The World Bank and the International Monetary Fund (IMF) are two international organizations created in the mid-twentieth century. The goals of these organizations are ultimately similar as both aim at the increase of the well-being of the countries throughout the world, either by reducing poverty and granting financial support in the case of World Bank or the increased financial stability, promotion of international trade, and stable economic growth in the case of IMF. As a result, the organizations have followed similar evolutionary paths, with some notable exceptions such as the structural adjustments conducted by the World Bank in the 1980s.
Analysis
The World Bank was conceived at the Bretton Woods Conference in 1944. The initial goal was to create an organization that would help the countries in need, resulting from the devastating World War II, to cope with the disrupted economy. Initially, the World Bank was focused on European countries. Fiscal conservatism was chosen as the preferred political-economic philosophy, which guaranteed the lower debt and more liberal conditions for loans, but meant stricter conditions had to be met by the countries applying for a loan. This effect was illustrated in three years when the first loan was approved to be issued to France for it to rebuild its infrastructure.
The loan was twice lower than the desired sum, and France had to comply with the strict conditions. First, the French government had to be restructured in order to exclude all the members of the Communist coalition. Besides, France had to demonstrate a solid budget that prioritized debt repayment. To ensure this, the World Bank established offices in France and closely monitored the process throughout its implementation.
The same year, however, the first major change occurred in the organization’s policy. With the emergence of other entities that offered similar services as a result of the Marshall plan, the World Bank had to turn to the non-European countries to deal with growing competition (SUNY 2). This defined its specialization for years to come, starting the very next year with the assistance in building the infrastructure on the Damodar river in India. The resources were provided mostly for building irrigation and power plants, as they guarantee the growing income that would eventually allow the repayment of the loan, a common practice up to the late seventies.
Meanwhile, as the new target group was much less sustainable in economic terms, the organization had to rethink its strict demands for loans. As a result, in 1960 a new institution, the International Development Association, was formed as a member of the World Bank Group. This entity focused on loans to the countries with the lowest gross national income.
The next decade saw several important key events. The World Bank’s capital was substantially increased using the global bond market. This increase allowed the organization to broaden the scope of the loans. Besides building the income-producing infrastructure, the funds now were also directed towards the creation of social services and other fields that focused on granting the developing countries the basic needs of their citizens.
The situation changed sharply in 1980, with a change in management. As the diverse and mild policy of the previous decade has led to the creation of the third world debt, the new structural adjustment programs were implemented to streamline the economies, as according to the new management, the loans did not create new wealth. This new direction chosen by the World Bank throughout the eighties was harshly criticized for undermining the social sector (Schilis-Gallego par. 1).
The final turn was taken in the late 1980s when the Bank decided to issue loans to non-government organizations. The environmental movement was prioritized around the same time, by providing funds to the environmental organizations and implementing environment-friendly policies, known as “Six Strategic Themes.” (“Conflicting Views” par. 4)
The International Monetary Fund was conceived in 1944 at the Bretton Woods Conference and officially became fully operational in 1947. Compared to the World Bank, to which the organization is closely related in terms of philosophy and ultimate goals, it has developed in a similar manner but had fewer radical turns in its policies. This is explained in part by the scope of its function. The main goal set by the IMF is economic stability, which is achieved through establishing the stable currency exchange, standardizing and promoting international trade, and support the countries that experience monetary or economic difficulties based on the current imperfection of the global picture.
In terms of scope, this means higher tangibility and less space for deviation. Thus, since its creation, the IMF was subject to little changes. The structural adjustments were implemented as early as 1952 and remained largely unaltered since. The most visible turning point was the end of the Bretton Woods system in 1971, which resulted in a serious disbalance of the economies worldwide. This has prompted the IMF to create the Trust Fund, the program focused on helping to the poorest countries.
The Trust Fund was succeeded with the Structural Adjustment Facility in 1986, the Enhanced Structural Adjustment Facility in 1987, and the Poverty Reduction and Growth Facility in 1999 (IMF 4). Each new program included stronger orientation at poverty reduction in accordance with criticisms voiced regarding the priorities set by the IMF’s structural adjustment programs. While some experts still believe that IMF favors the market development, trade, and production while ignoring the poor social conditions of the population, there is a clear direction taken by the organization to address these criticisms (WEO par. 1).
Conclusion
In conclusion, both the International Monetary Fund and the World Bank have been exhibiting similar development patterns with one notable difference. The World Bank has attempted a tightening of its policies in the 1980s which slowed down the formation of the third world debt but had an adverse effect on the well-being of many countries (“IMF & World Bank” par. 5). This conflicted with the organization’s primary goals and was overturned in the late 1980s. Otherwise, both entities have incorporated gradually more favorable conditions for developing countries over the course of their development.
Often times, the world has suffered terrible financial crises. The most severe being the 2007-2008 global financial crisis. Every time, a financial crisis has struck, economic policy makers meet in a conference like they did in 1944 in Bretton Woods conference (Hellener, 2010, p. 1).
However, the crisis has been recurrent regardless of the many policies that have been formulated. The failure of the policies in implementation has more often been blamed on policy mistakes made by developing world where the crisis emerges from (Hellener, 2010, p. 10).
Out of this, the solution in 1980s was perceived could originate from loaning the developing countries. International Monetary Fund (IMF) and World Bank were given the role of protecting global market from sovereign defaults and promote the adjustment programs in developing countries (Hellener, 2010, p. 9). This paper will seek to evaluate the effects of IMF and World Bank in the developing countries.
IMF and World Bank effects on Developed and Developing Countries
Both IMF and World Bank definitions of developed and developing counties are based on either high or low capital incomes which in turn depict the degree of interaction into the global financial system. Their definitions have created an aspect of losers and winners (Esty, 2002, p. 2) where the developed countries are the winners, and the developing countries are the losers.
The developing world has been placed in a losing position; most often than not, they are in need of support as they do not meet the set standards of the definition. It has always been an unfair judgment as the benefits of global trade may not be fairly distributed because not in all countries people are able to access free trade and fair economic growth (Esty, 2002, p. 3).
Therefore, the developing countries are the ones who have been utilizing the policy set in Bretton Woods conference of borrowing, and thereby, giving IMF and World Bank a great chance of influence as policy enforcers.
The influence of IMF and World Bank has greatly “contributed to the strengthening of the macroeconomic framework of member countries, reducing the public sector deficits and public debt accumulation, improving monetary control and reducing the distortions and dislocation of resources brought about by high rates of inflation” (Buira, 2003, p. 1).
This has set the developing countries at a vulnerable position where they are the ones always borrowing money from the developed countries in order to pull up their economies. The capital flow ceases to be from the developed to the developing as the developing repays the loan. Most countries, for instance, have tried to use the “theory of the second best” but have been greatly opposed by IMF.
The theory works when a country in a crisis through government intervention improves its welfare by the introduction of another country that is performing better economically (Buira, 2003, p. 1). This move was criticized by IMF even after Asia blaming the crisis on the speculative global financial flows (Hellener, 2010, p. 10). With such a kind of interference, Asia was not in a position to fill up the economic gap that was there hence the reason for its continued deterioration in the economy.
The idea of “market mechanism” developed in both IMF and World Bank operations have posed a very bad inequality problem for the countries that participate in the global financial markets. This is because, for a country to be considered as developed or developing there are factors like locality, population, and available resources that need to be considered.
For example, it will be unfair to judge a country that does not participate in international trade for lack of resources to a country that has oil, gold and other minerals, which facilitate the same. There is, therefore, a global inequality as 20% of the world population takes 80% of the global resources while the rest is shared the remaining 20% of the world population. No wonder the gap between the 80% of the population that lacks even the basic amenities gets (Danaher, 2001, p. 25).
However, time has revealed the hidden tricks played on developing countries. For example, in 2007-2008 during global financial crisis, China by market capitalization remained the only one that had the three largest banks.
This exposed the U.S., having been one of the countries considered to be developed dependent on foreign support from China and elsewhere (Hellener, 2010, p. 11). This makes it illegitimate to consider US and Britain as having more economic power than China.
There is a call to policy makers and financial analysts to question the stability of the developed countries without the support of the developing countries. The cited example proved that financial flow is from the under developed to the developed world which leaves the developing world with more needs than the developed world yet they contribute a lot to the global economy.
The policies of IMF and World Bank to rely on market solutions and international trade have been challenged with time. A country’s economic power cannot be categorized by what the market produces as the market only achieves certain goals.
This has caused its fault in evaluating the market failures that cause limited resource circulation in the developing countries (Buira, 2003, p. 3). For example, in a continent like Africa with a stable local economy had not suffered a financial crisis before the global trade came in. Everything was traded locally and there was no lack.
One did not need to have money as the mode of trade was barter trade. Global trade has brought everything to tumble as the currency stability cannot be predicted. The U.S. dollar being the standard global currency keeps on fluctuating in value hence affecting the countries whose currencies are weaker than the dollar.
This causes a great inequality where the market favors those with money as they make more money from the people who do not have. To sum up, the poor get poorer and the rich get richer, finally making it difficult for the gap to be bridged (Danaher, 2001, p. 32).
World Bank and the IMF are the most powerful enforcers of growth and a system of measurement that hides the social and environmental cost of market-led growth. Any eminent change from them will flow down to every other person and foster economic progress (Danaher, 2001, p. 32).
To regain their position to the public that has lost trust in them as economic leaders, they will be needed to start by correcting the mistakes they have done in setting unrealistic policies, which at the end get challenged every time there is a crisis. They also need to get back to the public where they, together with the public, will look for solutions that will operate at all times without subjecting any given country to any more financial risk.
Conclusion
From the discussion, it is evident that IMF and World Bank have contributed greatly to the widening of the gap between the developed and the developing counties. This comes about from their definition of the two, creating a superiority factor whereby, and countries with highest global finance interaction are being considered as developed.
The consideration has created financial inequality where the developed countries, which have the least population, enjoy the biggest share of the global economy while the rest remains to share the remainder. The results of this are that the rich countries continue becoming richer, and the poor countries get poorer.
However, this has been challenged as it was analyzed in 2007-2008 that the developed countries actually depend on the developing counties. There is, therefore, a need for the World Bank and IMF to revise their policies and get back to re-establishing the developing countries’ economy. They should device a way where the resources in the developing countries will remain with them to help them further in development.
References
Buira, A 2003, Challenges to the World Bank and IMF: developing country perspective, Wimbledon Publishing Company, London.
Danaher, K 2001, 10 Reasons to Abolish The IMF and World Bank, Seven Stories Press, Washington, D. C.
