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Global Governance
● Global governance is a broad, dynamic and complex process of interactive decision
making at the global level that involves formal and informal mechanisms as well as
governmental and non-governmental bodies.
● It is commonly confused with international organization to such an extent that global
governance is sometimes in effect used as a collective term to describe the international
organizations currently in existence.
● Global governance and international organization are not synonyms, an important aspect
of the emergence of global governance has been the growth in the number and
importance of international organizations.
● The term global governance is sometimes used more narrowly to refer to the institutions
through which these interactions take place.
● It involves shared management of global issues through institutions like the UN and the
EU, without dissolving national sovereignty.
● Global governance aims at collective management of global issues.
● Global governance, on the other hand, focuses on international cooperation through
norms and institutions but does not equate to a centralized world government.
● Power politics and state sovereignty still persist within this framework.
Features of Global Governance
● Polycentrism–
● Intergovernmentalism
● Mixed actor involvement
● Multilevel processes
● Deformalization
Global economic governance: Bretton woods system
● Established in 1944, the Bretton Woods system aimed to create a stable global economy
to prevent the economic instability and protectionist policies that led to the Great
Depression and WWII. It sought to promote international economic cooperation through
rules and institutions.
● The International Monetary Fund (IMF) and the World Bank were formed as pillars of
this system to provide financial stability, support development, and prevent future
economic crises. They provided frameworks for monetary cooperation and rebuilding
war-torn economies.
● T he system initially operated on fixed exchange rates, with currencies pegged to the US
dollar, which was convertible to gold. This helped ensure exchange rate stability and
facilitated international trade and investment.
● Over time, as the US dollar came under pressure, the Bretton Woods system weakened. In
1971, the US ended the dollar's convertibility to gold, leading to a shift toward floating
exchange rates and the gradual decline of the original system, giving rise to modern
global economic governance.
Making of bretton woods
● Liberal Economic Foundation: The system promoted an open and competitive international
economy, reflecting faith in liberal economic theories and multilateral cooperation to ensure
global economic stability.
● Post-War Reconstruction: Bretton Woods was designed to avoid the economic instability of the
interwar period and help rebuild war-ravaged nations, particularly in Europe and Japan, through
loans and financial assistance.
● Creation of Key Institutions: The system established three main institutions—the International
Monetary Fund (IMF), the World Bank (IBRD), and the General Agreement on Tariffs and Trade
(GATT)—to manage monetary policy, reconstruction, and global trade, respectively.
● Fixed Exchange Rate System: Currencies were pegged to the US dollar, which was convertible
to gold at a fixed rate of $35 per ounce, ensuring stable exchange rates and facilitating
international trade.
● Keynesian Influence: Influenced by John Maynard Keynes, the system aimed to manage markets
to prevent crises, reflecting the postwar adoption of Keynesian economic management to
stimulate growth and control unemployment.
● Embedded Liberalism: Bretton Woods reflected "embedded liberalism," which sought to
reconcile market efficiency with broader social goals, moving away from unregulated
laissez-faire economics.
● US Dominance: The USA, as the world’s leading economic and military power after WWII,
played a dominant role in shaping the Bretton Woods agreements, ensuring the system aligned
with its own priorities for postwar growth and containment of communism.
● Rejection of Keynes’ Radical Proposals: The USA rejected Keynes’ more egalitarian proposals,
such as the International Clearing Union and the "bancor" currency, which would have imposed
obligations on both creditor and debtor countries, favoring more balanced global trade.
● Structural Imbalances: The rejection of Keynes’ proposals led to imbalances in the system,
placing the burden of addressing trade and balance-of-payments deficits on debtor nations,
reinforcing the economic dominance of creditor countries.
● Proto-Global Economic Governance: The system established an early form of global economic
governance by creating a framework of norms, rules, and institutions to manage international
financial, monetary, and trade relations.
