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IMF and Other Organizations.doc

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Political Science
Todd Alway

Political Science 1G06 2013 II Lecture 10b International Organizations IMF - On one level, the International Monetary Fund has a degree of autonomy that most other international organizations lack - Specifically, in terms of its operational budget (although not its loan budget) the Fund is by and large self-funding - Having said this, the ability of the organization to exercise that autonomy is largely constrained by its most powerful members Problem: If the value of your currency is plummeting... it’s difficult to import goods. Debts is difficult to service. It takes more and more money to service that debt. Pros: Stabilizes the situation. Gives them loans in HARD currency. Lender of last resort! Really helps a country out. If you’re not able to pay the loan back? They micro manage your economy. If you have to take on board certain conditions: Slash government spending, open borders to trade etc. ---- in order to pay loan back. These conditionality’s with help your economy! Con: Squeeze the backs of the poor to pay the IMF back. The poor suffer the most! Its operational budget (money to fund itself) makes VERY little profit. Not every state has an equivalent vote inside the organization. The largest contributor of the funds to the IMF, gives them a larger vote. They have a VITO. They have 17 percent of the vote. It VITO’s significant changes. The unites states prevents the IMF from becoming more meaningful. The IMF continuously need to increase their reserves… so they NEED the US. China is more and more significant in the global economy, but it is not. You have to act of approval of 85% of the states, but the US constantly VITO it. BRIC states are getting more frustrated by the lack of accesss and power in these organizations so they are coming up with their own organizations. - Unequal voting rights - Decisions in the IMF are not made on the basis of one state one vote (as is the case in the UN General Assembly) - They are made on a weighted basis o Weighted according to a state’s financial contribution to the organization - The net effect is that certain economically powerful states have a far greater percentage of the total votes than others 1 - The United States, since it has contributed the most to the fund, has close to 17% of the total voting power in the organization - Moreover, since a certain category of IMF decisions requires the approval of 85% of the total votes, the US has the power to veto actions by the Fund in certain circumstances World Bank: IMF and World Bank are similar. The World Bank helps for development. It is made up of 5 organizations. It is established in 1944. The Bank is actually a composite of 5 separate organizations, two of which are most significant: - A) International Bank for Reconstruction and Development (IBRD) - The IBRD provides loans to “credit worthy” middle-income member states for specific development projects - These loans must be repaid with interest - However they are provided on more advantageous financial terms than the borrower government would be able to get from private sources -
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