Esty, D 2002, ‘The World Trade Organization’s legitimacy crisis’, World Trade Review, vol. 1, no. 1, pp. 7–22.
Hellener, E 2010, ‘A Bretton Woods Moment? The 2007-2008 crisis and the future of global finance’, International Affairs, vol. 86, no. 3, pp. 619–636.
The World Bank is a global institution that supports many countries to realize economic growth. The World Bank funds the developed and developing states research, grants guidance as well as financial aids (World Bank Staff, 2011).
The background of WBG
The WBG constitutes of more than five organizations aspiring to engage in development. The World Bank launch took place in Washington DC in the fiscal 1944 and has 188 members currently. The establishment aimed to support the restoration of several Asian and European nations that were economically torn apart by the Second World War.
In fact, the rational originators of World Bank included Dexter Harry and Keynes John (World Bank Staff, 2011). The WBG does not symbolize a physical bank but an amalgamation of two separate growth organizations namely IDA (International Development Association) and IBRD (International Bank for Reconstruction and Development).
The World Bank goals
The main goal of the World Bank is to heighten the shared proclivity and bring to an end intense poverty in international arena. This goal helps in stimulating the endeavors of global nations in ending the cohorts’ poverty since it is attainable and ambitious.
Thus, WBG sustains the amplification of the welfare of societies suffering from poverty and shared propensity. Conversely, modernization and diminution of poverty is the contemporary and outwit goal of the World Bank in the comprehensive and protracting globalization (World Bank Staff, 2011).
By the fiscal 2030, WBG aspires to reduce the fraction of people with a living wage below two dollars to three percent. Equally, the World Bank seeks to increase the growth of income of each nation falling below forty percent in development in order to boost their income. For instance, the World Bank has currently initiated a project in Cambodia (A Basic Need to Help Children) in order to help the underdeveloped community having no toilets and those with deprived growth.
The International Monetary Fund (IMF)
IMF is an intercontinental conglomerate dealing with money matters with the aim of propping up the potency of finances across nations. The corporation also engages in decreasing poverty levels, sponsoring sustainable development within an economy, facilitating levels of employment and making international trade possible (International Monetary Fund, 2013).
The background of IMF
The International Monetary Fund was found in the fiscal 1945 at a conference in the United States. When approximated, the member states forming IMF all over the world encompass more than 188 nations. Indeed, both the British and United States governments laid hand in the creation of IMF.
In the main, IMF has played a greater role in outlining the economy of the entire world. The institution engages in lessening poverty levels, subsidizing economic development, and ensures the eradication of unemployment in member states. Similarly, the originators of the IMF were Dexter Harry and Keynes John during a Conference held at Britton Woods (Clift, 2001).
The goals of IMF
The utmost goal of IMF was to lend hand in the global payment scheme during global re-enactment, which occurred after the Second World War. The International Monetary Fund aspires to develop the member states’ economies with autonomous policies and economic surveillance. Besides, IMF seeks to help different people to transact freely through ensuring global financial stability in matters related to payments and exchange rates.
Hence, IMF essentially trims down poverty, advances standards of living, and props up economic developments that appear sustainable. In fact, IMF has projects in diverse nations (Clift, 2001). For example in Japan, IMF has improved policy-making flairs of over six hundred junior officers working with the government through the ‘IMF-Japan Cooperation in Capacity Building (International Monetary Fund, 2013).’
The United State Agency for International Development (USAID)
The USAID is an organization in charge of the development and assists various overseas inhabitants. The agency is run via the central government of the U.S. The corporation functions in Europe, Latin America, and Africa to encourage democracy, maintain disaster and support the living standards of citizens (Melito, 2010).
The background of USAID
John Kennedy who was the U.S President by then founded the USAID in the year 1961. Its endorsement via the Foreign Assistance Act enacted by the Congress aimed at facilitating growth and support of foreign countries. Through legislation and yearly Acts on funds appropriation, the Congress brings up to date the consent of USAID (Melito, 2010). However, USAID as a procedural federal organization works under the leadership of the United States National Security Councils, Secretary of State, and the President.
The goals of USAID
The USAID possess diverse goals that serve different purposes all over the world. In fact, it has spread out various sets of connections that cover up the occupier countryside operations. The USAID as an agency administers the agenda on goals ranging from socio-economic growth, the United States mutual interests, and worldwide matters in technical business such as atmosphere. Besides, its goals are based on the liberation of poverty as well as aiding states during harsh conditions.
The projects designed and implemented by the USAID spread out in the entire world. In Pakistan for instance, the USAID has provided assistance to countless lives that were affected in the course of flood and clashes (Melito, 2010). The recent PPII (Pakistan Private Investment Initiative) is a groundbreaking agenda by the USAID meant to seed private equity finances and control the investment proficiency in corporations with private equity.
References
Clift, J. (2001). What is the international monetary fund? Cambridge, UK: International Monetary Fund Press.
International Monetary Fund (2013). IMF research bulletin, March 2013. Cambridge, UK: International Monetary Fund Press.
Melito, T. (2010). International food assistance: USAID is taking actions to improve monitoring and evaluation of non-emergency food aid, but weaknesses in planning could impede efforts. Darby, PA: DIANE Publishing.
World Bank Staff (2011). The World Bank group’s response to the global economic crisis: Phase I. London, UK: World Bank Publications.
The International Monetary Fund (IMF) and the World Bank are international organisations created to provide financial aid, and enhance the structures of international payment systems in the world markets. In the year 1944, the two organisations began their operation following the signing of the Articles of Agreement by the member states. During its inception period, the IMF consisted of 45 members.
The two institutions share similar attributes in that they were created at the same time, are based in the US, and have analogous Articles of Agreement. However, the major distinction between the two institutions is that the World Bank is largely owned by the American citizens, while the IMF is largely owned by the European citizens.
According to the economists, the two organisations have great influence on global economic policies and strategies. Their authority over economic policies has contributed to the strengthening of the macroeconomic frameworks, reduction in sector deficits, and decline in public debt accumulations among the member states.
Contrary to what economists assert, sceptics believe that the two international organisations have acted beyond the powers given to them in their Articles of Agreement (Antonio 34). Over time, the World Bank and the IMF have redefined their mandates as financial institutions. On this background, this article seeks to explore the validity of these criticisms by analysing the policies and actions of the two organisations.
Background
World Bank
Before a country becomes a member of the World Bank, it must subscribe to the bank’s shares. Over time, the bank has majored on loan operations. Loans are awarded to banks, public institutions, and private organisations within their member states’ jurisdictions. In case a borrower is from a non-member state, the borrower’s loan needs to be guaranteed by a member state.
In accordance with the banks Articles of Agreement, all lending operations should be preceded by a guarantee agreement from member states. Before the year 1968, the bank was actively engaged in lending loans geared towards project developments.
However, when the Basic Needs approach was adopted, under the leadership of Robert McNamara, the bank focused its operation on tackling poverty in the developing countries. Similarly, the bank started to offer assistance in development projects in developing countries by overseeing Structural Adjustment Loan (SAL) programs (Suvedī 78).
Through these programs, the bank aims to change the national economic policies among the member states. After the arrangement of the SAL, funds are distributed in a systematic manner over time according to the country’s ability to push for changes in specific policy areas. Notably, the bank needs their member states to change their economic policies in line with their requirements.
This condition requires member states to reform their industrial, agricultural, financial, export and import policies. Through these measures, the countries have to share and sometimes relinquish their economic decisions to the World Bank. By doing so, the World Bank has interfered with the member states’ sovereignty contrary to the Articles of Agreement.
Similarly, by interfering with its member state public administration apparatus, labour regulations, and public investment policies, the bank has acted beyond the powers given to them in their Articles of Agreement by compromising on the member state’s sovereignty.
IMF
The IMF allows its member states to contribute to the bank’s deposits. Through this contribution, each member state earns interest, quota, depending on its economy. According to the IMF regulations, the quotas consist of five tranches accessed in times of financial need. The member states have automatic access over one of the five tranches. However, other tranches are accessed under certain conditions and arrangements.
Among these arrangements are Stand-By Arrangements, Poverty Reduction Arrangements, Growth Facility Arrangements, and Extended Fund Facility Arrangements. These arrangements and conditions were incorporated to ensure that the bank resources meet the member states’ goals of resolving balance of payment challenges in accordance with the banks Articles of Agreement.
Under these conditions, the bank can only disburse its money to the borrower on a piecemeal basis. Similarly, the loans can be accredited when the borrowing state meets certain economic and financial policies required by the bank. Through these acts, critics argue that international organisations have not only interfered with the member states sovereignty but also limited their ability to create their own economic and financial policies.
Criticisms
Following the current state of the world economy, the two institutions have been heavily criticised for the ever-increasing gap between the poor nations and the rich nations. Critics argue that the two organisations have acted beyond the powers given to them in their Articles of Agreement. Currently, more than 400 organisations and NGOs have ganged up to call for the restriction and regulation of the two institutions (Lowenfeld 23).
According to these groups, the two institutions lack the expertise to tackle social and environmental challenges affecting each specific country. As such, the organisations should formulate specific policies and measures to be used in each country.
In addition, these groups argue that the IMF has only focused on rectifying short-term balances of payment challenges damaging the social fabric of several countries, rather than helping them as the Articles of Agreement assert.
Globally, it is widely argued that the two international banks’ policies have worsened the global economic and financial situations. According to critics, the organisations’ policies have not only failed, but also worsened the economic conditions in the borrowing countries. A similar criticism claims that even in countries where the two organisations have led to the enhancement in macro-economic indicators, social disparities have been eminent.
Notably the use of one-size-fits all approach and restrictions of government involvements in their policies have resulted in a vicious cycle of stagnation. These approaches have seen the debtor countries reduce the public expenditure in several sectors including health, education, and other social services.
In the recent past, more debtors have had to privatise their state firms, limit credit lending, and reform their tax policies to meet the requirements stipulated by the two organisations (Schrijver 56). Through these measures, the organisations have triggered conflicts in some nations. For instance, in the year 2000, the World Bank forced the Bolivian government to privatize its water service system.
They had to abide by the World Bank’s directive to qualify for the 25 million US dollars they had requested for from the institution. Through this move, the government of Bolivia had to reorganise its resource management systems to suit the foreign interests rather than the country’s interests. These initiatives later sparked numerous protests and demonstrations from the country’s citizens.
On the other hand, critics have criticised the two organisations for their lack of transparency and democracy in their affairs. Though the institutions claim that they are transparent, their hypocrisy is evidenced every time they carry out their activities in seclusion.
