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Developing Countries Hostility Caused by World Economic Groups

Essay by   •  December 22, 2010  •  Essay  •  579 Words (3 Pages)  •  1,485 Views

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The World Trade Organization (WTO), International Monetary Fund (IMF) and World Bank Group greatly affect the world economy. The WTO deals with international trade where it fights to break down trade barriers and serve as a forum for trade agreements, negotiations, etc. The IMF works closely with the WTO to facilitate trade and try and correct balance of payment problems. The World Bank is concerned with reducing poverty, funding developing countries infrastructure and often works closely with the IFM. Combined, I would say these three organizations have a huge impact on the world economy since there are so many members in these organizations.

Many problems stem from the power structure in these organizations, which seems to be stacked against developing nations. As an example of a power structure, the IMF according to Woods and Lombardi (2006) is structured as follows:

1) 7 countries (U.S., Japan, German, France, UK, Italy and Canada) out of the 185 member countries possess just over 45% of the vote on the Board.

2) 14% of the vote the United States has a veto power on the board of governors, which decides which issues will be voted on and discussed.

3) The majority of countries having to form constituencies and appoint a director, and there is no accountability for these elected directors to their constituents.

4) The amount of support each of the directors in the form of lobbying is unequal. Many developed countries have a large support group while developing countries have little support.

The list of problems goes past the power structure. Many developing countries feel forced into situations where their governments lose sovereignty. Rajan, (2008, p.11) speaks to the concerns developing countries have about intrusive conditions given to borrowing nations. Other concerns are that large businesses of developed nations can take advantage of their privileged situation in these organizations. While developing countries believe their economies will benefit from the increased business to be able to pay back their loans they're often left stripped of natural resources and left with an economy that's unimproved.

In conclusion, developing countries may have a reason to be hostile. During WTO negotiations in 1999, the coordinator for the African Trade Network said, "WTO is a place where power is loaded against developing countries" (Paulson, 1999). It seems that power isn't just loaded against developing countries in the WTO, but also in the International Monetary Fund (IMF) and World Bank Group. It seems that there will often be countries that are rarely able to address its concerns due to this imbalance. Many developing countries feel they've been taken advantage of under promises that these organizations say they can deliver on, such as reducing poverty,

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