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Environment, Sustainability and Development

In the current essay I would like to consider the global economic system established after World War II in particular Bretton Woods Institutions: the UN, the World Bank, the IMF and the GATT/ WTO. To begin with, it should be noted that after the global war crisis (World Bank) the global political and economic system need to develop new approaches to its regulation. Consequently, in 1945 appeared new international organization, designed to maintain and strengthen international peace and security, develop cooperation between countries – United Nations. However, with the creation of UN political stability was established in the world, in particular, the UN has become a platform on which countries could negotiate and express their positions rather than attack each other. At the same time, Bretton Woods established new world’s economic order, in particular on the conference were decided to create several powerful organizations, which to this day affect the economic relations in the world – the World Bank, the IMF and the GATT/ WTO. Nowadays, more and more people argue that all these organizations were created with one aim – to provide further wealth and the leading position of developed countries and enable developing countries to enter the leading position in the world.

The United Nations (UN) – is an international organization established to maintain and strengthen international peace and security, develop cooperation between countries. The basis of its activities and structure was developed during the Second World War by leading participants of anti-Hitler coalition. The name “United Nations” was first used in the United Nations Declaration, signed on January 1, 1942. The UN Charter was adopted at the San Francisco Conference, held from April to June 1945 and signed on June 26, 1945 by the representatives of 51 countries. The UN General Assembly occupies a central place as the chief deliberative, policymaking and representative organ. The General Assembly shall consider the principles of cooperation in the field of international peace and security; elects non-permanent UN Security Council members, members of the Economic and Social Council, on the recommendation of the Security Council appointed UN Secretary-General, in conjunction with the Security Council elects the members of the International Court of Justice, coordinates international cooperation in the economic social, cultural and humanitarian spheres; exercise other powers stipulated in the UN Charter. In turn, the UN Security Council has primary responsibility for maintaining international peace and security; its decisions are expected to obey all the UN members. The five permanent Security Council members (Russia, USA, Britain, France and China) have veto power. The Security Council consists of 15 members: five permanent members, the remaining ten members are elected to the Council in accordance with the procedure stipulated by the Charter. At the head of the Secretariat is the Secretary- General, who is appointed by the General Assembly upon the recommendation of the Security Council for a term of 5 years, who can be reelected for another term. Currently, there is a gentleman’s agreement that a citizen of the country, which is a permanent member of UN Security Council can not be the UN Secretary-General. UN carries out functions in the sphere of economic and social international cooperation (History of the United Nations, 2010).

It should be noted that in 2001 UN proclaimed so-called the Millennium Development Goals – the eight international development goals that 192 UN member states and at least 23 international organizations have agreed to achieve by 2015. These goals include reducing extreme poverty, reduce child mortality, combat epidemic diseases such as AIDS, as well as increased global cooperation to develop. In 2001, recognizing the need to more actively assist the poorest nations, UN member states adopted the basic goals. The purpose of these goals is the acceleration of development by improving social and economic conditions in the poorest countries in the world. These goals are based on earlier international development targets, and were officially established at the Millennium Summit in 2000, where all the present world leaders adopted the Millennium Declaration, in which were represented by eight goals. As a fact, among eight goals and 21 targets are:

  • Eradicate absolute poverty and hunger. Between 1999 and 2015. Halve the proportion of people whose income is less than one dollar per day. Achieve full and productive employment and decent work for all, including women and youth. Between 1990 and 2015. Halve the proportion of hungry people.
  • Achieve universal primary education. By 2015, ensure that children everywhere, boys and girls, to get the full course of primary schooling. Promote gender equality and empower women. Eliminate gender inequality in primary and secondary education, preferably as early as 2005, and by 2015 to achieve this at all levels of education.
  • Reduce child mortality. Between 1990 and 2015. Reduce by two thirds the mortality rate among children under five years. Reduce by three quarters the maternal mortality ratio. By 2015, ensure universal access to care in reproductive health.
  • Combat HIV / AIDS, malaria and other diseases. Have halted by 2015 the spread of HIV / AIDS, and begun to reverse incidence. By 2010, provide a publicly accessible treatment for HIV / AIDS for all those who need it. By 2015, halt the spread of malaria and other serious diseases, and begin to reverse incidence.
  • Ensure environmental sustainability. Integrate the principles of sustainable development into country policies and government programs countries to prevent the depletion of natural resources. Reduce biodiversity loss, achieving by 2010 a significant reduction of attrition rate. By 2015, to halve the proportion of people without sustainable access to safe drinking water and living in unsanitary conditions. By 2020, achieve significant improvement in the lives of at least 100 million slum dwellers.
  • Form a global partnership for development. Develop an open trading and financial system, acting on the basis of the rules, predictable and impartial. This includes a commitment to good governance, development and poverty reduction – nationally and internationally. Solve the special needs of least developed countries. Moreover, in cooperation with pharmaceutical companies to provide developing countries access to essential medicines. Also, in collaboration with the private sector, make available the benefits of new technologies, especially information and communication (Millennium Development Goals, 2011).

Today, it can be seen that not all of these goals at all will be achieved. Of course, setting such goals is a positive development, in many ways it is necessary. However, the results confirm that the UN today has no real levers of influence in the world and can not provide with achievement of the goals by UN member states. In my opinion, all of this suggests that the UN as its predecessor, the League of Nations, in essence does not perform its functions and is only a representative body to which very few countries listen.

World Trade Organization (WTO) is an international organization, founded in 1995 with the goal of liberalizing international trade and the regulation of trade and political relations between member states. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), concluded in 1947 and for nearly 50 years actually is an international organization. As a fact, WTO is responsible for developing and implementing new trade agreements, and monitors compliance with the members of the organization of all the agreements signed by most countries and ratified by their parliaments. WTO bases its activities on the basis of decisions taken in the years 1986-1994 under the Uruguay Round and earlier GATT agreements. Discussion and decision-making on global issues and prospects for further liberalization of world trade held in the framework of multilateral trade negotiations (rounds). To date, eight rounds of negotiations, including Uruguay, and in 2001 started the ninth in Doha, Qatar. WTO headquarters is in Geneva, Switzerland. To July 2010, the WTO consisted of 153 countries, whose share in total accounted for 97% of world trade. Also, WTO rules provide for a number of benefits for developing countries. Currently, developing countries – WTO members are (on average) a higher relative level of customs tariffs to protect their markets than developed. Nevertheless, in absolute terms, the total amount of customs- tariff sanctions in developed countries are much higher, resulting in access to markets products with high added value from developing countries are seriously limited (M.J. Stephey, 2008).

The stated purpose of the WTO is the dissemination of ideas and principles of free trade and stimulates economic growth. Many believe that free trade does not make life more prosperous majority, but only leads to further enrich the already rich (both countries and individuals). WTO agreements also were charged in a partial unfair priority to multinational corporations and rich countries. It can be said that small countries have very little impact on the WTO, and despite the stated goal (helping developing countries) developed countries have focused primarily on their commercial interests. Also, they claimed, health, safety and environmental protection are constantly ignored in favor of additional benefits for businesses.