Critics argue that the organisations should exercise transparent governance because as they require from their debtors. The IMF has been heavily criticised by sceptics for its lack of transparency in most of its acts. Sceptics argue that before IMF enters into an agreement with any country, they already have decided on the policy proposals thus limiting the country’s ability to adjust on these proposals.
Through these acts, the IMF does not only contradict its governance procedures as stipulated in the Articles of Agreement, but also perpetuates unresponsive policies leading to severe economic condition in debtor countries (Qureshi 67).
Criticisms on the democratic deficit bases their principles on the fact that the funds lend from these institutions are provided by the G-7 member states. According to the critics, it is wrong for the two institutions to impose inappropriate policies on countries that have no ability to contribute to the decision processes in the two organisations.
Similarly, the restrictions of the debtor countries’ participation in decision-making processes amount to violation of their rights to govern their country directly and indirectly. In addition, the citizens of the debtor countries have limited mechanisms to force the two organisations to be accountable in their acts.
Analysis
The World Bank’s and the IMF’s articles of the agreement are clearly outlined, and any acts by these organisations not covered in the Articles of Agreement are considered ultra vires. Thus, the functions of the two institutions must be in accordance with the Articles of Agreement. In the recent past, the two organisations have been heavily criticised for interfering with political and social affairs of their member states.
According to article 10, of the World Bank Articles of Agreement, the bank and its personnel are prohibited from interfering with political affairs of their member states (Simon & Bryan 34). As such, the articles assert that political individuals in the member state should not influence the bank’s decision.
This implies that the bank should focus on economic affairs rather than political affairs of member states when formulating their policies. As emphasised in their Articles of Agreement, the bank should uphold the political sovereignty of its member states. Similarly, the IMF’s Articles of Agreement prohibit the organisation from participating in political interference among the member states.
From the stipulations outlined above, it is apparent that the international lending institutions embrace the same view on political actions in member states. Contrary to this rule, these organisations are accused to be working under the preference of the United States and other industrialized countries. These countries are alleged to be providing structural constraints within which the IMF and the World Bank work.
Beyond these constraints set by the industrialised nations, activities of the IMF and the World Bank are subjective to professional economists whose intentions are in accordance with particular institutional environments. Owing to this, the IMF and the World Bank prescriptions have been accused of aiding political pressures and institutional constraints from their stakeholders’ countries.
Since their inceptions, corruption has been a great concern for the two organisations. The organisation has condemned on the vice recognising as a major challenge in the developing countries. In the affected countries, corruption has drained their national resources and negatively affected their economy.
The organisations have been advocating for the formation of anticorruption bodies in the affected member states to thwart the practice. Challenges arise when the affected member state borrows money from the international organisations. According to their Articles of Agreements, the institutions are supposed to ensure that the money borrowed is used in the intended purpose.
In this regard, the organisations cannot separate themselves from the issues of corruption in the affected countries. However, their involvements must be in accordance with the Articles of Agreement. Through this, they are required to advise, encourage, and support the affected countries in fighting corruption only without being involved in their political affairs.
However, over the years, the World Bank and the IMF have formulated policies that have deprived the lawfully governments’ abilities to create their own economic policies and programs. Though the two organisations have refuted the claims, these acts are eminent from the way they distribute their loans to various governments.
Several literatures have focused on how the IMF and World Bank have trampled on the national sovereignty of its member states. These literatures assert that the institutions have compromised on the national sovereignty of the member states through imposing conditionality on their loans.
Remarkably, international organisations including the World Bank and the IMF have imposed western cultural values on emerging economies disregarding on their autonomy. According to Graham Bird, when countries turn to IMF for fiscal assistance they have to aware that they are losing their national sovereignty over economic policy to the institution.
Another writer, Catherine H. Lee, believes that the IMF and the World Bank have greatly interfered with the internal affairs of developing member states.
Thus, it is a fact that the two international organisations are interfering with the political affairs of their member states indirectly through their conditionality arrangement. By doing so, critics’ allegations that the organisations are acting contrary to the powers bestowed to them by the Articles of Agreement are confirmed.
Over the last decade, the two organisations have evolved immensely astonishing the critics and their founders. Their expansion has come to be referred to as economic creep by the sceptics. Between the two organisations, the IMF has been greatly criticised due to its dramatic expansion.
During its inception, the IMF was only mandated to provide fiscal assistance and assist countries manage their balance of payment challenges. However, over time the institution has expanded its boundaries to include development and poverty eradication programs. Through these initiatives, the IMF has acted contrary to its Articles of Agreement since these acts were not envisioned in the original articles.
Those against this move argue that it is illegal for the institution to engage itself in activities meant for other organs of the UN agencies. Through these changes, conditionality measures have been introduced.
Over time, these conditionality measures have expanded to oversee adjustment of national currencies. In the recent past, the measures have expanded to include trade liberalization, bankruptcy legislation, poverty eradication measures, anti terrorism measures, and bankruptcy legislations.
IMF and ultra vires acts
Through their massive expansion, the IMF has been accused of overstepping its mandate outlined in the Articles of Agreement. The IMF has compromised its original mandate of facilitating payment adjustments through these dramatic expansions. If the organisation had stuck to its original mandate, it could have generated little business.
However, by redefining its roles to meet with the current economic challenges, the institution has had to deal with issues tackled by the multilateral development banks leading to the conflict of interests. For instance, the IMF’s shift to finance the long-term balance of payment had long been initiated by the World Bank.
The World Bank had tried to tackle the issue before they changed their mandate to finance projects aimed at eradicating poverty. Equally, the IMF has overstepped its mandate by availing its funds to all developing countries.
As stated in the Articles of Agreement, the IMF’s balance of payment support is limited to low income developing countries. Through these acts, the IMF has denied some countries with chronic payments deficits chances to revive their situations.
In its attempt to enhance the development and poverty alleviation programs in the developing countries, IMF strategies and structural conditionality have covered all areas related to development policy. Through this act, the organisation has not only acted contrary to the Articles of Agreement, but also created numerous problems in development policy. It is alleged that the institution is not competent to tackle such complex issues.
Those opposed to this move argue that there are serious risks in relinquishing development matters to international organisations mandated to tackle short-term financial challenges. It is a fact that the IMF’s involvement in poverty reduction programs may yield fruits; however, this does not imply that that the organisation is acting in accordance with the Articles of Agreement by working in such areas.
The IMF should realise that there are other recognised institutions, with expertise and resources, mandated to work in such areas. In this regard, the IMF should stop with immediate effect duplicating other institutional projects, and rather cooperate and coordinate development projects directed by these institutions.
The IMF and the World Bank have refuted claims that they are duplicating their functions. The two organisations argue that they are closely working together to coordinate their programs and to minimise overlap. However, reality indicates that indeed the two organisations are duplicating their roles contrary to their Articles of Agreement.
Through these acts, opponents have called the two organisations to merge their roles. Similarly, the two organisations leadership has been accused of being undemocratic. The voting rights in the two institutions are not allocated on the principles of democracy. As such, most of their votes are allocated to wealthy industrialized nations. This implies that the more money a country has the more votes they earn from the two organisations.
Allegations against the IMF in Asia
In Asia, IMF’s and the World Bank strategies in the past have conflicted with their Articles of Agreement. During the Asian crisis, Indonesia was adversely affected by the economic challenges due to poor policies and strategies, which were implemented by the IMF to reverse on the situation. During this period, 1997 to 1998, the Indonesian currency lost its value by 83% owing to forceful interactions of politics and economics policies.
As a result, Indonesia’s economic imbalances were rated among the worst in Asia. In their attempt to reverse on these situations, the IMF had to step in and help the country from further economic plunders. Through this, the IMF advised the Indonesian government to reduce on their expenditure, cut down expenditure on social services, privatise its state firms, and adopt appropriate fiscal policies.
Before the country could be funded, to bail its state institution out of the fiscal challenges, they had to meet IMF’s conditions. Later on the IMF’s program in the country led to several problems. The structure of the program adopted was so complex that the country could not incorporate. Similarly, the provisions provided by the IMF strained the Indonesian government’s ability to ease its social pressures.
On the other hand, restructuring led to a rapid decline in the economy’s expansion raising the level of public frustration. During the crisis, the Indonesian market confidence was greatly affected by the financial catastrophe.
Under the IMF’s program, the country was prohibited from bailing out banks and private companies that succumbed to the crisis. As a result, Indonesian businesses suffered.
Later on when the government implemented tight monetary policies under directives from the IMF and the World Bank, the country witnessed the closure of several unprofitable banks, reduction in budgetary spending, and the failure of extended companies. Because of these, the IMF realised that their acts were going to trigger social tension.
To prevent such occurrence, the IMF approved that under no circumstances could the elites be exempted from the sternness. Through this move, the IMF moved in to fight corruption to restore market confidence in the country. Critics argue that the IMF and the World Bank initiatives during the crisis were out of their power as stated out in their Articles of Agreement.
The IMF’s structural reforms in the short term had negative implications on the country’s economy. As such, when Indonesia adopted these structural reforms in accordance with the IMF’s directive, they increased their country’s future indebtedness.
Economists assert that if the country could have used $10 billion IMF standby finance during the crisis, the country’s debt stock could have increased by 70%. According to the economists, these figures could have been extremely high, and could have led to further economic crises such as defaults in the long-term foreign debt payment.
Another challenge experienced in Indonesia during the crises was that the public was under-informed on the roles of the IMF during the crises. According to economic analysts, the challenges in Asia at the time were unique. In this respect, the analyst believed that the IMF deployed the wrong policies and strategies worsening the situation.
This implies that, the budget cutting, credit tightening and emergency bank closures were inappropriate. Therefore, the banking sector should have been strengthened by the government and the IMF rather than enhancing their hasty closures. Through this, the IMF and the Indonesian government should have advised the weaker banks to merge with the stronger banks and encourage them to raise their capital bases.
Economic crisis in Russia
The Russian economic crises of the year 1988 proved that international lending organisations interfere with economic, social, and political activities of their member states. By examining, the IMF’s involvement in Russia for the last decade, we can affirm this allegation. The institution has not only interfered with the country’s political structures, but also objected the second phase of reforms desired by the Russian citizens.
From the beginning of their involvement in Russia, the IMF’s interests were driven by the western interest and aspirations in the region. As such, the institution was not competent to tackle the issues faced by the Russians during the economic crisis. It is alleged that the institution was largely preferred over the EU since it solved the country’s crisis in accordance to the US’ wishes.
At the same time, the US interest in the region promoted its overall rating. Similarly, by engaging itself in the Russian economic crisis, the IMF saw this as an opportunity to take a lead in policy alteration economies.
Before the crisis, the institution was actively engaged in tackling balance of payment challenges in member states. Based on these allegations, the IMF overstepped its mandate right from the time it began its involvements in Russia.
