Contemporary Economic Policy Reforms

7/29/2019 Contemporary Economic Policy Reforms

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THE UNIVERSITY OF ZAMBIA

SCHOOL OF HUMANITIES AND SOCIAL SCIENCES

DEPARTMENT OF DEVELOPMENT STUDIES

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CONTEMPORARY ECONOMIC POLICYREFORMS.

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World Bank Group (WBG)

• The group consists of five (5) international organisationsresponsible for providing finance and advice to member countries for the following purposes;

– Economic development

– Poverty reduction

– Encouraging and safeguarding international development.

• Like the IMF, it is also headquartered in Washington DC,with a membership of about 192 .

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The World Bank Group headquartersin Washington, DC.

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WBG Agencies

The World Bank Group consists of;

• International Bank for Reconstruction and

Development (IBRD), established in 1944, which provides

debt financing on the basis of sovereign guarantees aims to

reduce poverty in middle-income and creditworthy poorer

countries by promoting sustainable development through

loans, guarantees, risk management products, andanalytical and advisory services. Established in 1944 as the

original institution of the World Bank Group, IBRD is

structured like a cooperative that is owned and operated for

the benefit of its 187 member countries (1,2);• International Finance Corporation (IFC), it was

established in 1956, is the largest global development

institution focused exclusively on the private sector in

developing countries. It provides various forms of

financing without sovereign guarantees. 5

http://en.wikipedia.org/wiki/International_Bank_for_Reconstruction_and_Development


http://en.wikipedia.org/wiki/International_Finance_Corporation



















WBG Agencies

The World Bank Group consists of;

• International Development Association (IDA),

established in 1960. It is concerned with public sector

lending. It provides concessional financing (interest-free

loans or grants), usually with sovereign guarantees (2);

• International Centre for Settlement of Investment

Disputes (ICSID), established in 1966. It works withgovernments to reduce investment risk by helping settle

investment related disputes between TNCs and host

countries.

• Multilateral Investment Guarantee Agency (MIGA),founded in 1988, which provides insurance against certain

types of risk, including political risk, primarily to the

private sector.

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http://en.wikipedia.org/wiki/International_Development_Association

http://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes


http://en.wikipedia.org/wiki/Multilateral_Investment_Guarantee_Agency




























WBG activities in the Global South

• Provision of preferential loans and grants

• Emphasis placed in fields of human development such as

education, health, agriculture and rural development

(irrigation and rural services), environmental mitigation,

infrastructure development and governance issues.

• Washington, DC, January 18, 2012 — Developing

countries should prepare for further downside risks, as

Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth

prospects, says the World Bank in the newly-released

Global Economic Prospects (GEP) 2012

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WBG Presidency

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Conventionally, the Bank President has always been

a U.S. citizen nominated by the President of the United

States, the largest shareholder in the bank.

The nominee is subject to confirmation by the Board of

Governors, to serve for a five year, renewable term.

Current President ,Robert Zoellick (1,2).



WBG Governance

• The institutions of the World Bank Group are all run by a Board

of Governors meeting once a year.

• Each member country appoints a governor, generally its

Minister of Finance.

• On a daily basis the World Bank Group is run by a Board of 24Executive Directors to whom the governors have delegated

certain powers.

• Each Director represents either one country (for the largest

countries), or a group of countries. Executive Directors areappointed by their respective governments or the constituencies.

• The agencies of the World Bank are each governed by their

Articles of Agreement that serve as the legal and institutional

foundation for all of their work.

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WBG Voting Rights.

• Votes are proportional to shareholding.

• Membership gives certain voting rights (basic votes)

that are the same for all countries but there are also

some additional votes which depend on the member’s financial contributions to the organization

• As of November 15, 2009 the United States held

16.4% of total votes, Japan7.9%, Germany 4.5%, the

United Kingdom 4.3%, and France 4.3%. As changesto the Bank's Charter require an 85% super-majority,

the US can block any major change in the Bank's

governing structure.10



WBG Voting Rights.

• In 2010, voting powers at the World Bank were revised to increase the

voice of developing countries, notably China. The countries with most

voting power are now the United States (15.85%), Japan (6.84%),

China (4.42%), Germany (4.00%), the United Kingdom (3.75%),

France (3.75%), India (2.91%), Russia (2.77%), Saudi Arabia (2.77%)and Italy (2.64%).

• Under the changes, known as 'Voice Reform – Phase 2', countries

other than China that saw significant gains included South Korea,

Turkey, Mexico, Singapore, Greece, Brazil, India, and Spain. Most

developed countries' voting power was reduced, along with a few poor countries such as Nigeria. The voting powers of the United States,

Russia and Saudi Arabia were unchanged (1).

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In the recent past, the WBG and IMF policies are often equated

with neo-liberalism and market-fundamentalism. They have

thus, attracted street protests and in some cases violent riots.



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Critic to WBG Policies

• The World Bank has been subject to long standing criticismfrom a wide range of non-governmental organizations and

some academics, notably including its former Chief Economist Joseph Stiglitz, who is equally critical of theInternational Monetary Fund and other internationalorganizations.

• In some cases, the WB’s own internal evaluations have

produced negative conclusions. It is criticized along thefollowing lines;

– Critics argue that the so-called free market reform policies – which the Bank advocates for in many cases – in practice areoften harmful to economic development if implemented badly,too quickly ("shock therapy"), in the wrong sequence, or invery weak, uncompetitive economies. World Bank loanagreements can also force procurements of goods and servicesat uncompetitive, non free-market prices (Stiglitz, 2003).




It is viewed to be a tool for the US and WesternGovernments for imposing economic policies thatsupport western interest by the anti- corporation(TNCs) neo-colonialism (globalization). The bank is

accused of being in favor of the installation TNCs tothe detrimental of the development of the localindustry.

It has also been criticized for its neo-liberal guiding

policies which are not always suitable for nationsexperiencing conflicts, wars, depressed economiesand those with poor governance structures.

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• Social consequences of these programs ledin many countries to social unrest. Socialsafety nets were generally missing and programs were often implemented in ashort period of time.

• A major problem was that the programs

were designed to solve short termstabilization problems but were notadequate to solve structural problems;they rather reinforced these.

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• The bank is further accused of intervening in order to

salvage irresponsible loans from private institutions to

LDC Govts which are also often corrupt and non

representative and thus shifts the risk from the original risk takers to the public in the DCs.

•

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WB and Corruption

• The World Bank is supposedly working against corruption both

outside and within its organization. Its website states:• Recognizing that any program to assist in controlling corruption

worldwide needs to start with the example of best practices at home,

the Bank has taken initiatives to stamp out conflicts of interest and any

possible corrupt practices among its own staff.

•Beginning in 2005, Paul Wolfowitz, former President of the WorldBank, allegedly used his position to influence a pay and grade increase

for his girlfriend Shaha Riza. Riza, who had held a position at the bank

before Wolfowitz was appointed president in June 2005, was required

to leave the bank and re-assigned to the State Department to avoid a

conflict of interest, working in the office of Liz Cheney, daughter of

Dick Cheney, while remaining on the bank's payroll. Her salary was

increased from nearly $133,000 to tax-free compensation of $180,000,

and eventually reached $193,590 after subsequent raises. The panel

concluded that the salary increase "at Mr. Wolfowitz's direction" was

"in excess of the range" allowed under bank rules. As a result of this

controversy, Paul Wolfowotz has resigned effective June 30, 2007. 17

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Contemporary Economic Policy Reforms