The document discusses concepts related to the current global economic order and institutions like the World Bank and IMF. It provides an overview of how these institutions work, their goals and activities, as well as concepts like poverty, inequality, and voting power within the IMF. Some key points include: - The current economic order is centered around rules established by Bretton Woods institutions and aims to maintain Western power through the dominance of the US dollar. - The World Bank aims to promote development through projects, loans, and partnerships. It works to reduce poverty defined as living on less than $1.25 or $2 per day. - The IMF aims to foster macroeconomic stability and provides loans to countries experiencing economic cri

1. Global Economic Order
Nicolas FOUCRAS Phd
University TEC de Monterrey
nicolas.foucras@itesm.mx

2. Concept of Economic Order
• Order (Palacios 2011) (“governance”): sum of explicit rules
(established by Bretton Woods institutions) or implicit rules
(OECD and G20 recommendations that generate soft law i.e. no
binding norms) that guides:
1. Actors’ behaviors
2. Actors’ decisions
3. Relations between actors
4. Distribution of power
• Current Order: Bretton Woods (1944)
– Maintains hegemony of the western powers (USA and the
predominance of the USD)
– Nowadays: DCs (middle powers) search to insert themselves
without abandoning “what they are” and with the idea to
favor first their own development

3. World Bank
• Overview
– Headquarters in Washington
– 10.000 employees
– Belongs to the UN system
– President: Jim Yong Kim (since 2012)
– President is from USA:
• Wolfowitz (2005-2007);
• Zoellick (2007-2012);
• Jim Yong Kim (2012-present; even if he was born in Seoul)

4. • How does it work?
• Objective =
–It is a Development bank => finance projects without
profitability
–Search to promote “Development” through the promotion of
commerce, FDI and growth (insertion in globalization)
– Priority: DCs and LDCs
– It provides loans with a very low interest rate
• Generally imposes some conditions
• Main fields for interventions: Education, agriculture,
industry and health

5. – Works with
• NGOs and local civil associations (“decentralization”)
• Regional development Banks
• UN agencies:
– UNICEF
– WHO
– UNDP with which it developed the HDI (Human
Development Index) which takes into account key
dimensions of human development : education; life
expectancy; GDP per capita
– FAO

6. 3 groups according to the WB

7. • Divided in 5 institutions
– IBRD: International Bank for Reconstruction and Development (created
in 1944 to help Europe rebuild after WWII). Its mission is to grant credits
to promote development
– IDA: International Development Association: to fight poverty through
financial assistance and State consultation; designed to help LDCs
– IFC: International Finance Corporation is a financial institution that
offers support (investment and consulting) to boost private sector in
DCs (soft loans); goal: to maintain the local economic fabric
– MIGA: Multilateral Investment Guarantee Agency offers guarantee to
MNFs willing to invest in a DC (when the country can not offer any
guarantee on its own)
– International Center for Conflict Regulation: offers help for conflicts
about investment between a MNF and DCs

8. Poverty according to the WB
• Poverty: people living with less than $2 a day
• Extreme poverty: people living with less than $1.25 a
day
• WB participated (as an important actor) in the
elaboration of the Millennium Development Goals
(MDG) during the Millennium Summit:
– Organized by UN in 2000
– In total 189 UN members participated (there are 196 currently) and 23
IOs
– The document is a commitment to help achieve the following 8 Goals
by 2015 (most of them are very vague):
Source: Angus Madisson 2002

10. Extreme poverty has decreased: rates
have fallen significantly in China, India and
LAC
• Brazil: 5%
• China: 10%
• India: 15%
• Indonesia: 18%
• The Philipines:
18%
• Angola: 25%
• Nigeria: 42%
• Chad: 79%Source: WB

11. Top 10 countries with largest share of the global extreme poor (2000
Vs 2011)
Percentage of people living on less than $1.25 a day
Source: World Bank
2010 2011

12. Map established by the Oxford Poverty
and Human Development Institute (2013)
Percentage of people living on less than $1.25 a day