As stated above, several challenges emerged from the institutions involvements in the country. During this period, the IMF had little experience of tackling long-term economic issues since this mandate was not stipulated in their Articles of Agreement. In this regard, the institution was not competent enough to enhance the country’s transition from communism to capitalism.
When Russian government was faced with an economic crisis in the late 1980s, they applied for membership in the IMF. Its membership was fully granted in the year 1992. Following this, the institution funded the country’s government in two phases before stopping. Critics assert that although the IMF allowed the country to become part of its members, the institution was slow in responding to the country’s needs.
According to the critics, the slowness to respond implied that the organisation was acting under the policies and interests of the Western countries who are the major shareholders. Through this act, the IMF acted above its powers stipulated in the Articles of Agreement by being influenced by political interests.
Similarly, the institution is criticised for its steps in advising the Russian government to liberalise their markets and privatise their state firms contrary to the Russians wishes. Through this move, several protests and demonstrations were witnessed through Russia.
Similarly, the Russian parliament was involved in objecting the government’s directive. According to the demonstrators, the government had made a wrong decision by accepting foreign assistance in the management of their economic crisis. Those opposed to the move were fully aware that international organisation participations in their country would compromise on their national sovereignty.
Allegations against the World Bank
Having been in the lending business for more than five decades, the World Bank is a major lending institution in its field. The bank provides more than $20 billion annually to its borrowers. Its stakeholders through a board of directors control the bank. During its inception, the bank was mandated to alleviate poverty through funding long-term development projects.
Over time, the bank has expanded its roles and become more bureaucratic, more inwardly focused, and more averse to criticisms. Through this initiative, the bank has fostered a lending culture disregarding the risks of failure. Similarly, its management team has lied to the public on its lending operations, fostering an illusion that the institution is aimed at enhancing world developments.
Because of these, the sceptics have condemned the World Bank for acting above its mandate. Although the organisation management teams are responsible for the bank’s success, they develop and implement economic policies as they are pleased disregarding the Articles of Agreement. It is alleged that the bank’s management teams are the gods of lending.
This implies that they have disregarded the terms stated out in the article of agreement by leading the bank to perform its unintended missions and ignoring their professional obligations. Similarly, it is alleged that the bank is cooperating with some of the third world government officials to fund white elephant projects contrary to the best interest of the citizens in these developing nations.
Critics argue that the bank pretends to be lending their funds for noble initiatives in the third world countries, while the borrowers pretend they will put the funds in the noble initiatives. Through these illegal acts, some of the bank’s staff and borrowers’ leaders have been able to serve their own interests at the expense of the poverty-stricken citizens.
Notably, the World Bank’s initiatives relating to governance and anticorruption have attracted numerous criticisms. In the late 1990s, the World Bank and the IMF activities in the developing world were being faced with numerous challenges owing to rampant cases of corruption in the countries. After decades of lending, the bank realized that the borrowers were losing their borrowed money through corruption.
The bank attempted to stop the prevalence of corruption through investigations, identification, and exposure of fraud committed against Bank projects. Through these acts, it depicted an appropriate step towards fostering accountability and transparency in their projects, which was against the provision stipulated in their Articles of Agreement.
After a futile attempt to stop corruption cases, the World Bank management later realised that they had overstepped their mandate, something that the critics could use against them, the bank changed its focus on fighting corruption.
The bank then shifted from exposing corruption to studying it. Critics argue that the shift of focus has worked well, in that it has allowed them to claim leadership in fighting corruption whilst authorising them to continue funding the corrupt governments.
Through these acts, it is clear that the World Bank and the corrupt governments continue to plunder billions of dollars through white elephant projects each year. Although the World Bank claims that it is making positive steps towards ensuring that their funds meets the intended purposes, they should realise that the gap between the poor and the rich in the developing countries has been on the increase.
By acknowledging this fact, the World Bank should similarly acknowledge that by the institution acting beyond the powers outlined in its Articles of Agreement has aggravated the situation. Similarly, the World Bank should acknowledge this allegation by lending less and supervising more.
Through this, it should employ all the possible powers outlined in the Articles of Agreement to investigate, prosecute, and punish corrupt staff members who are colluding with the corrupt governments for their own selfish interests.
The bank’s claim that poor governance and corruption are the major obstacles to economic growth has resulted in numerous disagreements between the accused governments and the organisation.
Developing countries insist that the bank’s effort to stem out corruption and promote good governance within their territories is beyond the powers given to them in their Articles of Agreement. Despite the fact that these governments’ claims are true, they should realise that the bank’s funds are meant to uplift the livelihoods of their citizens, and not to benefit some few elites in their respective governments.
Despite the critics’ allegations, legal writers argue that through the acts described above the World Bank and the IMF acted within their legal mandate. According to these scholars, the decision organs of international organisations such as the World Bank have exclusive rights to interpret the article of agreements. By doing so, international institutions are mandated by the provisions to commit illegal acts.
With respect to these legal experts’ concept, the doctrine of ultra vires is not applicable to international organisations, and that their activities and decisions are always legal and valid. The Articles of Agreements of both organisations have clear procedures to be followed in determining whether an individual or the executive board members exceeded their powers in interpreting the provisions.
Through this, the IMF and the World Bank have argued that their acts of expanding the organisations mandates were justified within their Articles of Agreement. The organisations assert that the expansion of their institutions has taken place in accordance with article IV consultations. For instance, before the collapse of the par value system the IMF was largely involved in the macroeconomic issues.
After the collapse of this system, the IMF became involved in the microeconomic issues. The organisations argue that it was within its mandate to change its roles as the article of agreements allows the organisation to tackle payment deficits and to assist countries with balance of payment issues.
Conclusion
In conclusion, we should note that the World Bank and the International Monetary Fund were created as specialized agencies of the United Nations during the World War II. According to their Articles of Agreement, the two institutions function under the directions of the Economic and Social Council (ECOSOC). Sceptics argue that the two organisations are not functioning in compliance with the ECOSOC directives.
If the two organisations could work under the General Assembly directives, they could not only be more accountable, but also concentrate more on both social issues and banking interests. Informal surveys indicate that the top officials in these organisations are unaccountable to their member states.
According to these surveys, most individuals are not only unaware of the existence of the two organisations, but also unaware of their functions. The organisations spend huge sums of their resources in propaganda that portrays them as institutions aimed at steering acts and policies geared towards enhancing economic development.
However, in the recent years the two organisations have been under heavy criticisms for acting beyond their Articles of Agreements. Notably, academics and NGOs have alleged that the two organisations represent the interest of the transnational corporations and banks that provide them with most of their capital.
As such, individuals mandated to create policies in these organisations operate under the influence of first world bankers and third world elites. This implies that the poor, who are the majority, are shielded from presenting their policies and evaluations. In this regard, this article concludes that the two organisations are reinforcing poverty rather than reducing it.
According to their Articles of Agreements, the two organisations should encourage private corporations to invest in the developing countries in order to spur economic growth in these countries. Instead, the organisations have focused on increasing profits for their shareholders at the expense of the poor in the developing countries.
Similarly, by allocating huge sums of money in the hands of some few elites in the developing countries, the IMF and the World Bank have equipped these few individuals with resources enabling them to hang on to power and resist social pressures (Weiss & Friedl 7).
Works Cited
Antonio Cassese. International law. Oxford: Oxford University Press, 2004. Print.
Lowenfeld, Andreas F. International economic law. Oxford: Oxford University Press, 2002. Print.
Qureshi, Asif H.. Perspectives in international economic law. London: Kluwer Law International, 2002. Print.
Schrijver, Nico. Sovereignty over natural resources: balancing rights and duties. Cambridge: Cambridge University Press, 1997. Print.
Simon, Lester and Bryan Mercurio. World trade law: text, materials, and commentary. Oxford: Hart, 2008. Print.
Suvedī, Sūryaprasāda. International investment law: reconciling policy and principle. Oxford: Hart, 2008. Print.
Weiss L, and Friedl. International economic law with a human face. The Hague: Kluwer Law International, 1998. Print.
The article ‘The World bank of the future’ gives an insight into the contributions made by the World Bank to the development of the world economy. It assesses the available means that can be used to eradicate poverty. As such, countries that defaulted payments should be offered funds with rational restrictions to avoid suffocating the countries’ economies.
This issue will allow for the restructuring of lending programs once such default reoccurs to complement the scuffled optimal plans. Also, the World Bank should promote the invention of economic ventures and investments, which increases its capital base. Such an initiative can be achieved by offering capital investment, such as infrastructure and information expertise needed to initialize these investments (Banerjee & Ruimin, 2010).
It could also utilize its advantages to pursue the creation of viable procedures that promote economic activities. The article also delves the procedures that the World Bank can utilize to improve efficiency in targeting its objectives.
A quasi-experimental design is used to conduct qualitative research of the overall credit allocation of funds to the countries. The authors used the loans lent to the market as a controlled variable, which enables them to hypothesize the market performance and estimate the effectiveness of the World Bank in carrying out its economic tasks.
The data used is not accurate due to the presence of biases in the selection of the sample countries and controlled variables used in the experiment. Such an issue may have altered the results obtained regarding the effectiveness of the World Bank in achieving its objectives through lending (Banerjee & Ruimin, 2010). The data does not give a true representation of the effectiveness of the World Bank through the different methods of lending.
This is attributed to an arbitrary sampling method adopted, which is contrary to the expected scientific random sampling method. Therefore, this research does not consider the pre-existing economic conditions of the countries selected, which may have affected in conclusion the effectiveness of the World Bank.
In many instances, the World Bank advocates for the best economic practices that effectively reduce poverty. Since major world policies favor the developed countries, the World Bank stepped out to use its expertise and negotiation power to offer terms favorable to the third world governments. Although the bank has been lenient on some defaulters, it has created a set of strategies targeted at one of the fundamental issues, which is poverty reduction.
This initiative was done by ensuring that information was effectively passed on through education, provision of means of communication and targeting the marginalized population (Banerjee & Ruimin, 2010). Participatory events were also set up to assess the poverty level and viable means of eradicating it, such as through micro-financing.
Several questions have been raised on the impact of the strategies used by the World Bank in the eradication of poverty. The management of lending defaulters and the discord with other lenders have been the main issue. Opponents argue that there should be a module to ensure punishment of defaulters because restructuring the loans would be detrimental to the borrowers in the long term.
The bank has provided clear-cut procedures to support bankrupt countries. The involvement of private sector lending in the eradication of poverty has affected the bank’s response during the evaluation of projects and is undertaken negatively. Questions posed to the bank include the way its rates are achieved and initiatives were taken to create an all-inclusive means to eradicate poverty.