Fate of bretton woods system
● Economic Boom and Decline: Initially, Bretton Woods contributed to the post-WWII economic
boom, with stable currencies and free trade facilitating rapid growth during the 1950s and 1960s.
owever, by the late 1960s, the system began to falter as economic stagnation and inflation
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(stagflation) emerged in the 1970s.
● US Abandons Fixed Exchange Rates: In 1971, the USA abandoned the fixed exchange rate
system, ending the dollar-gold convertibility. This effectively marked the collapse of the original
Bretton Woods system, transitioning to floating exchange rates.
● Survival of Bretton Woods Institutions: Despite the end of the fixed exchange rate system,
institutions like the IMF and World Bank survived, although their roles and policy focus shifted
in the post-Bretton Woods era.
● Rise of the G-7: The challenges of the 1970s led to the creation of the Group of Seven (G-7), a
forum for industrialized nations to meet regularly and discuss global economic issues, taking over
part of the Bretton Woods system’s coordination role.
● Shift to Neoliberalism: The 1980s saw a transition from the embedded liberalism of Bretton
Woods to neoliberalism, particularly with the rise of the Washington Consensus, emphasizing free
markets, deregulation, and privatization in global economic governance.
World bank
he International Bank for Reconstruction and Development (IBRD), often referred to as the
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World Bank, was set up as a sister organization of the International Monetary' Fund. The
decision to create IBRD was taken at the Bretton Woods Conference in 1944. The World Bank
started its operations in 1946. Its main purpose was to promote long-term foreign investment to
help in transforming War devastated economies and to encourage less developed economies to
accelerate the pace of their development.
Aim:
● inancing reconstruction of the war-devastated economies
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● Financing development of economically backward countries
● Promotion of priVate foreign investment
● Promotion of long-term balanced growth of international trade
● Assisting member countries in bringing about an easy transition from a war time
economy to a peacetime economy.
tructure:
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Headquarters: washington dc
he World Bank is structured as a group of five closely related institutions, collectively referred
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to as theWorld Bank Group (WBG). Each institution serves different functions within the goal
of reducing global poverty and supporting development. Here's the structure:
1. International Bank for Reconstruction and Development (IBRD)
● P
urpose: Provides loans and financial services tomiddle-income and creditworthy
low-income countries.
● F
unction: Focuses on reducing poverty and building infrastructure in countries that can
afford to repay loans.
2. International Development Association (IDA)
● P urpose: Offers concessional loans (low-interest or interest-free) and grants to the
world’s poorest countries.
● Function: Aims to support countries with weak economies by providing them with
financial resources for development projects.
3. International Finance Corporation (IFC)
● P urpose: Provides loans, equity, and advisory servicesto private businesses in
developing countries.
● Function: Encourages private sector development tostimulate economic growth and job
creation.
4. Multilateral Investment Guarantee Agency (MIGA)
● P urpose: Offers political risk insurance and creditenhancement to encourage foreign
direct investment in developing countries.
● Function: Provides protection to investors againstnon-commercial risks such as
expropriation, political instability, and currency inconvertibility.
5. International Centre for Settlement of Investment Disputes (ICSID)
● P urpose: Provides facilities for arbitration and conciliationof investment disputes
between governments and foreign investors.
● Function: Helps resolve disputes to promote a stableinvestment climate in developing
countries.
Governance and Leadership
● B oard of Governors: The highest decision-making body,consisting of representatives
(usually finance ministers or central bank governors) from each of the 189 member
countries.
● Board of Executive Directors: Oversees day-to-dayoperations, consisting of 25
directors who represent the member countries or groups of countries. (2 year term)
● President: The President of the World Bank Group,typically chosen by the USA, leads
the organization and implements its policies and programs.
Functions:
● C hanneling Funds: Transfers resources from developed countries to developing
countries and allows resource transfers between developed countries.
● Providing Loans:
1. From Own Resources: Loans funded by the World Bank's paid-up capital and
retained earnings.
