, the fraction of basic votes assigned to all constituent members should be incresed. At the time of the IMF creation, each affiliate was allotted an identical number of basic votes in addition to a proportion of votes that mirrored its economic affluence. As a prominent fact basic votes have been abandoned and at the present make up fewer than 3% of totality votes. Reinstate a level of equivalence in voting power for developing nations require raising basic votes to an approved share of voting privileges. (Kynge 2006)

Secondly, the authority of developing nations within the organizations should be improved. Officially, all affiliates of the IMF and World Bank decision-making boards are believed to choose the agencies’ leaders. But by tradition, Europeans decide on an entrant for the director of IMF and the U.S. administration decides on the chief of the World Bank. The nomination process has to be more transparent and perhaps made to some extent more essential concerning the candidates’ outlook on the idea for the agencies. A selection board for those posts would allow broader contribution and transparency. An additional step would be raising the percentage of participation for developing nations on the decision-making panels. (Murray 2006)

Thirdly, the institutions should be made more answerable for their initiatives, not simply to their administrative group members but also to the sections influenced by their pronouncements. In particular, this leads to guarantying transparency and keeps an eye on and assesses their principles, verdicts, guidelines and actions. Monitoring and evaluation is one of the most significant aspects in this regard. Like most organizations, global agencies should be put under unvarying pressure from stakeholders, affiliates, NGOs and reviewers to assess their processes and their efficiency in a more methodical, effectual and open manner. (Murray 2006)

Justification

The justification for greater enclosure and democratic system at the United Nations has led to demand for broadening the institute’s representative foundation. Reform suggestions concentrate on these quarters. It involves rising representation in the UN framework— escalating the plurality of influences in order that the organization is not perceived as being exclusively for administrations and administrators. There have been suggestions for a People’s Assembly—somewhat comparable to a chosen European legislative body, with people around the world voting for representatives. Additionally, suggestions have been made to permit civil society establishments to contribute in the negotiations of the General Assembly, Economic and Social Council and Security Council. (Schmidt 2007)

Conclusion

Global economic authority is in complete disorder and simultaneously reform processes are much required. The likely collapse of the Doha round and the outlasting framework and performance of the International Monetary Fund and the World Bank make reorganization of the global economic structural design unavoidable. In addition the political crisis and growing economic instability across the world demands reorganization to promote peace and security.

Bibliography

Bhagwati, J 2004, In Defense of Globalization, Oxford University Press, Oxford, New York.

Garnaut, R 2007, China: Linking Markets for Growth, ANU E Press and Asia Pacific Press, Hong Kong.

James, J 2006, Globalization, Information Technology and Development, St. Martin’s Press, New York.

Kiely, R and Marfleet, P 2005, Globalisation and the Third World, New York: Routledge.

Kynge, J 2006, China Shakes the World: A Titan’s Rise and Troubled Future and the Challenge for America, Houghton Mifflin, New York.

Mander, J 1996, The case against the global economy: and for a turn toward the local, Sierra Club Books, San Francisco.

Murray, W E 2006, Geographies of Globalization, Routledge/Taylor and Francis, New York.

O’Riordan, T 2001, Localism and Identity, Earthscan, London.

Schmidt, WV 2007, Communicating Globally: Intercultural Communication and International Business, Sage Publications: London.

Smith, C 2007, International Trade, 3rd edition. Stocksfield: Anforme.

Steger, M 2002, The new market ideology, Rowman & Littlefield Publishers, Lanham, MD.

Steger, M 2003, Globalization: A Very Short Introduction, Oxford University Press, Oxford, New York.

Stiglitz, JE 2003, WTO and Its Discontents, W.W. Norton, New York.

Stiglitz, JE 2006, Making Globalization Work, W.W. Norton, New York.

Waters, M 2004, Globalization, New York: Routledge.

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