Reference
Banerjee, A., & Ruimin, H. (2010). The World Bank of the Future, Economic Review 14(1), 39-44.
The development of modern countries is predetermined by a variety of factors, including legal, institutional, and policy questions. The governments are ready to deal with the existing demands and the already established standards and rules.
The World Bank is one of the main international organizations that provide financial and organizational assistance to developing and developed countries around the whole world. Its loans and capital projects help to stabilize the economic situation in countries and create the conditions under which the progress in different fields becomes possible. Regardless of the existing growth and evident achievements in different fields, many problems remain unsolved and continue creating new challenges.
According to the World Bank Group with the World Bank as its main component, corruption is a serious global problem that leads to poverty, unfair treatment, increased costs, and public discontent.1 It is characterized as a complex phenomenon with its roots being observed in political and bureaucratic institutions that take responsibility for the overall development. Corruption hurts development and requires taking serious steps and implementing new policies in different fields, including the environment, health care, global safety, economics, or labor.
In this paper, the theme of corruption will be discussed from International Law and its relation to the World Bank. The international development of the countries cannot be stopped or controlled, and many unexpected outcomes and conditions may appear in a short period. The goal of this paper is to discuss the worth of the World Bank in the international arena and its contribution to the solution of corruption-associated problems from the legal perspective.
The analysis of the goals and purposes of the World Bank and the definition of international law helps to expand a list of contributions these two bodies may have on the development of anti-corruption policies. As a result, the World Bank in assistance with international law provides and contributes to international development through the introduction of policies and the definition of the standards for statues on the examples of the United Kingdom as a developed country and India as a developing country.
World Bank Essence
The World Bank is an international financial facility that exists since 1945 when it was created to help countries to borrow money and receive aid for their development and solution of current problems. This organization was formed to investigate the reasons for extreme poverty in different countries and promote prosperity by offering enough opportunities.2 According to the World Bank, the root of poverty is the present injustice that has to be eliminated by “creating the enabling environment for a range of development outcomes – from improved basic services to increased private sector investment and reduced corruption”.3
Together with the International Monetary Fund (IMF), the World Bank takes the necessary precautionary steps to control poverty and recognize the sources of corruption as a political and financial issue. It evaluates the conditions under which the governments may promote the development of their countries and offer loans to support and reduce the number of financial challenges.
The World Bank is a coalition of countries that are ready to become financial donors for other nations. At this moment, this group focuses on the provision of financial and technical aid to clients, supporting criminal justice and order, and improving global knowledge and initiatives. It is also necessary to understand that the World Bank is not a separate organization but a part of a huge international group. There are five main organizations in this group, including the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).4
Each organizational unit has its specific goals and functions in the World Bank Group. For example, ICSID provides international facilities with a chance to demand investment disputes’ arbitration. MIGA focuses on the creation of new opportunities for foreign direct investment and guarantees against any political risks for both donors and borrowers. IFC deals with the private sector and assists developing countries in sustainable development that includes advisory services and financial investment.
The World Bank is a combination of two units of the World Bank Group, IDA and IBRD. IDA is responsible for credits that can be offered to developing (the poorest in the list) countries in their intentions to achieve some financial growth.
IBRD works with middle- and low-income countries the governments of which can prove their creditworthiness and give enough reasons for a new interest-free loan being offered. The World Bank investigates such issues as climate (environmental management), gender (equality promotion), employment (the creation of new good jobs for people), and violence (the removal of social and political conflicts). As soon as enough material is gathered, solutions and alternatives have to be formulated, and the countries in need may define some new aspects in their development from legal, political, environmental, and social perspectives.
Aims and Purposes of the World Bank
As a part of the World Bank Group, the World Bank has established one significant mission. It is expected to end extreme poverty in the world by 2030.5 This organization sets clear and definite purposes and proves its readiness to work hard to decrease the percentage (up to 3%) of people who live on less than $1.90 per day.6 The promotion of prosperity among the citizens of developing countries includes the possibility to increase the income growth up to 40%, and the World Bank performs an important role in this mission.7
It creates unique opportunities for poor or middle-income countries to ask for financial and technical help and maintain sustainable development. The main tasks of the World Bank are to provide loans, give guarantees, promote risk management, and coordinate challenges with the governments of the countries in need. Also, this organization aims at researching and analyzing the conditions under which developing countries can achieve progress by participating in different conferences, collaborating with many partners, and advising political leaders.
The World Bank has already established three priorities in its work with developing countries. First, it is important to focus on the results that can be achieved within a certain period. Therefore, the outcomes of the work done should be clear and measurable. It has to be easy to track changes and underline the progress made, as the implementation of new policies, approval or elaboration of laws and regulations in different countries, and the establishment of additional economic or political purposes.
The next priority is reformation with the help of which it is possible to improve living conditions and underline each aspect of the work. It is not enough to offer a loan and make it available to developing countries. Any offer has to be properly explained to a government and a community, and access to this information determines the worth of the World Bank. Finally, open development is the priority that cannot be neglected in the discussion of development, prosperity, and poverty reduction. The World Bank offers a variety of free printed and online sources with comprehensive information about the development in countries, crucial indicators, and challenges.
Overall Contributions of the World Bank
The contributions of the World Bank remain an integral part of international development, as well as economic, political, and social freedoms. Being the main source of loans and credits for developing countries, this facility has enough background information to introduce new policies, law operations, and institutions. According to the World Bank report developed in 2017, all “policies do not occur in a vacuum”, meaning that “complex political and social settings in which individuals and groups with unequal bargaining power interact within changing rules as they pursue conflicting interests”.8
It is expected that this organization deals with some external and internal factors while promoting sustainable growth and prosperity in developing countries. The work of the World Bank introduces a difficult system of tasks and functions that have to be performed in a logical order and according to the existing rules and regulations.
Also, the World Bank can monitor and analyze the progress of each country and clarify which targets have been already achieved, and what kind of work should be performed at another level. Recent technological progress offers multiple opportunities for countries regardless of the fact if they are ready to accept new options or not. Modern technologies have already helped more than one billion people to lift out of poverty.9 At the same time, technologies may challenge some countries and their governments because not all people understand the essence of technologies and can use them properly, thus promoting inequality and other factors to divide people into groups.
Therefore, technological contributions and data exchange under the control of the World Bank must be underlined in this sort of discussion. Nations have to be properly educated on how to use the information and available communication technologies. Innovations, policies, and research activities sponsored by the World Bank help to train people to build necessary capacities and monitor recent achievements. Overall, the World Bank is the organization that uses its financial opportunities to promote economic, social, and political prosperity in developing countries.
The World Bank and Economic Development
The World Bank is a financial body that performs multiple functions to reduce poverty that is an integral goal of economic development. The improvement of financial and economic welfare in the countries around the whole includes the necessity to strengthen public literacy, social infrastructures, and even healthcare indicators. Policies within the frames of economic development are based on investing in human capital with three main skills to be properly identified, including “advanced cognitive skills such as complex problem-solving, socio-behavioral skills such as teamwork, and skill combinations that are predictive of adaptabilities such as reasoning and self-efficacy”.10
In addition to personal qualities that serve as a basis for economic development and public goods, the recognition of necessary economic indicators is required. They may include inflation control, privatization, the establishment of low taxes, and investment. The World Bank promotes macroeconomic stability that is an important part of economic development in any country. It embraces effective monetary and fiscal policies and tools to stabilize the economic cycle and manage recessions because of inflation.
Governments develop social and financial programs to deal with poverty and create appropriate conditions for countries that want to take long-term loans. Globalization and industrialization lead to the establishment of international relationships that in turn promote international trade and foreign investments. The World Bank, as well as the International Monetary Fund (IMF), is an international body that develops structural adjustment policies and regulations for a country regarding its economic conditions, social attitudes, and other norms. Tax revenues can be raised, inflation may be controlled, and the budget deficit is reduced because government spending removes the existing barriers on markets.
Offered adjustment policies contribute to economic freedoms in developing countries. Compared to the IMF activities within which structural and growth-oriented changes are not possible, the programs offered by the World Bank have clear development goals and enough financial sources. Cooperation among more than 100 countries is a unique opportunity to find the necessary help in a short period and choose between the most suitable conditions. In other words, the environment that is conducive for business is created with reduced regulations, corruption, and costs.
Corruption as a Global Concern
The task of the government, as well as the World Bank or any other international organization, is to tackle corruption and avoid the mistakes associated with the need for inward investment. During a long period, corruption turns out to be a serious and, what is more important, complex economic issue that affects development in countries. It hurts poor and vulnerable populations when costs are increased, and access to necessary services (health care, education, and law) is limited.11
Because of existing corruption, poor people continue paying high taxes without the possibility to change a situation, and rich people can find out the ways and improve the conditions by reducing taxes and increasing costs. People continue living with corruption being a part of their lives. They understand that governments are direct participants and sponsors of corruption thus questioning the quality of work and the worth of social relations in their countries. The results of such concerns and the lack of control may gain different forms, including civil protests and enforcement of the law.
Each country is free to develop its anti-corruption laws, give definitions, and establish punishment. For example, in the United States of America, the Foreign Corrupt Practices Act (FCPA) was created in 1977 as a restriction for companies and individuals to influence the decisions of officials by specific rewards (payments, financial gifts, etc.).12
In the United Kingdom, the Bribery Act 2010 created a legal framework according to which people who are accused of bribery (an act when one person receives a reward, payment, or promise from another person who wants to achieve certain financial or business advantage.13
In China, there is Criminal Law of the People’s Republic of China, also known as the Criminal Code, and campaigns against corruption aim at eliminating the situations when money or property is offered to a public official to obtain certain illegitimate benefits.14 In India, corruption is defined and controlled under the Prevention of Corruption Act, 1988 when an investigation body is defined to study each case and make legally and ethically correct decisions.15 The consequences of corruption and bribery are usually lifetime imprisonment, criminal fines, and confiscation of property or other financial resources.
Many attempts are made to fight against corruption and establish trustful relationships between citizens and governments. During the United Nations Convention against Corruption, it was concluded that this economic issue threatens “the stability and security of societies, undermining the institutions and values of democracy, ethical values, and justice and jeopardizing sustainable development and the rule of law”.16
Corruption is a form of dishonesty that is based on authority, money, and power. These qualities make it existence and multiple conversions possible and unnoticeable. However, as soon as the case of corruption is recorded and legally proved, all stakeholders can be punished and deprived of several privileges and opportunities. The lack of control of corruption is one of the possible reasons why countries are not able to achieve the desired development and achievements. On the one hand, corruption is a result of what has been achieved, and what authorities can do with the resources and options obtained. On the other hand, corruption prevents many nations from taking the correct direction in the development and achieving the best possible outcomes in their financial operations, services, and other activities.