2. From Borrowed Resources: Loans financed through borrowing from capital
markets.
3. Guaranteed Loans: Guarantees loans provided by privateinvestors to encourage
capital flow to developing countries.
● Resource Allocation: Ensures that the loans are provided in foreign currencies, with
exceptions for certain cases.
● Managing Debt: Diversifies debt through various currencies, countries, sources,
maturities, and techniques of borrowing to optimize funding.
● Technical Assistance: Provides support for effective utilization of financial aid,
including project feasibility evaluations and prioritization.
● Conducting Surveys: Identifies resource potential and obstacles in member countries to
aid decision-making for loans.
● Training Programs: Offers training to senior officials from developing countries in areas
related to economic development and resource management.
● Stimulating Private Investment: Aims to encourage direct international capital flow and
private foreign investment by creating favorable conditions.
● Co-financing Projects: Collaborates with aid-giving agencies, export-credit institutions,
and commercial banks for co-financing capital-intensive projects.
● Facilitating Loan Management: Works with governments to establish repayment
schedules and manage risks associated with loan defaults.
Contribution of world bank:
● Financial Assistance: The World Bank provides loansto developing countries,
particularly through its International Development Association, which offers concessional
financing to low-income economies.
● Access to Markets: It facilitates access to internationalfinancial markets, allowing
developing countries to acquire funding through bonds and other financial instruments.
● Private Investment Stimulation: The World Bank encouragesprivate foreign
investment by guaranteeing loans and financing infrastructure projects, which improves
conditions for private investment in developing countries.
● Focus on Poverty Alleviation: The World Bank has shiftedits emphasis toward poverty
alleviation, prioritizing agriculture and rural development projects to benefit the poorest
populations in developing countries.
Failures of world bank:
● Limited Impact on Capital Flows: The World Bank'sloans account for only about
4-10% of total international capital flows, highlighting its marginal role in global finance
and questioning the significance of its influence.
● High Interest Rates: The World Bank charges high interestrates and fees, reflecting a
commercial approach that can be burdensome for developing countries seeking
concessional financing.
● Project-Tied Loans: The World Bank often ties loansto specific projects, which can
limit the borrowing country's flexibility. This approach may overlook the
interconnectedness of projects and the broader developmental needs of the country.
● Neo-Imperialist Allegations: Critics argue that theWorld Bank serves the interests of
developed countries, particularly the USA, facilitating a neo-imperialist agenda by
exerting control over the economic policies of developing nations through structural
adjustment loans and conditions.
IMF
● T he International Monetary Fund (IMF), which was established in 1944 at Bretton
Woods, is considered as the leading international institution which helps its members in
overcoming their short-term balance of payments problem.
● In its early years, the IMF emphasized the importance of stable exchange rates, believing
that they would facilitate trade and capital movements internationally. This stability was
seen as crucial for a healthy global economy.
● Overemphasis on exchange rate stability led to issues like unwarranted balance of
payments deficits, particularly when currencies, such as the US dollar, became
overvalued. This situation ultimately contributed to the collapse of the stable exchange
rate system in the early 1970s.
● The collapse of the stable exchange rate system resulted in the adoption of a managed
floating exchange rate system, allowing currency values to fluctuate in response to
market conditions while aiming to prevent significant balance of payments deficits.
● The IMF plays a critical role as a source of international liquidity, providing financial
resources to countries facing balance of payments problems and helping stabilize
economies during crises.
● The IMF aims to ensure a rational exchange rate system and adequate international
liquidity, facilitating economic stability and growth among its member countries through
financial assistance, policy advice, and monitoring economic conditions globally.
bjectives:
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1) to promote international monetary cooperation,
2) to facilitate the expansion of international trade with a view to realize high levels
of employment and real income,
3 ) to promote exchange rate stability and discourage competitive devaluation of
currencies,
4) to develop a multilateral international payments system,
5) to eliminate exchange controls over current transactions,
6) to assist member nations to correct balance of payments maladjustments, and
7) to reduce the duration and the severity of balance of payments disequilibrium.
tructure:
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Board of Governors:
● C omposition: Composed of one governor from each of the 190 member countries,
usually the country’s finance minister or central bank governor.
