Please enable JavaScript.

Coggle requires JavaScript to display documents.

4.2 Economic - Coggle Diagram

- - - - Decisions are made by a simple majority, meaning it is an efficient organisation.
      - 66% of members are developing states, making them more influential than in the IMF and World Bank.
      - Trade barriers have reduced from an average on manufactured goods of 40% in 1947 to 3% in 2000.
    - - It is too powerful, as it forces members to change their policies on trade even if they disagree.
      - Decision-making is again dominated by the West, with the USA and EU having huge powers.
      - There are also questions over the
        impact of free trade on workers’rights and child labour.
  - - - The open nature of the G7 means that the largest economies of the world can discuss policy in a far less formal way than the UN.
      - There is also consensus since the members are democratic and capitalist.
      - It has also had many successes, such
        as in 1999 when it cancelled $100bn of multilateral debt.
    - - It is seen as a rich members’ clubthat promotes neoliberal economic policy.
      - It is criticised for not representing developing and underdeveloped nations.
      - It also fails to address poverty and climate change.
  - - - In 2008 financial crisis, the G7 members were hit hard. They needed developing nations to help heal the wounds, which led to
        $500bn of aid to recover being agreed between 2008-09.
      - It has also been agreed that the G20
        has replaced the G7 as the main forum for economic issues.It is seen to replace the G7, due to its more open membership, particularly to developing economies. It aims to promote financial stability and discuss
        economic matters.
    - - There is still limited representation among underdeveloped and developing nations. Only Argentina,Indonesia and Mexico rank outside the top 20 largest economies.
      - However, these institutions have also faced criticism for being dominated by developed countries and for promoting policies that benefit developed countries at the expense of developing countries. The WTO has been accused of failing to address the concerns of developing countries, and the G7/G8 and G20 have been criticized for their lack of accountability and transparency.
- - - - Roles:
        -Surveillance (its primary purpose)
        • Monitors the system of exchange rates and international payments.
        • This allows countries and their citizens to do business with each other.
        -Capacity development
        • Gives policy advice to member states on financial matters.
        size of your economy.
        -Lending
        • To the developing world
        • Has helped post-communist states liberalise their markets and
        economically develop.
        • Whilst it acts to prevent financial crises, it did not predict the 2007-09 global crisis.
        -Policies are decided by member countries, with an 85% vote share to pass.
        • Unlike the UN General Assembly, vote share in the IMF depends on the size of your economy. For example, the USA gets 16.5% of the votes; Belgium
        gets 1.3% of the votes.
        
        STRENGTHS
        
        It is effective: in the 1950s and 1960s,there was huge economic stability,and economic growth of OECD countries was around 4% to 5% per year.
        
        It lends to countries that can’t find other sources of finance. It has bailed out a number of countries since the 2007-09 crisis, including Greece and Spain.
        
        The strengths of the IMF and the World Bank include their ability to provide financial support to countries in need and to promote economic growth and poverty reduction in developing countries. These institutions also play a critical role in coordinating global economic policy and promoting international financial stability.
        
        WEAKNESSES
        
        It is dominated by the USA, with a huge vote share, and the headquarters are in Washington.
        
        As decisions require a majority of 85% to pass, the US effective has a veto on decisions.
        
        However, the IMF and the World Bank have faced criticism for their approach to economic policy, which some argue has promoted austerity and neoliberal economic reforms that have exacerbated poverty and inequality in many countries. These institutions have also been accused of being overly influenced by developed countries and of promoting policies that benefit developed countries at the expense of developing countries.
    - - Roles:
        -Redistribution of wealth & reduction of poverty
        • In 2016, the World Bank provided over $63bn in low-interest loans, zero- to low-interest credits and grants to 275 projects in developing, fragile and post-conflict states.
        • These have funded agriculture, transport and housing.
        • These projects aim to reduce the proportion of income that citizens spend on food, so they have more disposable income to stimulate economic development.
        -Works with other international organisations
        • Work with the Arab League (see Chapter 3.5B) to reduce unemployment and increase economic participation of women in the Arab world
        
        WEAKNESSES
        
        Again, the USA has too much
        influence over decisions made. The World Bank is keen on privatisation, free trade and deregulation –
        ‘American’ economic practises.
        
        It encourages poor countries to produce cash crops like cocoa and coffee, which leaves developing economies dependent on developed markets and vulnerable to transnational corporations (TNCs)
        
        STRENGTHS
        
        Redistribution: works closely with
        the UN to aim by 2030 to reduce the world’s population living on less than $1.90 per day to 3% and boost the
        income growth of every country in the bottom 40%.
        
        Willingness to adapt: it has changed from funding infrastructure projects to promoting development and reducing poverty.
- - - - World-systems theory and dependency theory are two frameworks that seek to explain the North-South divide. World-systems theory argues that the global economy is structured in a way that benefits developed countries at the expense of developing countries. Dependency theory argues that developing countries are dependent on developed countries for resources and markets, which perpetuates their underdevelopment.
        
        Orthodox measurements of poverty, such as income-based measures, have been criticized for being too narrow and failing to capture the full extent of poverty. Alternative measurements of poverty, such as multidimensional measures that take into account factors such as access to education and healthcare, have been proposed as a way to provide a more comprehensive understanding of poverty.
        
        Classical economic development theory posits that economic growth and development will lead to a reduction in poverty. However, this theory has been criticized for being too simplistic and failing to take into account the complexities of the global economy and the political and social factors that can impact poverty.
        
        Structural theory suggests that poverty is a result of structural factors, such as unequal distribution of resources, that are built into the economic and social systems of society. This theory emphasizes the need for systemic change to address poverty.
        
        Neo-classical development theory emphasizes the importance of market-based solutions to poverty, such as foreign investment and trade liberalization. Critics of this theory argue that it often leads to the exploitation of poorer nations and fails to address the root causes of poverty.