As it was proclaimed on the Bretton Woods conference, in order to promote cooperation and ensure the integrity and stabilizing the world economy mainly after the Second World War, there were created the international monetary and financial institutions. Among them the leading place is occupied by the International Monetary Fund (IMF) and World Bank Group (WB), organized on the basis of the Bretton Woods agreements of the countries participating in international conferences. World Bank – is an international financial institution created to organize the financial and technical assistance to developing countries. Initially, the World Bank provided financial support for the reconstruction after World War II mainly in Western Europe and Japan. Later in 1960, was created the International Development Association, which claimed some of the functions associated with the policy of this bank. Currently, under the World Bank actually understand two organizations: The International Bank for Reconstruction and Development and International Development Association. However, there are other organizations, which are in Word Bank Group: International Finance Corporation, Multilateral Investment Guarantee Agency, and International Centre for Settlement of Investment Disputes. It should be noted that the World Bank for a long time have been criticized by various non-governmental organizations, scholars and famous economists. In particular, Stiglitz called the policy towards developing countries, developed by the IMF, World Bank economists in the U.S. government constantly wrong. In his view, according to the policy followed by the U.S., strong economic growth would not occur. He also pointed out that Russia, which followed the recommendation and has experienced falling real incomes, while China has not followed and is experiencing an economic upturn. Moreover, analysis of the global economy indicates that the World Bank’s program did not provide a sustainable and equitable economic development. In this connection, started increasing pressure on the Bank. Non-governmental organizations at national and international level began to pursue an open and democratic review of decisions of alternative policies of the World Bank. In 2001, the U.S. Congress Commission has assessed the performance of international financial institutions and concluded that 60% of World Bank projects were failed. The World Bank aims to fight poverty, but over the past five years, only 1% of the loans were given to the “poor” state, most in need of such assistance. During this time, global poverty dropped slightly (Todd Moss, 2011).

Research at the Heritage Foundation analyzed the impact that had on the poorest countries loans from the World Bank. During the period from 1980 to 2003 its credits and grants received 105 “poor” countries. As a result, in 39 countries of them gross domestic product decreased, in 33 – moderate (1 – 4%). Only 12 recipients were able to significantly increase the pace of economic development. Even more depressing situation is in Africa. In this region, the World Bank gave money to 48 states, only three of them were able to thrive economically and 23 were marked by economic recession.

It can be said that International Monetary Fund (IMF) and World Bank group have a lot in common. They are organized similarly to a joint stock company. Therefore, the share capital contribution determines the possibility of influencing the country on their activities. The principle of “weighted” votes determines the number of votes each member country. Twenty four developed countries accounting for 14% of IMF members have almost 60% of the vote, including the United States – 17.7%, EU countries – 26,2%. In WB U.S. has 17% of the total vote, i.e. as many as 140 developing countries combined. The headquarters of the IMF and World Bank Group are in Washington – the capital of the country, which has the largest quota in their capitals. Quotas of member countries of IMF are paid in full (about 25% – SDR and freely convertible currency and 75% – the national currency). The size of quotas is determined by the proportion of the country in the world economy and trade. In addition to equity international financial institutions have resorted to borrowing. Among the main tasks of the IMF are: to promote balanced growth of international trade; to provide loans to member countries (ranging from three to five years) to overcome the currency difficulties in their balance of payments deficit; abolition of currency restrictions; interstate exchange regulations by monitoring compliance with the structural principles of the world monetary system, enshrined in the Charter Fund. Opportunity to get an IMF loan is limited to the following conditions: limited size of the borrowing country depending on its range; fund imposes certain requirements are sometimes hard to country-borrowing, which must meet the macroeconomic stabilization program. This allows the Fund to work on the economy of the indebted countries. The IMF stabilization programs are also based on the concept of “supply-side economics” and focus on production development, economic reforms, on neutralization of their negative social consequences, as stated in (Agreement of the International Monetary Fund,

The IMF is often criticized by various scholars and politicians. Without any doubts, there are many reasons for such critics, but most often is mentioned the pro-American nature of the action of the IMF and the ineffectiveness of its recommendations for crisis management. It is important to keep in mind that a voice in decisions making process about the actions of the Fund is in proportion to their contributions of certain countries in its budget. For approval of the Fund’s decision there must be 85% of the votes. The U.S. has about 17% of the votes. This is not enough for self-decision, but this is quite enough to block any decision of the Fund. Moreover, the U.S. Senate may pass a bill, which bans the International Monetary Fund to carry out certain actions, such as to provide loans to countries. The IMF provides loans to initiate a number of requirements – free movement of capital, privatization (including natural monopolies – railway transport and utilities), minimizing or even eliminating government spending on social programs – education, health care, cheaper housing, public transportation, etc. n.; waiver of environmental protection, reduction of wages, limiting workers’ rights, strengthening of tax pressure on the poor, etc.