● Function: Responsible for major decisions and policies,including approving the budget
and determining quotas.
Executive Board:
● C omposition: Consists of 24 Executive Directors, representingthe member countries or
groups of countries.
● Function: Responsible for the day-to-day operationsof the IMF, including approving
loans and policies.
Managing Director:
● R ole: The Managing Director (MD) is the head of theIMF and is responsible for the
overall management and administration.
● Selection: The MD is selected by the Executive Boardand is typically from one of the
member countries.
Staff:
● C omposition: Composed of economists, financial experts, and support staff from various
countries.
● Function: Conducts research, provides technical assistance,and implements policies.
Committees:
● Various committees support the work of the IMF, including:
○ International Monetary and Financial Committee (IMFC):Advises on global
financial issues.
○ Development Committee: Focuses on issues related toeconomic development
and poverty reduction.
Quota System:
● M
ember countries contribute financial resources based on their economic size and global
economic position, which determines their voting power and financial commitment to the
IMF.
Headquarters: Washington, D.C.,
unctions:
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(register)
ssessment:
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Inflation and Policy Issues in the USA: The inflation caused by the U.S. government's policies
to finance the Vietnam War led to a balance of payments deficit, undermining confidence in the
U.S. dollar and creating imbalances in the global monetary system.
Speculation and Currency Overvaluation: The overvaluation of the dollar, coupled with the
U.S. government's refusal to devalue it, encouraged speculation in foreign exchange markets.
This resulted in significant capital outflows from the U.S. and increased trading of other
currencies, particularly the German mark.
Reluctance to Adjust Currencies: The leading developed countries were reluctant to devalue
their currencies to correct balance of payments disequilibria. This rigidity contributed to growing
dissatisfaction among countries with surplus balances and ultimately led to a lack of necessary
adjustments in exchange rates.
Inadequate Response to Global Pressures: The IMF and central banks of major countries were
unable to effectively manage the pressures from global speculation and disturbances in the
financial markets, leading to a breakdown of the Bretton Woods system and the eventual
abandonment of the dollar's convertibility into gold on August 15, 1971.
TO:
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The WTO was established as a result of the Uruguay Round of negotiations, which began in
1986 and concluded in 1994. It replaced the General Agreement on Tariffs and Trade (GATT) to
create a more comprehensive framework for global trade, incorporating new rules for trade in
services and intellectual property. The WTO emphasized the importance of intellectual property
protection as a driver of global trade growth. The agreement established strict enforcement of
intellectual property rights, responding to the demands of multinational corporations and their
governments for a mechanism to protect technological innovations.
he WTO Agreements establish legal ground rules for member countries, mandating that
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national trade policies align with these agreements. Their dual objectives are to facilitate a free
flow of global trade without negative side effects and to enable governments to achieve social
and environmental goals. To promote trade, the WTO aims to remove barriers such as customs
d uties, quotas, and subsidies. It also emphasizes creating a transparent, rule-based trading system
where all members adhere to agreed-upon regulations. Furthermore, the WTO includes an
effective dispute resolution system, ensuring fair and prompt resolution of trade conflicts.
Structure:
● Ministerial Conference: The highest decision-making body of the WTO, comprising all
member countries. It meets every two years to make major decisions and set the
organization’s agenda.
● General Council: This body conducts the day-to-day operations of the WTO. It meets
regularly and consists of representatives from all member countries. The General Council
also serves as the Dispute Settlement Body and the Trade Policy Review Body.
● Secretariat: Headquartered in Geneva, the Secretariat is responsible for the
administrative functions of the WTO. It provides technical support, analysis, and
information to member countries and oversees various WTO operations.