13. Actually international community agrees more and more that the
most important problem of poverty is the way we define
“poverty”: we should review this concept to be able to elaborate
a better strategy
1. Academics agree that we should consider the
characteristics of the place where individuals live
(Foucras 2012):
a. Prices are different depending on where
individuals live so financial necessities are different:
• NYC Vs countryside in India
– NYC: high purchasing power => high prices
– Rural zones India: there is still a local production, with small
farmers adapting their prices to the low local purchasing power

14. b. Expectations/needs are different depending on where
individuals live:
• The context of “normal lifestyle” will be different
• Who is participating to the construction of this concept?
– Influenced by local culture (which is the product of history and
the environmental context)
– Social programs of the Governments that build the “normal
diet”, what should be a “decent house”, a “normal education”…
– IOs like OECD through recommendations
– Trade marketing (big firms and banks) creates the idea of a
decent car, house, lifestyle,…… the way to dress
– Movie industry and soap operas
– Local and global mafias (Russian mafia)
– Football players (transmitters of lifestyle)
– Everybody daily is contributing to the creation of “what is or
should be the normal life”

15. • Ex.: Mexico close to the border with Texas: high material
expectations (ostentatious life)
a vast majority of the population feels poor (despite the fact
they earn much more than in rest of the country) and they
behave as poor people => they tend to be violent (high
willingness to collaborate with drug cartels)
• Ex.: In indigenous communities in the Amazonian forest:
people live without any money and with very little material
expectations and the Happiness Index is very high
There is not a positive correlation between economic
poverty and violence (as thought initially WB)

16. 2. Poverty is social created concept because every
day we are building the “normal lifestyle” i.e. we are
creating new necessities to be part of the dynamics
(mostly material necessities)
– Ex. Internet or mobile phone (more and more sophisticated life):
the access or not is creating inners and outers (= poor people
because they can not access to the service due to the lack of
recourses or the lack of education…)
– The cost of access to these “new necessities” tends to increase
the poverty
3. Poverty is not a static concept (it is changing in

17. 4. Poverty is not only economic; it is more and more
associated by international/national officials to the ability
to access to the economic, social, cultural and political
dynamics (Sen)
5. Many agree that our model tends to promote a
poverty feeling due to individualism, lost of dignity and
self-esteem (Sen)
6. Other point: poverty depend more and more on the
inequality: more there is inequality more the person is
going to feel poor (Piketty)

18. Access to electricity
Source: WB, 2014

19. Current situation of the world inequality:
1% of the global population have the same wealth as the rest of the
population i.e. 99% (= 1% has 50% of the world wealth and 99% has
the same)

20. IMF
• Overview
– Headquarters in Washington
– 188 members
– Director (always european):
• Lagarde (2011 to present)
• Strauss-Kahn (2007-2011)
• Rato (2004-2007)
• Kolher (200-2004)
• Camdessus (1987-2000)

21. • Goals:
– To foster macroeconomic stability and global growth
– To promote international monetary cooperation
– To guarantee financial stability (avoid bankruptcy and
provide aid to countries with strong BoP deficit)
– To facilitate international exchange
– To guide public policies through Structural Adjustment
Programs (conditionality; promoting austerity => bad
reputation among society due to the important
interference)

22. • How does it operate?
– More a country applicate for a credit more IMF will impose it
conditions
– Main interventions:
• Greece (2010: 140billionsUSD);
• Portugal (2011: 99billionsUSD);
• Brazil (1998:42MMUSD);
• Asia (1997:36billionsUSD);
• Russia (1998:23billionsUSD);
• Argentina (2001:22MMUSD);
• Mexico(1994:18billionsUSD);
• Turkey (2000:11billionsUSD)
When they need financial
capital, ICs prefere to get it
in the financial market
(national and international;
tax revenues as well)
through issuing treasury
bills; reason: to avoid the
intereference of the IMF