In addition, I would like to provide some examples, which show the consequences of IMF policy. (What is Bretton Woods, and what does it mean for the future of the global economy?, 2011) indicates that the most of the IMF loans to Yugoslavia in the 80’s went to service that debt and problems caused by the implementation of IMF prescriptions. The Fund has forced Yugoslavia to stop the economic alignment of the regions, which led to the growth of separatism and subsequent civil war that claimed the lives of 600 thousand people. In 1989, the IMF provided a loan for Rwanda on the condition that the government will cease to provide support to farmers, however, such norm exist in many countries, including the U.S., and will devalue the local currency. This triggered a collapse in household incomes and, consequently, a bloody civil war between Hutus and Tutsis, which killed more than a half million people.

In the 80th of the XX century the sharp drop to oil prices collapsed Mexican economy. The IMF began to act: loans were given in exchange for a large-scale privatization, with cuts in public spending, etc. As a result, up to 57% of public expenditure was spent on payment of external debt. Moreover, the country spent about $ 45 billion; unemployment reached 40% of the economically active population. The country was forced to join NAFTA and provide enormous benefits to American corporations. Income of Mexican workers reduced instantly. As a result of such reforms, Mexico – is a country where corn was domesticated first – began to import it from the U.S. also, a support system of Mexican farmers was completely destroyed. It should be noted that IMF’s offer to take, and then pay the external debt in foreign currency leads to the orientation of the economy exclusively for export, regardless of any measures of food security (as it was in the case of many African countries, the Philippines, etc.).

To sum it up, I would like to say that the global economic system, established after World War II with its institutions: United Nations, International Monetary Fund, the World Bank Group, the World Trade Organization represents only the interests of developed countries, in particular the United States and its strategic allies. Moreover, it can be seen that the policy of such organizations is aimed not only on straitening of the developed countries, but also on weakening of developing countries and turning them into raw materials and food appendages. Today, many people critique these organizations and have formed so-called anti-globalism movement. The scheme is simple, developing countries take expensive loans with the condition to follow the international institutions advice, and as a result, conduct absolutely wrong economic policy, which forces them to bring to loans and so on. It should be noted that according to such mechanism developing countries conduct not independently, but with a foreign economic policy. Also, in my opinion, today it can be seen that humanity will not achieve the millennium goals by 2015 because of formal powers of UN. I am convinced that Bretton Woods Institutions were created with one aim – to provide further wealth and the leading position of developed countries and enable developing countries to enter the leading positions in the world.

Works cited

Agreement of the International Monetary Fund. 2010. [online] Available at: <http://www.imf.org/external/pubs/ft/aa/index.htm> [Accessed 20 May 2011].
History of the United Nations. 2011. [online] Available at: <http://www.un.org/aboutun/unhistory/> [Accessed 20 May 2011].
Millennium Development Goals. 2011. [online] Available at: <http://www.un.org/millenniumgoals/> [Accessed 20 May 2011].
M.J. Stephey. 2008. Bretton Woods System. [online] Available at: <http://www.time.com/time/business/article/0,8599,1852254,00.html > [Accessed 20 May 2011].
Todd Moss. 2011. The World Bank as a Foundation? Why I’m Scratching My Head Over the World Bank’s New Vision. [online] Available at: <http://blogs.cgdev.org/globaldevelopment/2011/04/the-world-bank-as-a-foundation-why-i%E2%80%99m-scratching-my-head-over-the-world-bank%E2%80%99s-new-vision%E2%80%A6.php> [Accessed 20 May 2011].
What is Bretton Woods, and what does it mean for the future of the global economy? 2011. [online] Available at:<http://100gf.wordpress.com/2011/04/07/what-is-bretton-woods-iii-and-what-does-it-mean-for-the-future-of-the-global-economy/> [Accessed 20 May 2011].