International Law and the World Bank on Corruption
The World Bank considers corruption as a cause of poverty, and anti-corruption programs should be developed to alleviate weaknesses and inequalities in society. During one of the recent meetings organized by the World Bank Group, the International Corruption Hunters Alliance was formed to prove that people who worked on the front governmental lines have to take all the steps and stop corruption in their countries.17
Corruption is when some public goods are used for private gain, and the goal of the World Bank is to prevent fraud within Bank’s operations, fight against corruption, raise a concern of corruption at different levels, and offer active support at the international level. From International Law, the Institute of Business Ethics introduced Anti-Bribery & Corruption (ABC) Standards and Frameworks in 2012 to combat corruption in business as the major obstacle in socio-economic development. The United Kingdom (UK) Bribery Act of 2010 and the FCPA were the two milestones in the creation of these regulations.18,19 Corruption is a complex phenomenon that may have different forms and outcomes, and it has to be eradicated with the help of global solutions.
The World Bank is based on the cooperation of many countries, united by one goal and having access to various resources. Therefore, there is a good chance to identify corruption using the experience of different countries in their fields, including ethical, religious, social, and cultural aspects. International law cannot be ignored as it dictates the norms that cannot be broken, and the World Bank is the instrument that completes tasks and makes decisions.
Corruption is a problem, and there is a solution that has to be found out by countries regarding demands, expectations, and possibilities. The World Bank offers several strong strategies to fight corruption and introduces approaches with sufficient definitions and examples. For example, it is recommended to understand that corruption is not only a financial bribe from which nations suffer but any condition when necessary resources are wasted, and people lose an opportunity to develop smart responses.20 Waste and resource management are integral parts of anti-corruption programs in any country.
Corruption may damage different layers of social, institutional, and political lives. The World Bank relies on the recommendations given by Rose-Ackerman to develop a two-prolonged strategy to increase honest benefits and corruption fines, meaning that people are rewarded due to their fair treatment to business operations and punished in case they use unfair methods of work.21 As one of the possible strategies, it is offered to pay special attention to the wages of civil servants.
When the work of these people is underpaid, they become less motivated and find new incentives to earn more, even if they have to corrupt or choose other unofficial ways. There is a relation between the level of wages and the cases of corruption in developing countries.22 People do not want to lose an opportunity and earn more even if they realize that punishment can be serious. Some may think that in developing countries, there is a higher chance of corruption because of the desire to earn and have a lot of money. Developed countries are also under threat of being corrupted because there is always a temptation to earn more than it is at the moment.
At the beginning of the 21st century, the World Bank began the creation of new guidelines on how to prevent and combat fraud and corruption in financial projects. Certain improvements and amendments took place during the last ten years. At this moment, there are guidelines for clear purposes and general principles. Corruption is defined as a practice of “offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party”.23
In addition to this type of practices, policy-makers introduce obstructive practices (when falsification of evidence occurs), collusive practices (when several parties are guided by common improper purposes), coercive practices (when direct or indirect harm is made to a party or its property), and fraudulent practices (when intentional or unintentional misrepresentation prevents from achieving financial benefits).24 There are specially trained people and departments that focus on investigating each case and determining the causes of corruption.
The World Bank is also responsible for making decisions about punishment for parties whose fault is proved. One of the most frequent outcomes is the right to sanction a person, an organization, or an entire country. To prevent such results, the World Bank aims to prevent fraud and corruption and follow several rules and regulations. The creation of a transparent budget process (New Zealand is one of the most successful examples) is the solution offered by the World Bank.25
When people observe that the government develops various mechanisms to meet their needs and follow the public interest, openness, and transparency of processes lead to fewer concerns and less abuse. In countries where citizens can cooperate with the government, understand and support their activities, and participate in the discussion of political, economic, and social issues, corruption may be the least problem. However, this type of democracy and the lack of governmental control may be characterized by other unpredictable problems and outcomes. Therefore, the role of the World Bank in corruption control is integral for governments and citizens, as well as for countries in general.
Legal Frameworks to Deal with Corruption
There are many ways and methods to deal with corruption, and each country has to focus on its resources, people, and traditions to make the best choices. Regardless of the existing varieties, there is one common step for any nation to take – the creation of a legal framework for corruption control. The World Bank recommends the establishment of international conventions as a key element in the work of governments.26
At the end of the 1990s, the OECD Anti-Bribery Convention was offered and signed to reduce political corruption and control crimes in developing countries. At the beginning of the 2000s, the UN Convention Against Corruption (UNCAC) was approved by more than 100 countries as “a global framework involving developed and developing nations” that covers such subjects as “domestic and foreign corruption, extortion, preventive measures, anti-money laundering provisions, conflict of interest laws, means to recover illicit funds deposited by officials in offshore banks”.27 Although it is hard for many countries and their government representatives to stay honest to their business partners and civilians, it is necessary to continue making attempts to stop corruption.
The UK is one of the developed countries where corruption does not represent a serious problem for the government and citizens due to some high ethical standards that are promoted in public services and society. The UK Bribery Act was signed in 2010 and became the main framework in terms of which liability for corruption is established on any person anywhere in the world. The authors of this law give clear definitions of when bribery occurs and who may be blamed for it.
The most frequent explanation of bribery and corruption is as follows, “a person offers, promises or gives a financial or another advantage to another person” with an intent to obtain some business or personal advantage.28 As soon as guilty is proved, a person is punished by the established standards. In the majority of cases, an offender may be imprisoned for no more than 12 months or no more than 10 years (regarding the nature of the crime), assigned to a fine (financial or social), or both.29 To predict corruption, UK agencies aim at developing new fighting methods regularly.
Being one of the most successful developed countries in its intentions to predict corruption, the UK becomes a good example for many developing countries where financial crimes occur. For a long period, India was a country with poor governance and billions of dollars wasted in vain. 2018 was the year when certain improvements were made, including the amendments in the Prevention of Corruption Act (POCA), 1988 to check the cases of political grafts.30
The developers of the Act relied on the framework offered by the US anti-bribery law and promoted a possibility to blame both individuals and corporations for paying bribes with undue advantage (not just some economic benefits). The existing law identifies authorities that take responsibility for analyzing each case of bribery. There are the Anti-Corruption Bureau (ACB), the Central Bureau of Investigation (CBI), and the Central Vigilance Commission (CVC). In addition to them, the Serious Fraud Investigation Office (SFIO) representatives can join any investigation anytime to strengthen a working process and discover new perspectives of a case. There are all chances for India to control dishonesty and fraud in business and support development.
The examples of both the UK and India prove that governments continue improving their economic, political, and social conditions by providing new legal frameworks and legislation. Development depends on the level of control and the discovery of new sources and revenues. When corruption becomes an ordinary practice in business affairs, a country can hardly achieve positive results and stay competitive at the international level.
The evaluation of the current situation with anti-corruption campaigns and the role of the World Bank shows that developed and developing countries have equal opportunities to use legislation and international conventions as the main anti-corruption instruments to prevent crimes, enforce the law, define penalties, and asset recovery. Corruption may have different forms, and governments should be ready to recognize it, make people aware of conditions and consequences, and offer guarantees which promote a safer and more stable future.
Country Development without Corruption
When new legislation and laws are introduced in developed and developing countries, it is necessary to understand how these steps can contribute to their overall development in the future. For example, for India, anti-corruption campaigns result in the establishment of new trade relationships with different countries, including the already developed UK. The expansion of investments opens new opportunities for the government to stabilize it is Gross Domestic Product (GDP) value. The Indian bureaucratic machine still exists, but control over it has been improved, promoting guarantees for new investors. The UK, in its turn, can get access to Indian resources and revenues and expand services and industries.
Economic development in both countries is characterized by the arrangement of new bilateral trade agreements to import cheap textile, petroleum, leather, and jewelry from India and equipment, electronics, silver, and beverages from the UK. According to the World Bank’s research, corruption in the economic sector cannot be removed completely. Therefore, it is expected to promote macroeconomic stability and foreign direct investments through the discussion of new strategies, restrictions, and penalties in case the actions of one party have the characteristics of bribery, theft, or other associated crime. Although the World Bank cannot directly address corruption, annual reports, reviews, and conventions draw enough attention to this problem and assess costs.
The connection between development, the World Bank, and both developed and developing countries can also be traced through the recent changes in the education system. As soon as poor people stop suffering from corruption and obtain access to fair and stable opportunities, they may focus on their personal and professional development. Business relationships between India, the UK, and other countries show that the exchange of experience and knowledge about traditions and cultures influence further success and enhancement. Education should be available to all people, regardless of their incomes, statuses, and family histories.
Anti-corruption society is a solid background for the creation of a new (or, at least, improved) system of education. In addition to the principles of efficiency and transparency, people can benefit from promoted education and training programs that can “enable them to meet the requirements for the correct, honorable and proper performance of public functions” and “enhance their awareness of the risks of corruption inherent in the performance of their functions”.31 In the majority of cases, anti-corruption strategies work to improve the level of knowledge and develop several professional skills.
The World Bank’s anti-corruption frameworks also promote linkage between developed and developing countries. India is a country that is characterized by high respect for its past, traditions, and customs. The UK is a country with a strong belief in the Queen and her role in society. On the one hand, there are not many things in common between these two countries, and many efforts are required to stabilize these relationships.
On the other hand, anti-corruption motives unite two different nations, and the World Bank offers a basis for this cooperation. The UN Convention and communication at different levels contribute to the development of both countries from economic, political, and social perspectives. Anti-corruption measures strengthen business and behavioral forces and help to discover new partners within the World Bank.32 As a result, developing countries that suffer from fragile control and conflicts may identify additional international resources and combat corruption. In this case, the UK may succeed in helping other poorer countries and pioneering its standards, rules, and recommendations, and India can be recognized in the global arena as a reliable and flexible partner.
Despite the already made intentions to reduce the level of poverty in India, many citizens still cannot allow themselves to live in comfort and prosperity. The World Bank and its intentions to remove poverty turn out to be a perfect solution for the country and its goals for development and growth.
The UK is a regular partner of the World Bank, and their cooperation results in the creation of new international policies to prevent conflicts, reduce corruption, and improve social, healthcare, and education services. The World Bank has already proved that its goals to help poor countries may have different forms, and the UK contributes to a better understanding of how Indian citizens can have access to clean water, stable wages, working conditions, and education. Sustainable development around the entire world may open new opportunities for the UK and discover additional methods to fight against corruption, poverty, and dishonesty.
