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Economic Global Governance NotesThe Bretton Woods Conference
The need for more effective economic Global governance was seen close to the end of WW2 at
the Bretton Woods conference, held in 1944
The 44 nations of the WW2 allies met to consider how the world financial systems and trade
could be managed in peacetime
Many of today's Global economic governance institutions were founded at the conference
- IMF
- World Bank
Aims of the Bretton Woods conference
To create an agreed system of rules for international economic matters, including World Trade
To stabilise world currencies and reduce wild fluctuations in the value of currencies
To prevent a repeat of the Great Depression that occurred in the 1930s
To bolster capitalism against the rise of communism as a competing economic model in the
Soviet Union
Economic Global Governance IGOs and arrangements
IMF (1947)
- Establish the US dollar as the basis against which all other states currencies would be
valued
- This stabilised world currencies from major fluctuations in their value
World Bank (1946)
- Aim is to provide a pool of investment for middle income states
World Trade Organisation (WTO) (1947)
- International forum in which states can make deals and international rules on trade
Collectively, these institutions and the principles on which they were founded are known as the
Bretton Woods system
Refers to the forums and institutions of Global economic governance that states have put in
place to manage the Global economy
1
,Global cooperation on economic governance
In the more recent decades, Global cooperation on Economic governance has focused on the following:
1. Poverty/development
Value of international coordination through the UN and other forums has progressed
considerably
Developing states have increased spending on development
MDGs represent the most coordinated effort of IGOs and states to work towards common
development targets
2. Free trade
There has been an increase in multilateral free trade agreements
- Single market of the European Union
- North American free trade agreement (NAFTA) between Canada, Mexico, and the USA
3. Single currency
The economic debate in the EU in the 1990s focused on developing a single currency - the euro
- Euro came into circulation in 2002
- It is now the currency of 19 of the 27 EU member states
Most economic Global governance in Global politics is Inter governmental in nature, but the
eurozone countries have agreed to strict economic rules and given up significant freedom to
make economic decisions nationally
- Such as setting their own interest rates
- Power is with super national institutions such as the European central bank
4. Forums
There is a need for a forum of discussion and decision-making to enable states to resolve
international economic crisis
Global financial crisis of 2008 posed a particular challenge for economic ideas, notably the IMF
In response to the crisis, the IMF dramatically increased the loans it makes to bailout failing
economies
Actors in economic Global governance
1. IGOs
The World Bank
The IMF
UN (Including the UN development programme – UNDP)
2. Informal intergovernmental forums
G7/G8 and the G20 - includes the most industrialised States and the biggest Global economic
powers
2
, 3. Multinational corporations (MNCs)
Privately owned companies that operate in more than one state
4. Multilateral forums
World Economic Forum (WEF)
Provides an opportunity for world leaders, IGOs, business leaders, NGOs, and economists to
discuss the challenges facing the Global economy
The International Monetary Fund
One of the key Global economic governance institutions, agreed at the Bretton Woods
conference
Became fully operational in 1947
Headquarters are in Washington DC
Role of the IMF in the 1940s
To encourage stability in world exchange rates
During the Great Depression, many currencies had been devalued, causing great uncertainty
and ultimately deep economic recession
IMF oversaw a system of fixed exchange rates, linked to the US dollar, which in turn was fixed
to the price of gold
This system brought much increased ability and prevented unsettling fluctuations in currency
State and traders knew how much currency was worth, and could make investments with
greater degree of stability
Fixed exchange rate system broke apart in 1971 when Nixon abandoned the fixed link between
the value of the US dollar and gold
Decision reflected the USA’s desire to have greater flexibility over the value of its currency
Current role of the IMF
Provides economic stability by giving financial support or loans to states that are suffering, or
likely to suffer from debt crisis
- Debt crisis: when a state is unable to repay loans that it owes to financial institutions such
as the IMF or private banks
- Predominantly seen the IMF focusing on the developing world, but it has also made loans
to developed countries
- In 1976, the UK borrowed 3.9 million US dollars from the IMF as it struggled to deal with a
deep financial crisis
- Greece, Portugal, and Spain have received IMF loans in order to help save their economies
from bankruptcy
Monitors the economic outlook of both the world economy and individual member countries
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