● Council for Trade in Goods: This council oversees agreements related to trade in goods,
including the General Agreement on Tariffs and Trade (GATT).
● Council for Trade in Services: This council focuses on trade in services and oversees
the General Agreement on Trade in Services (GATS).
● Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS): This
body deals with issues related to intellectual property rights, ensuring that such rights are
respected and protected in the context of international trade.
● Committees and Working Groups: The WTO has various committees and working
groups that address specific areas of trade and env, trade and development, regional trade
agreements, balance of payment restrictions and finance and administration.
● The Doha Agenda was launched at the Fourth Ministerial Conference in Doha, Qatar, in
November 2001. The Governments agreed to launch new negotiations and work on the
implementation of the existing agreements. The entire package is referred to as the Doha
Development Agenda (DDA).
bjectives:
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Promote Free Trade: The WTO aims to facilitate thesmooth and fair flow of international trade
by reducing barriers such as tariffs, quotas, and subsidies, thereby encouraging global trade
liberalization.
Establish Trade Rules: It seeks to create a transparentand rule-based trading system where
member countries adhere to agreed-upon regulations, ensuring fairness and predictability in
international commerce.
Dispute Resolution: The WTO provides an effectivemechanism for resolving trade disputes
between member countries, fostering confidence in the multilateral trading system and ensuring
that trade rules are respected and enforced.
Functions:
1. A dministering Trade Agreements: The WTO oversees theimplementation and
administration of various trade agreements among member countries, ensuring
compliance with the established rules.
2. Acting as a Forum for Negotiations: The organizationserves as a platform for member
countries to engage in trade negotiations, facilitating discussions on trade issues and the
reduction of barriers.
3. Dispute Settlement: The WTO provides a structuredmechanism for resolving trade
disputes between member countries, helping to ensure that trade rules are upheld and that
conflicts are addressed fairly and efficiently.
4. Monitoring Trade Policies: The WTO conducts periodicreviews of the trade policies of
its members to ensure transparency and adherence to WTO agreements, promoting
accountability in international trade practices.
5. Technical Assistance and Capacity Building: The organizationoffers support and
training to developing countries to help them improve their trade capacity, ensuring that
they can fully participate in the global trading system.
6. Research and Analysis: The WTO conducts research on global trade trends and issues,
providing valuable data and analysis to member countries to inform their trade policies
and decisions.
Criticism:
ias Towards Developed Countries: Critics argue thatthe WTO's rules and policies favor
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developed nations, often sidelining the interests of developing countries. This leads to unequal
benefits from trade agreements and reinforces existing disparities.
I mpact on National Sovereignty: The WTO's regulationscan constrain the ability of member
countries to implement their own policies, particularly in areas such as public health,
environmental protection, and labor rights, raising concerns about national sovereignty.
ispute Settlement System: While the WTO has a disputeresolution mechanism, critics claim
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it can be slow and ineffective, with powerful nations often disregarding rulings without facing
significant consequences.
nvironmental and Social Concerns: The focus on tradeliberalization is seen as prioritizing
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economic growth over environmental protection and social welfare. Critics argue that this can
lead to exploitation of natural resources, labor rights violations, and negative impacts on local
communities.
G-20
Introduction
he Group of Twenty (G20) is a premier international forum that convenes the world's
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major economies to discuss and coordinate policies aimed at fostering global economic
stability and sustainable development. The G20 was established in response to the
financial crises of the late 1990s and early 2000s, particularly the Asian financial crisis
and the global financial crisis of 2008. These events exposed the inadequacies of
existing global governance structures, prompting the need for a more inclusive platform
that could address the challenges posed by an interconnected global economy.
