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Lesson 5 the imf and world bank


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Edexcel A Level 2016 Specification: Superpowers

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Lesson 5 the imf and world bank

  1. 1. The IMF and World Bank
  2. 2. The IMF
  3. 3. How does this make you feel?
  4. 4. History • Formed in 1944 at Bretton Woods, USA to stabilise currencies after WWII. • 44 Govt’s joined at first nearly all these were wealthy countries • Money was loaned out to help countries in debt. Thus stabilising their currencies and economies • It was an attempt to prevent poverty and communism.
  5. 5. Today • Has 185 members • Each member does not have parity as voting rights depend on money invested. • Headquarters in Washington D.C • Worlds top 21 economies have 70% of votes.
  6. 6. SO? • USA has nearly 17% - due to size of economy • EU has 25.7% • Western developed countries have 54.5% • NIC’s – Brazil, Russia, India, China (BRIC) have only 9.7% • The IMF therefore reflects the interests of America and Europe • It has lent money not just to stabilise countries but to counter the growth of communism.
  7. 7. • It has imposed conditions on the borrowing of money decided by the wealthiest members • The IMF main role now is still to stabilise countries faced with debt, impacts however can be harsh. E.g. Right wing UK and US govt’s forced developing Countries to cut spending on health and education in return for re- financing their debts.
  8. 8. Question In pairs discuss whether the IMF is the best way of helping poverty, if not what could be better. Write down your ideas.
  9. 9. The World Bank And The IMF
  10. 10. THE WORLD BANK
  11. 11. History • Also formed at Bretton Woods, USA in 1944 • Was to be the bank to finance development • First loan was to France for post war reconstruction • Also focuses on natural disasters and humanitarian emergencies.
  12. 12. • By 1950’s it began financing ex-colonies • Reputation was damaged in the 1970’s and 80’s for financing developments that were environmentally damaging or beyond the ability of developing countries to repay • By 1990’s it focus had shifted to just debt. • It’s goals have gone on to achieving the Millennium Development Goals:
  13. 13. • However it’s structure is similar to the IMF in that the wealthiest countries have the majority voting rights (USA 16%)
  14. 14. IGOs • Often give some powers to EU and USA • Make things that are in their best interest • Often operate some form of veto policy • Tend to group vote • They therefore can block policy meaning it’s very hard to ‘go it alone’ • Mainly used now for NATO peacekeeping • G7 led focus on debt and poverty • EU forcing through carbon emissions.
  15. 15. SAPS – 5 steps to freedom Five Steps What WB/ IMF believe will happen What can actually happen 1. Reduce tariffs and protection for domestic industry 2. Remove or decrease financial regulations 3. Remove or reduce state control of industries and remove any price controls 4. Cut social spending to reduce debt 5. Increase interests rates to reduce inflation
  16. 16. Example Question • Evaluate the need for superpowers to play a key role in trade and international decision-making to maintain their status. (16)