23. IMF loans • At first: lending to ICs (UK and
France during 50s and 60s to
foster reconstruction)
• During 1980s and 1990s: strong
intervention in DCs (LAC, Asia,
Commonwealth of Independent
States[CIS]) to facilitate
integration and to face crisis
(1982, 1995, 1997, 1998, 1999,
2001)
• 2000s: Eastern Europe to ease its
integration process with EU
• 2010s: Southern Europe and
Ireland

24. Rewards for its move
towars EU
Purpose: to save UK,
France and German banks
=> Greece need money to
pay back the debt it holds
with these banks
otherwise this country will
declare bankruptcy =>
bankruptcy for European
banks unless Govts
nationalize this debt

25. Source: Guardian 2015
Generally, interest for IMF to lend money depend on the importance of the country
according to the proper functioning of the global market
Countries that impact more on the stability of the global economy (key role) have
more probability to receive attention from IMF (and others)
=> lack of certainty for most of the DCs, above all for countries
(1) willing to stay out of the globalization (no members of WTO: Turkmenistan, South
Sudan, Somalia, Eritrea, N. Korea) or weakly integrated to the globalization (India) =>
low weight
(2) with a weak economy with regard to the global market (Africa)

26. – Voting rights depend on the capital contribution (quota): USA (16.7%),
Japan (6%), Germany (5.9%), France and UK (4.9%), China (3.7%), Italy
3.7%…
BRICS: around 10.5% (China 3.7%; Russia 2.7%; India: 1.9%; Brazil:
1.4%; S. Africa: 0.8%)
– Current decisions (how to give a loan and to whom)  75% of the
votes is required
– Reforms must have 85% of the votes USA “freezes” the voting process
(16.7% = veto power)
=> Quota determine political power and the debt capacity

28. Voting power IMF
It is almost the same since WWII due to the difficulty to reform
=> the balance of power is crystallized/frozen
=> much more difficult to get access to the economic
development for LDCs than ICs and emerging markets
Source: IMF (2006)

29. Special Drawing Right (SDR) : The future world currency?
(currently = unit of account)
– Keynes first proposed a supranational currency known as "Bancor" at
the Bretton Woods conference, but his proposal was rejected
• At the beginning, USD and gold were the world
reserve assets. However, IMF created in 1969 SDR
to supplement official reserves i.e. to be able to
increase interventions (Hayes 2015)
• SDR is an international reserve asset (it is not held
by private actors)

31. • There are speculation that the IMF might add the
Chinese yuan => it would be the first emerging
currency to be added to the IMF's reserves
• SDRs can be exchanged for currencies (around: 1
SDR = 1.39 USD)
• Other international organizations are using SDR as
a unit of account to face monetary volatility:
African Development Bank, Arab Monetary Fund,
Islamic Development Bank, etc.
• China would like to use SDR in international trade:

32. BRICS and IMF
Difficult for BRICS to take part of the operation (10.5% of the
votes)
=> BRICS created a new IMF more oriented to the “real
development” of the members (New Development Bank)

33. New Development Bank
• Multilateral development bank operated by the
BRICS
• Alternative to the existing US-Japan-EU dominated
WB and IMF
• The goal is to provide loans and liquidity to
members (but also outside)
• Each member will be assigned one vote (≠ WB-IMF:
it depends of the contribution)
• None of the members will have veto power (≠ WB-
IMF)

34. BRICS:
• More than 3 billion people (42% world population)
• Cover more than 25% of the world’s land area
• Represents 4 continents
• Share of the world’s trade: 17%
• Share of the world’s GDP: 20%
• Account for more than 25% of global GDP

35. New Development Bank (NDB): refocus financial
flows
• Each country brings 10bnUSD: this
places it in the 7th position among
development banks (capital base
= 50bn.USD)
• 1st Chairman of the Board of
Directors is Brazilian
• 1st Chairman of the Board of
Governors is Russian
• 1st President of the Bank is from
India (Kamath)
• The HQ of the Bank is in Shanghai
• An “African regional center” will
be set up in Johannesburg