Conclusion
In general, the modern world has already achieved some positive results and discovered millions of opportunities on how to support sustainable development. It is always necessary to remember that new threats and challenges may appear without any reason. The presence of such organizations as the World Bank cannot be ignored by developing and developed countries. Corruption is a serious problem in development with many legal, institutional, and social questions being raised.
The operation of law, the creation of new policies, and cooperation among countries influence the goals of development. The World Bank aims at reducing poverty, and corruption is one of the causes of this condition in many developing countries. It is not enough to create laws and make sure people and corporations follow them. It is obligatory to involve countries with its governments and citizens in discussions to identify drawbacks and search for appropriate solutions. Transparency, honesty, and control in social, economic, and political relationships is a significant step forward for such a country as India, and support of the UK serves as evidence of the worth of the World Bank and its participation in international affairs.
Bibliography
The Bribery Act 2010 c. 23.
The Criminal Law of the People’s Republic of China (Criminal Code) 2015.
The Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 78dd-1.
Hunja R, ‘Here Are 10 Ways to Fight Corruption’ . Web.
Lopez-Claros A, ‘Six Strategies to Fight Corruption’. Web.
The World Bank, ‘What We Do’ (The World Bank, 2018), Web.
World Bank Group, ‘Guidelines on Prevention and Combating Fraud and Corruption in Projects Financed by IBRID Loans and IDA Credits and Grants’ (World Bank Group, 2016). Web.
World Bank Group, ‘World Development Report 2019: The Changing Nature of Work’ (International Bank for Reconstruction and Development, 2019. Web.
World Bank Group, ‘World Development Report: Governance and the Law’ (International Bank for Reconstruction and Development, 2017). Web.
Footnotes
The World Bank, ‘Combating Corruption’ (The World Bank). Web.
United Nations and the Rule of Law, ‘World Bank’ (United Nations, 2018) . Web.
The World Bank, ‘About the World Bank’ (The World Bank, 2018). Web.
The World Bank, ‘What We Do’ (The World Bank, 2018). Web.
Ibid.
Ibid.
World Bank Group, ‘World Development Report: Governance and the Law’ (International Bank for Reconstruction and Development, 2017). Web.
World Bank Group, ‘World Development Report: Governance and the Law’ (International Bank for Reconstruction and Development, 2017).
World Bank Group, ‘World Development Report 2019: The Changing Nature of Work’ (International Bank for Reconstruction and Development, 2019. Web.
The World Bank, ‘Combating Corruption’ (The World Bank, 2018). Web.
The Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 78dd-1.
The Bribery Act 2010 c. 23.
The Criminal Law of the People’s Republic of China (Criminal Code) 2015.
The Prevention of Corruption Act 1988 No. 49.
United Nations, ‘United Nations Convention against Corruption’ (United Nations Office on Drugs and Crime, 2004). Web.
World Bank Group, ‘International Corruption Hunters Alliance 2018: Coalitions Against Corruption’ (International Corruption Hunters Alliance, 2018). Web.
The Bribery Act 2010 c. 23.
The Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 78dd-1.
Robert Hunja, ‘Here Are 10 Ways to Fight Corruption’ (The World Bank, 2015). Web.
Augusto Lopez-Claros, ‘Six Strategies to Fight Corruption’ (The World Bank, 2014). Web.
Ibid.
World Bank Group, ‘Guidelines on Prevention and Combating Fraud and Corruption in Projects Financed by IBRID Loans and IDA Credits and Grants’ (World Bank Group, 2016) . Web.
Ibid.
Augusto Lopez-Claros, ‘Six Strategies to Fight Corruption’
Ibid.
Augusto Lopez-Claros, ‘Six Strategies to Fight Corruption’
The Bribery Act 2010 c. 23
Ibid.
Riar, S, ‘India’s New Anticorruption Law Casts Wider Net’ (The Anticorruption Blog, 2018). Web.
United Nations, ‘United Nations Convention against Corruption’ (United Nations Office on Drugs and Crime, 2004). Web.
Robert Hunja, ‘Here Are 10 Ways to Fight Corruption’ (The World Bank, 2015). Web.
World Bank and IMF are monetary institutions that cannot be differentiated. This is evident by the difficulty which the founding father John Maynard Keynes admitting the confusion by names during an inaugural meeting held for the IMF. They are collectively known as Bretton Woods Institutions that act as twin intergovernmental pillars that focus on supporting the structure of the financial and economic order of the world. In the two organizations there creation was due to a need to ensure the division of labor (Harrigan 112). Both the bank as well as IMF are directed and owned by member nations’ governments. Besides, both institutions are concerned with the world economic issues; this is established through strengthening and broadening the economies of countries that are members of the institutions.
Moreover, the two institutions normally hold annual meetings that are joined with extensive media coverage. In addition to this point, they jointly have their headquarters in Washington, D. C, and as such, they have access to similar facilities which include a library. The institutions further exchange economic data regularly, they in most cases present seminars that are joined, more often they hold informal meetings, and even sometimes send out occasionally joint missions to nations that are members.
Regardless of these similarities, the World Bank and International Monetary Fund remain distinct (Johnson 84). The main difference is that World Bank functions primarily as a development institution, and on the other hand, International Monetary Fund functions as a cooperative institution whose main purpose is to ensure that member nations maintain a payment and receipt system that is orderly (Prince and Porter 92). Each institution has a distinct structure, a different purpose, gets its funding from varying sources, offer assistance to varying categories of members, and finally, they endeavor to achieve different targets and goals via methods odd to itself.
Work Cited
Prince, Danforth and Porter, Darwin. (2010). Frommer’s Spain. New York: John Wiley & Sons
Harrigan, James. (2003). Handbook of International Trade. New York: John Wiley & Sons. reprint
Johnson, E. Omotunde. (2000). Financial risks, stability, and globalization. USA: International Monetary Fund.
Considering the current dept crisis facing the Dubai’s World real estates and the government, a constructive engagement with the creditors would be very helpful for its acceleration on economic growth as well as its dependants who are mainly the developing countries benefiting from its exports of the wide range of products and machinery.
The creditors of a county require equal treatment for a positive impact to the already experienced market uncertainty. This calls for urgent and regular communication with the creditors and investors with the aim of orderly and timely solutions.
The credible factors the United Arabs Emirates ought to address urgently include the reputation ruined by the property sector (real Estates). The international investor confidence remains dented thus lowering the value of equity, risk basic coverage and its future access to international markets.
When the risk repugnance is high among traders, the conditions for acquiring credit become more restricted. Finally, the financial losses have a huge impact to the overall balance sheets to the household level. These consequences require the support of the International Monetary Fund or the World Bank assistance.
The support from the international financial institutions acts as a prevention or resolution facility that entails flexibility on the credit offers as per the urgency of the needs.
Possible positive effects of IMF/World Bank on the UAE
The IMF and World Bank financial support, development advice and security assessment and validation policies would be very important during this global financial crisis.
Considering the UAE, which is one of the world’s chief oil exporters, the decline on the oil prices would highly affect the revenue thus leading to the country’s economical reduction.
The lowered oil prices mainly affect the expenditure patterns of the public while a weak global economy affects on the tourism of the country considering that it is one of the most visited country by tourists from all over the world.
The country’s revenue mostly comes from the oil exports and thus the eminent reason why the financial bodies would work conjunctively to supplement the lost income and offer financial support to the economy.
The regional and global trade deal holds status of the banking sector for a country like the UAE. More favourable work conditions that support economical growth and capital markets can work out through proper liberalisation.
The IMF and World Bank are financial institutions that provide the required comfort zone of capitalization and profits through the expansion of the economy. As a financial institution, the IMF is in a position to recommend regulations that govern the risks involved in mortgages and lending in the real estates by financial institutions.
Taking the situation in UAE, the fall on the real estates sector would compromise the quality of consumer loans. Mostly the effects on the loan may come about due to the lending standards by other financial institutions due to competition.
One major benefit the IMF provides to its members entails the surveillance. For an affected economy such as the UAE, the IMF has broad powers for ensuring proper surveillance of the exchange rates policies, which ensures adherence principals provided through the registered act of the member countries.
The annual consultation forums with the member countries also ensure proper analysis of the economical and developmental policies and recently studies indicate some “social, environmental, industrial, labor market, and governance issues as factors influencing economic engagement of a country.” (Mody et al, 3)
Surveillance over the regionally designed policies also assists to bar regional economical consequences. Well-enhanced security ensures expansion of the capital markets.
The IMF facilitates expansion and balances growth of the trade by encouraging the use of convertible currencies. Today it is rare to find discrimination of currency among the member countries.
The IMF and World Bank are in a position of providing technical support to the member countries such as the UAE. Since time in memorial, the IMF helped to setup the central banks and finance ministries of the member countries upon requests.
Some of other areas addressed by the IMF and are not in relation to economics include the sectors supporting the laws that support free trade, building of the financial institutions, emending the monetary policies of a country, taking and analysis of statistical data.
The International Bank for Reconstruction and Development (IBRD) together with the International Development Association (IDA) also known as the World Bank facilitates. They issue loans to the government and other public or private entities approved by their respective government.
The key and most important point of these loans is their concession nature; they are interest free and long-term depending on the nation’s per capita GDP. IDA loans come from donations made from the world’s rich countries thus their nature.
Conclusion
The UAE is a stable and well-developed country where the current market inflation rates may be of little or no impact to the state’s economy. Being a major oil exporter, the UAE has a stable and powerfully built economy and many dependants particularly the developing nations.
It is also an influence to other sectors of the economy such as the tourism industry besides being a chief key energy resource supplier.
The concern of the IMF and the World Bank probably inclines on the issue of oil prices, which is a global concern. Stable oil prices are only achievable when the economy is stable and growing without any political or social concerns.
This can be the basis for cooperation between the UAE and IMF or World Bank. The IMF acts as the financial advisor to the UAE. In relation to conducted research over the effects that can occur due to collapse of the UAE, the major effects would befall other economies especially those of the developing countries.
Works Cited
Mody, Ashoka. Kletzer, Kenneth., and Eichengreen, Barry. J. “The IMF in a world of Private capital markets”, International Monetary Fund: European Deptment. International Monetary Fund Publishers, 2005
The present section includes description of the analytical approach used in this paper. Thus, qualitative research based on secondary research is employed. This approach enables the researcher to collect the necessary data for the present analysis. The present analysis employs such variables as time, growth rate, external funds rate, production rate and population growth rate.
