THE RELATION OF DEVELOPING COUNTRIES WITH IMF IN A GLOBALIZED ECONOMY
Capitalism has taken over in the majority of the economies in the world. The last version of capitalism in the light of globalism allows all these world economies to mingle and interact with one another. This in return brings the problem of domino effect when there is a major economic crisis in one of the world’s biggest economies such as USA, China, or Russia. For example, the mortgage bubble in the United States has had such a huge influence over the rest of the world’s economies like a contagious disease.
With that power of global economy, countries, especially the developing ones, have to be even more careful with managing economy with waves of economic crises coming through one after the other. Major economies in Europe such as Spain and France are having difficulties adapting to the fluctuations taking place in the world. Greece went bankrupt. Italy is another story. And what does IMF and the World Bank do? They lend money to countries that demand it. For example, as we can remember, Turkey took a loan and has been paying that debt back for years now. As we all know, taking a loan from a bank for a normal person saves the situation for the moment, and maybe even saves us from a fatal fiscal problem, it can create some problems paying it back with the bank interest on top of it. Likewise, these debts create similar problems for developing countries. “The Third World sits on debts of over $ 1.3 trillion, which has seriously hindered the third worlds abilities to provide for the basic needs of their citizens.” (Malik, 6) says Maas Riyaz Malik from Malaysia on his essay IMF Policy Involvement in the Developing Countries. And I think he has a point since at some point some countries such as Mexico in August 1982 announced cannot make loan payments.
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Over the past generation, more progress has been made in reducing poverty and raising living standards than during any other period in history. In developing countries, life expect ances have increased from 55 to 64 years, Income per person has doubled and Infant Mortality has been reduced by 50 percent. Despite the successes, massive development challenges remain. Three billion people live on ...
“Certainly, for developing countries these days, it is no easy task charting the best path forward.” states Alassane Ouattara when he was the Deputy Managing Director of the IMF on his address, which was published in official IMF webpage. He goes on to speak about his amazement how the least integrated countries into the world economy can avoid getting hit the crisis contagion. Well this is not always the case as a country’s economy has to have a type of connection to the source of the economic problem in order to get influenced by it, which is sometimes the case with third world countries. After all, what kind of connection does an African country have to the mortgage bubble in the states?
The recent wave of financial globalization since the mid-1980s has been marked by a surge in capital flows among industrial, more notably, between industrial and developing countries. While these flows are associated with high growth rate in some developing countries, a number of countries have experiences a periodic collapse in the growth rates and significant financial crises. (Prasad, Rogoff, Wei, Kose, 2003)
As is pointed out in Economic & Political Weekly journal in Volume 38, the flow of money is not really the solution to the economic problems of developing countries. So, my answer to the question of whether IMF is really of some help to the developing countries is very much dependent on the time and certain situation of the country at stake. What matters is a good money management. Taking a loan from IMF may after all not be the best solution to an economic recession. Some counties prefer the way of austerity policy whereas many of them resort to loans from IMF and the World Bank.
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Commonwealth: was founded in 1931 as an association of former British colonies, which committed themselves to world peace, the basic human rights & the fight against colonialism. But this goals were not reality, because there were conflicts between C. members (B vsP). The problem is that the C. is much more a political than a cultural association. It tries to unite people of very different ...
Another point that can be criticized about IMF is the administration part and its transparency. When you have a quick look at the administrators of IMF and the World Bank, you will quickly see that it is dominated by the nations of the Western economies. “Little opportunity is provided for the developing countries to put their concerns on the board’s agenda. In other words, priorities of the IMF do not necessarily reflect the view of those developing countries.” (Malik, 8) Many of the poorest countries are barely represented in IMF’s decision making process. Therefore, this fact tempts me to think that IMF is an organization that represents only the rich and countries with strong political say in the world. Hence, looking at today’s political world, it would not be surprising for a person to doubt the good intentions of IMF in terms of their “mission to increase the world welfare”.
(In the continuation of the essay, I will bring up different angles to IMF and its influence over the third world with references from more resources.)