36. • 3 months later the NDB, China decided to
promote the AIIB:
– Capital base: 100bnUSD (Beijing plans
to provide the majority of the capital
>50bn USD)
– Goal: to finance development projects
in the region
– Official reason: The current Asian
Development Bank (ADB) (leading
lender in the region) is not able to face
the growing demand for infrastructure
– 57 countries signed on as members
(Asian, BRICS and many European
countries)
China also created Asian Infrastructure
Investment Bank (AIIB):

38. • HQ is located in Beijing
• Interesting because: Beijing provides an alternative source
of loans for Asian countries (it will compete with WB and
ADB i.e. USA & Japan; officially: “it will complement”)
• It confirms the new role of China and the orientation to
assume leadership in the international economy
Reduces USA and Japanese abilities to get political support
through the use of WB or ADB (=> undermines Japanese and US
influence in Asia which used WB to reward allies)
USA view this Chinese initiative with deep suspicion and
pressured Australia and South Korea to refrain from joining
(Dreher et. al 2009; Lim and Vreeland 2013)

39. Outlook of the main
regional/international Development
banks (2014):

40. Voting power = political power in regional
and national decisions in DCs (Wilkipedia 2015)

41. World Trade Organization (WTO)
Overview
• Replaced the GATT Conferences: WTO became the
successor organization in 1995
• WTO is an institution and not an agreement as was
GATT
• 160 members (Yemen: 2004; Russia: 2012)
• Based on multilateral cooperation
• HQ in Geneva
• Director: R. Azavedo (2013, Brazil) (before: P. Lamy)

42. Members and observers of the WTO
Missing:
• Turkmenistan
• South Sudan
• Somalia
• Eritrea
• North Korea
• Monaco
• San Marino
• Palestinian
territories
• Bermuda
• Micronesia

43. • China
since
2001
• Russia
since
2012
• Brazil,
South
Africa

44. • Goal:
– To create the rules that govern international trade
To provide a common framework for the conduct of trade (“code
of conduct”)
To bring transparency, confidence, visibility and fairness
• 2 Principles:
• (1) Most Favored Nation (MFN; Art. 1) = Products from a
member country must be treated no less favorably than
coming from any other country (you can not privilege a
country); normally:
Free Trade Agreements (FTA) should be prohibited
Generalized System of Preferences* (GSP) should be prohibited
• (2) National Treatment = Foreign goods must be treated no
less favorably than domestic goods (i.e. Equivalence of

45. *Generalized System of Preferences (GSP)
– Is a preferential tariff system
– It is when ICs lower tariffs for the LDCs
without looking for any reciprocity
– It benefits of an exemption from the
Most favored nation principle

46. What does WTO pretend?:
– To promote international ‘trade and investment’
agreements
– To allow coherence and coordination between national
economic policymaking
– To facilitate the negotiation and implementation of
multilateral/regional trade agreements (ex.: FTA)
– To give Technical assistance for DCs

47. General exceptions to free trade (considered
by WTO):
– International trade must protect: “public morals”,
“human, animal or plant life” and “health” => forbidden
to trade drugs, protected animals, ivory, products of
childhood labor and prison labor…
• But arms trade is allowed: WTO protects indirectly
the war industry through a "security exception" in the
GATT (Article XXI); problem is that governments
define for themselves their "essential security
interests"

48. • Sellers are ICs
• Buyers are DCs
Source: Human Traffiking Statistics

49. Exceptions…
–WTO contains escape clause (Safeguards)
permitting to reestablish tariffs or quotas as a
result of “increasing imports causing serious
injury to domestic producers”
• Ex: Steel and USA or Textile and clothing during
several decades
• DCs accuse ICs of overusing this rule

50. – WTO contains many exceptions for agriculture;
consequence:
• Agriculture is protected in every nation
• Highest levels of protection are in EU, USA and
Japan
• Also in China, Brazil, India, Mexico...
Trade for agricultural goods is very disturbed due to
subsidies: many ICs that should import are exporting
and DCs that should export are importing

51. Agricultural imports and exports:
ICs have reached an equilibrium between imports and exports or tend
to export; some DCs are net exporters (South American) and others are
net importers (Russia, China)
Source: CIA, 2012