Initially focused on macroeconomic stability and financial regulation, the G20 has
evolved significantly since its inception. The first meeting of the G20 was held in 1999 at
the level of Finance Ministers and Central Bank Governors. It aimed to enhance
international financial stability and promote dialogue among major economies. The G20
was elevated to the leaders' level in 2008 in response to the global financial crisis,
marking a shift towards a broader agenda that now includes issues such as trade,
investment, poverty alleviation, climate change, and social inclusion.
Objectives
The G20's objectives can be grouped into several key areas:
● G lobal Economic Stability: The G20 aims to promote macroeconomic
coordination among its members to ensure stability and sustainable growth. This
includes addressing issues of inflation, unemployment, and economic recovery in
the wake of crises.
● Development Issues: The G20 seeks to tackle pressing global challenges such
as poverty alleviation, food security, climate change, and social inclusion. By
focusing on development, the G20 aims to create a more equitable world.
● Trade and Investment: The organization advocates for enhancing international
trade and investment flows. This involves promoting open markets, reducing
trade barriers, and fostering an environment conducive to investment.
● Financial Regulation: The G20 is committed to reforming international financial
institutions and improving global financial governance. This includes enhancing
regulatory frameworks to prevent future financial crises and ensuring the stability
of the global financial system.
Structure
he G20 consists of 19 individual countries and the European Union, representing
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approximately 85% of the world's economy and over two-thirds of the global population.
The member countries are:
● rgentina
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● Australia
● Brazil
● Canada
● China
● France
● Germany
● India
● Indonesia
● Italy
● Japan
● Mexico
● Russia
● Saudi Arabia
● South Africa
● Turkey
● United Kingdom
● United States
● European Union
Key Bodies
● L eaders' Summits: These annual meetings of heads of state serve as the primary
platform for discussing and making decisions on global economic issues. The
summits allow leaders to engage in high-level dialogue and set the agenda for
future cooperation.
● Finance Ministers and Central Bank Governors Meetings: Regular meetings of
finance ministers and central bank governors focus on financial and economic
policies. These discussions are crucial for coordinating economic responses and
addressing global financial challenges.
● Sherpa Meetings: Sherpas, or representatives from member countries, meet
annually to discuss agenda-setting and policy coordination. These meetings are
essential for preparing for leaders' summits and ensuring a cohesive approach to
global issues.
Functions
The G20 serves several critical functions that contribute to its role in global governance:
● P olicy Coordination: The G20 facilitates dialogue and cooperation on
macroeconomic policies among member states. This coordination is vital for
addressing global economic challenges and ensuring a unified response to
crises.
● Agenda Setting: The G20 addresses a wide range of global issues, expanding
from its initial focus on financial stability to include development, trade,
technology, climate change, and social issues. This broadening of the agenda
reflects the changing dynamics of the global economy.
● Implementation of Initiatives: The G20 launches various initiatives aimed at
promoting financial inclusion, sustainable development, and job creation. These
initiatives often involve collaboration with international organizations and other
stakeholders.
● Collaboration with International Organizations: The G20 works alongside
institutions like the International Monetary Fund (IMF) and the World Bank to
implement policies and reforms. This collaboration enhances the effectiveness of
G20 initiatives and ensures alignment with global efforts.
Criticism
● L egitimacy and Effectiveness: Questions arise regarding the legitimacy of the
G20's decisions and the commitment of member states to implement them.
Critics argue that the G20 lacks formal authority, which may undermine its
influence.
● Focus and Prioritization: Critics contend that the G20 lacks a clear focus, leading
to a perception of it as a "no man's organization." The overlapping agendas and
diverse interests of member states can dilute the effectiveness of its initiatives.
● Influence of Developed Economies: Many studies suggest that G7 countries
dominate discussions, sidelining the interests of emerging economies. This
imbalance raises concerns about equity and representation within the G20
framework.
● Implementation Gaps: There is skepticism about the actual implementation of
commitments made during summits, especially concerning development issues.
Critics argue that despite ambitious declarations, tangible progress often falls
short.