Methodology
To address the objectives of the present research, a qualitative method will be utilized. Secondary research will be implemented and data obtained will be incorporated in the present research. Secondary research will include analysis of books and peer reviewed articles. It is necessary to note that to explore the role of transformational leadership concepts, a variety of sources (books as well as peer reviewed journals) will be analyzed. Furthermore, data from the World Bank Group and the International Monetary Fund (IMF) will be employed. These data will be used to reveal particular indicators of the success of the economies of the four nations. The secondary research is chosen due to the time limit and certain geographical constraints as the subject of the present research is a set of several countries. It is necessary to note that there are certain limitations to the present research as the data collected from databases are available on certain periods only and more recent data can be obtained from secondary sources only.
Goldstein (2013, p. 163) notes that the growth of the BRICS has been continuing for a decade. Therefore, one of the variables of the present research will be time as it is essential to trace the development of the countries throughout the 2000s and 2010s to identify major factors affecting this growth. Another variable is GDP growth rate as these data also provide insights into development of the emerging markets. Marino (2012, p. 71) notes that capital flows contribute greatly to the development of the BRICs. Admittedly, the rate of external funds is an important variable as it will help identify the role of this factor on the emerging markets. Furthermore, production rate as well as fiscal policy of the countries will also be variables in the present research. Finally, population rate is another important variable as it has been acknowledged that population has enabled the countries in question to enter the global market and become some of the most prospective emerging markets (Ghosh, 2009, p. 24).
The present research will include a number of graphs which will be presented and analyzed. One of these graphs is retrieved from the review implemented by the IMF (Matsumoto & Rousset, 2014, p. 3). The graph shows the latest trends in the industrial production in BRICs (see figure 1). The period taken is the period used in the present research (2000-2014). It is clear that China is one of the most rapidly growing economies among BRICs. It is also seen that this country had the lowest rate at the beginning of the period measured. At the same time, China has the highest rate of industrial production now.
Whereas, the other three countries have rather modest growth even though the rate of this growth was significant up to 2008. Admittedly, the global financial crisis of 2008 had a negative impact on the development of the countries. Remarkably, China seems to be almost untouched by detrimental effects of the crises. At that, Russia is facing certain decrease. These rates can be explained by inflation in Brazil and India. Russian economy is facing a variety of constraints partially due to economic sanctions imposed by European countries, the USA, Japan and some other state. The present graph is valuable for the present research as it explicitly reveals the rate of industrial production in the countries in question.
Figure 1. Industrial production in BRIC. Source: Matsumoto & Rousset (2014, p. 3)
As has been mentioned above, GRD growth rate is also important for the present research. Therefore, another graph will be used. The graph is developed based on the data obtained through the World Bank database (see figure 2). It is noteworthy that the data is revealed for the period from 2000 to 2012. Even though it does not reflect the latest changes in the GDP growth, it is still valuable as it shows that the GDP growth was interrupted between 2008 and 2010.
Clearly, such global events as financial crisis tend to have a considerable impact on the rate of GDP growth. Again, the data suggest that China has had the highest rate of the GDP growth and it was not affected as substantially as other countries under consideration. The graph also supports the assumption that the four countries have been witnessing a lasting (and quite significant) growth. The data revealed also suggest that the countries recovered from the global financial countries since the growth continued even though the rate of this growth was considerably lower.
Figure 2. GDP annual growth in BRICs. Source: The World databank (2014).
Another variable exploited in the present research is the rate of external funds (see figure 3). The graph is based on the data available in the World Bank database. It is noteworthy that the data reveal the rate in the period between 2005 and 2012, which imposes certain limitations. However, the graph still reflects the trend existing for a period that is meaningful. It is clear from the graph that China received the least amount of direct investment. At the same time, the growth of this country’s economy is the highest. Therefore, special attention will be paid to the structure of the Chinese economy and leadership concepts employed. These indicators will be compared with similar ones of the other countries. It is noteworthy that Russia got the most amount of direct investment and showed moderate and after the crisis of 2008 insignificant rate of growth. In the next section, the structure and leadership of this country will also be considered in detail.
Figure 3. Foreign direct investment. Source: The World databank (2014)
Finally, population is another variable which will be facilitated by the use of the graph developed on the basis of the World Bank database (see figure 4). This graph is valuable as it reveals explicitly the rate of population growth in the nations in question. Again, the data available cover the period between 2000 and 2012 but the trend has not significantly changed at present. Hence, the data are relevant. As seen from the graph, China and India are leading while Russia has the slowest rate of population growth. It is also noteworthy that the population is significantly larger in China and India as compared to the other two countries. This suggests that China and India have a significant advantage while Russia and Brazil may lag behind due to decreased labor force and consumer cohort.
Figure 4. Population growth in BRIC. Source: The World databank (2014).
Reference List
Ghosh, J. (2011). Model of BRICs’ economic development and challenges for EU competitiveness. Washington, DC: Thomas Nelson Inc.
Goldstein, A. (2013). The political economy of global business: The case of the BRICs. Global Policy, 12(2), 162-172.
Marino, R. (2012). Submerging markets the impact of increased financial regulations on the future growth rates of BRICS countries. Basingstoke: Palgrave Macmillan.
Over the years, the World Bank has been at the forefront in helping the developing nations to fully integrate their systems with emerging managing technologies. Founded in 1945, the bank functions to provide advice and finance to nations for the sole purpose of developing them economically and abolishing poverty in these countries. Most of the World Bank activities are focused on budding nations, mostly in Africa and Asia.
It has continued to help these countries in diverse areas of agriculture and development of rural areas, health, education, environmental protection, governance, and infrastructure. It has established critical management technologies that aim to streamline governments’ functions of these poor countries and help develop institutions that are free from corruption – a major setback to third world economies (World Bank Group, 2008).
Main body
The World Bank, through its arms, provides loans to member nations at special rates to develop the growth areas mentioned above. Grants are offered to the least developed nations so that they may catch up with the rest. The World Bank loans and grants for explicit ventures are closely allied to broader policy changes in the economy or individual sectors of recipient nations (World Bank Group, 2008).
The World Bank is a major user of emerging managing technologies. The Bank’s basic terms of reference are helping countries to achieve economic development as well as reducing poverty levels. To achieve these crucial goals, the institution has honored the significant role played by Information and Communication Technology (ICT) in the development endeavors around the globe. Not so long ago, people and governments did not realize the benefits of using ICT in poverty reduction and advancing economic development.
Governments, especially in Africa could not understand how ICT could deal with the terrible challenges of homelessness, lack of education, lack of health services, and starvation that continued to pose problems to their populations. This was until the World Bank realized that ICT was a vital component of its broader efforts of increasing economic development and decreasing poverty levels (Thompson, 2004).
Through the grants and loans offered by the World Bank, developing nations have now taken tangible steps to integrate ICT into their development programs and economic strategies. Many nations, especially in Africa and Asia are now implementing nationwide e-strategies that lay prominence on internet connectivity as well as new applications in e-business and e-government (World Bank, 2006). In Kenya for example, the government has secured a substantial loan from the World Bank for its e-business project which is done in phases. Upon completion, the management technology will ensure that government affairs are run efficiently thus providing room for economic development.
The bank is also in the process of providing grants to a number of African countries for the construction of Business Processing Packs. This will bring employment opportunities for millions of unemployed youths thus spurring economic development and fighting poverty.
To focus on emerging managing technologies and how they can spur economic development, the World Bank has opened up a fully-fledged department in the name of the Global Information and Communication Technologies Department (GICT). This shows the seriousness in which the World Bank carries ICT and other emerging managing technologies. In education, the World Bank through GICT has realized that fast technological advancements and globalization have made the impartment of knowledge and information a significant determinant of economic development and reduction of poverty. In this regard, the World Bank has continued to play a vital task in supporting nations to take advantage of the prospects in ICT to contribute to educational objectives and reduce poverty (ICT and education, 2008).
To meet the needs of a more complicated labor force, contribute to poverty reduction, and manage information systems, the World Bank has continued to recognize the vital importance of efficiently exploiting new ICT technologies. World Bank is supporting numerous educational projects that include an ICT module. It has assisted in distant learning programs, equipment and facilities, information systems, capacity building, teacher training and support, educational content, and education management (ICT and education, 2008). This has positively affected the lives of millions of people and led to economic development.
The World Bank has been at the forefront in supporting governments and corporations to integrate e-business in their management systems. In fact, it has supported small businesses to fully integrate into e-business. The argument here is that the future of world business will be on the internet. Companies that have been helped by the World Bank to transact e-business have reported an increase in sales revenues.
E-business is a management technology that enables businesses to trade in goods and services, source clients, market products and services, and receives payments online. Small enterprises in low-income urban areas of Mexico received help from the World Bank to assimilate e-business into their management operations. In one year, the businesses reported increased growth in revenues. The competition was thriving well. The poverty level in urban Mexico was greatly reduced since the small enterprises provided livelihood to two out of three individuals in the private sector. Therefore, e-business, a management technology advocated by the World Bank has been successful in increasing the economic development of nations that have embraced its use. (World Bank Supports e-business, 2003).
E-government is another management technology that the World Bank continues to support in its endeavor to make governments lean, efficient, and accountable to their citizens. By definition, it refers to the use of ICT by government agencies that are aimed at transforming the government relations with its citizens, enterprises, and other organs of the government. E-government has been found to work wonders especially in Africa where the majority of the population live below the poverty line and thus cannot afford transport costs to visit government offices. Due to recent technologies used in e-governance, government services are now delivered better.
Respective governments can now interact better with their citizens, businesses, and industry. Citizens of nations that have embraced e-government are now empowered through having access to information on how government matters are run. Benefits that have accrued from embracing e-governance include economic growth, costs reductions, reduction in corruption cases, increased transparency in government functions, and greater convenience for citizens (E-government, 2008).
Conclusion
In conclusion, emerging managing technologies in information and communication technology have gone a long way to help the World Bank achieve its core objectives of helping nations realize an increase in economic development as well as reduce poverty levels. The Bank has been at the forefront in providing the much-needed capital to countries to make sure that they utilize the emerging technologies to better the lives of their citizens. The Bank has realized that ICT can be an engine of growth and can be effectively used to tackle poverty, more so in developing countries (Thompson, 2004).
Works Cited
Definition of e-government. 2008. The World Bank. Web.
ICT and Education. 2008. The World Bank. Web.
Thompson, Mark. “Discourse, Development, and the Digital Divide: ICT and the World Bank.” Review of African Political Economy, vol. 32, no. 99 (2004) pp. 103-123. Web.
World Bank supports e-business to increase productivity of Small businesses in Mexico. 2003. Goliath. Web.
World Bank. 2006 Information and communications for Development. World Bank Publications. Web.