52. Due to the high protected agricultural market in ICs it is difficult for
DCs to export to ICs
=> they export mainly to DCs. Case of India (export to neighboring
countries):

53. On the other hand, DCs have difficulties to preserve their
agricultural sector because farmers have to compete with
subsidized products imported from ICs
=> threatens the food security (dependence from ICs)
Food security (access to food) is preserved in all ICs and is at
risk in all DCs except Chile

54. The fact that many DCs are losing their food security has dramatic
consequences in terms of access to alimentation:
• Individuals living in DCs depend on several external factors:
– Value of the USD => many DCs spend important amounts of public
resources to maintain the value of the national currency
– Willingness of the ICs to sell food products to these countries
– Any kind of environmental crisis in the ICs (drought)
Losing food security affects the access to food and the
Hunger Index:

55. • Furthermore importing food means a regime
change
creates health problems
• Many are also questioning humanitarian
operations in Africa:
– 1st it tends to destroy small farmers and local distribution
networks (due to the distribution of free food; similar to the case
of dumping)
– Once established among the population it is difficult for local
producers to regain the market which they held before

56. Due to subsidies in ICs, DCs have to dedicate an important
share of their GDP to preserve their agriculture
Subsidies in DCs is the unique way to face/counteract ICs subsidies and to
preserve agricultural sovereignty
Agricultural support estimate in terms of national GDP (2012)
Source: OECD

57. Example of Japan:
Established very high tariffs to protect its
agricultural sector
Source: Ministry of Agriculture, Japan

58. An other sector escaping to the rules of the
WTO: Textile and Clothing
• For many decades trade was depending on Multi-Fiber
Agreement (MFA) = imposition of unilateral quotas by ICs
to slow imports from DCs
• 1995: WTO implemented an ATC (Agreement on Textiles
and Clothing) which considered a 10-year transition period
(1995-2005) to eliminate quotas => decreasing quotas until
2005
• Reality: many ICs are still imposing quotas but negotiated
directly with DC governments (outside of WTO)

59. • Many DCs are concerned since China, India and other large
producers (Bangladesh or Pakistan) are no longer subject to
quotas to access to ICs markets:
It is more and more difficult to compete for many small
countries: in Caribbean, Central America and Sub-Saharan
Africa (Mexico has serious problems to access to US market
due to the Chinese competition)
• Countries which are not belonging to the WTO remain
subject to ICs quotas
Even India ovetook Mexico in
2012

60. Share of global exports for textiles and clothing: Chinese share
was 37% of global exports in 2013 (284 bn USD), far ahead of all
its competitors (EU is 2nd with 25%, India is 3rd with 4.7%)
Source:WTOglobaltradestatistics

61. Textile and clothing exports in 2013 in millions of
USD: China account for 37% of the total export
Source:WTOglobaltradestatistics

62. Labor cost in the textile industry
In many DCs costs are lower than in China => many think that
production could move to other countries during the coming years
IC are still producing but they specialized in luxury goods
Source:Werner2015

63. FTAs (or Regional Trade Agreements RTAs) have proliferated:
• Nearly 300 notified to WTO
• They do not respect the principle of Most Favored Nation
(since they give preferences to members)
– Furthermore generally there is a system of “Preferential Rule”: a
product has to respect a minimum regional content to be able to move
freely from a country to the other (NAFTA: 60%; AFTA: 40%)
• WTO does not prohibit FTA; reasons:
– (1) Due to the slow progress of the multilateral negotiations
– (2) It considers that it will accelerate multilateral negotiations
– But there are conditions:
• WTO considers that FTA has to be a short term strategy
• All FTAs have to accept “open regionalism”

64. Regional trade agreements in force:
Source: The Economist 2014

65. Number of FTAs by status only in Asia
(2013): more or less 100 in force
Source:ARICFTAdatabase(asof2013),Asian
DevelopmentBank.

66. Under negotation:
1.Gulf Cooperation
Council (GCC)
2.Japan-Korea
3.Autsralia
4.Norway
5.Regional
Comprehensive
Economic
Partnership
Agreement
(RCEP): ASEAN +
India + Australia +
S. Korea

67. Gulf Cooperation Council
• Regional intergovernmental political and economic Union
• All Arab states of the Persian Gulf (except Iraq): Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and United Arab
Emirates
• Founded in 1981
• Goals:
– To defend common interests against occidental pressures
– To formulate similar regulations in various fields such as religion,
finance, trade, customs and tourism
– To foster scientific and technical progress in industry, mining,
agriculture and water
– To promote cooperation of the private sector (encouraging joint
ventures)
– To promote military cooperation (there is a common force)
– To establish a common currency
• Candidates: Jordan, Morocco and Yemen

68. • Less and less countries are using this multilateral
mechanism; most of them prefer a bilateral negotiation
to resolve their problems
=> Due to asymmetric negotiations DCs tend to loose
• In the DSB: More sanctions in cases of
• Dumping
• Subsidies
Dispute Settlement Body (DSB)

69. List of Rounds and Outcomes (GATT and WTO); important
dedication on tariff reductions

70. Tariffs on trade have almost disappeared
Case of the USA

71. Doha’s Round started in 2001 with new issues in
the agenda:
1. To eliminate ICs protection and subsidies mechanisms for Agriculture and
Textiles
2. To eliminate all kind of Non-Tariff Barriers (ex: quantitative restrictions)
3. To deepen Labor standards:
– In this area we observe a growing participation of the Labor
International Organization
– The willingness to deepen Intl. legislation reflects the great concern
among trade unions from ICs: they want to slow down the
decentralization/outsourcing that causes loss of jobs in the industrial
sector

72. 4. To consider more and more the Environment in the
International Trade (DCs do not agree to incorporate this
topic: they say that ICs will use it to implement new
protectionist measures)
5. To develop rules for E-commerce
6. To incorporate Intellectual property:
If WTO members reach an agreement it will give a
preferential treatment to ICs specially for the
pharmaceutical laboratories and their patents at the
expense of DCs industry (India which have developed since
the 1970s a generic drug industry by copying US and
European formulas)
Tensions between alliances of ICs and DCs

73. Many claim that the Doha’s Round is a
total failure and it reflects the
impossibility to go further with
multilateral negotiations
• After 14 years of hard negotiations
• Main reasons:
– Many players: 160 countries willing to defend their interests +
non-state actors want to participate (NGOs)
– Important concerns for DCs about trade asymmetry => DCs
developed capacity to organize themselves and to create
alliances to balance ICs interests
– The tendency is protectionism due to the changing global order
– New issues of the global agenda are very sensitive for all the
members

74. • USA cannot wait due to growing competition and
because they are under threat of losing their
hegemony i.e. global leadership (China is gaining
much more than USA in the globalization)
 They want to accelerate regional negotiations;
Objective: to maintain competitiveness, growth,
employment and influence…but also to consolidate
political influence to preserve hegemony. 2
important projects:
– Trans-pacific Partnership (TPP)
– Trans-Atlantic Trade and Investment Partnership (TTIP)
• China reacts to TPP:

75. ASEAN–China Free Trade Area (ACFTA),
• 11 members
• Started in 2010
• It is the largest FTA in
force in terms of
population (more than
2bn people) and 3rd
largest in terms of GDP

77. TPP members: with US leadership

78. • TPP trade block
leaded by USA
• RCEP trade
block leaded by
China
• Several

79. • Is a forum for 21 Pacific member that promotes free trade
in the region
• It was created in 1989
• Its goal is to reach a Regional FTA by 2020
• It includes big actors: China, India, USA and Russia
• APEC = RCEP + TPP + HK + Taiwan + Russia + Papua

80. Activity:
• Form groups of 3
• Answer the questions (20 minutes):
1. What are the reasons why some DCs say that the
Globalization is not fair?
2. How to make globalization fairer for DCs?
3. What are the obstacles to make it fairer?
• Make your presentation