GLOBAL BUSINESS STRATEGY 1
The GreatDepression of the 1930s destroyed economic progress in manycountries. Failing economies forced countries to devalue nationalcurrencies and increase trade barriers. Such measures were adopted soas to gain a competitive advantage in export markets. Many countriesalso aimed to discourage its citizens from using foreign currency.Consequently, living standards dropped to record lows. On the otherhand, sharp declines in global trade raised unemployment levels torecord highs. It was under these conditions that the InternationalMonetary Fund and the World Bank came into existence. The BrettonWoods agreement was established in 1944 in response to the overridingneed for an international monetary framework (Reinhart, 2015).
The IMF and theWorld Bank are recognized as pillars that support the world’sfinancial and economic order. Both organizations areintergovernmental and bear tremendous responsibilities with regardsto the global economy. The lack of a single global fiscal policy hasplaced increased pressure on the IMF and the World Bank. The twoinstitutions have some astounding similarities. For example, bothorganizations are headquartered in Washington D.C. They conduct jointmeetings since their membership includes most nations in the world.Major world economies control the functions of both institutions(Reinhart, 2015). The IMF and the World Bank combine research effortsand task forces in strengthening the economies of member countries.Nevertheless, the IMF is a cooperative organization in that itmaintains orderly receipts and payments between member states (IMF,2016). On the other hand, the World Bank serves as a developmentinstitution (World Bank, 2016).
The IMF and theWorld Bank have distinct purposes, structures, goals, methods, andsources of funding. The IMF maintains exchange stability amongmember states so as to eradicate depreciation of the currency. Italso eliminates barriers to world trade by reducing exchangerestrictions. The IMF works to promote monetary cooperation throughcollaboration and consultation. It facilitates the expansion ofinternational trade with an aim to reduce unemployment and raiseliving standards. The institution also avails funds to member statesat reasonable rates. In this regard, the IMF helps individualcountries to rectify maladjustments and disequilibrium in theirbalance of payments (Monschella, 2010). Consequently, member statesare protected from destructive measures that jeopardize nationalprosperity. The IMF also provides technical assistance to memberstates (IMF, 2016). Such assistance is geared towards adoptingeffective banking, monetary, and economic policies and regulations.
The World Bank isofficially recognized as the International Bank for Reconstructionand Development (IBRD). It is primarily concerned with financingdevelopment throughout the world (World Bank, 2016). The World Bankinitially extended loans to Western countries recovering from theeffects of long-lasting wars. From that point forward, the World Bankhas focused on helping developing nations. The institution isconcerned with promoting social and economic progress so as to raiseliving standards. Increasing productivity in developing countrieswill also lessen the burden on developed nations in the providingaid. The World Bank focuses on various sectors such as health,education, infrastructure, and disaster relief (World Bank, 2016).These efforts are geared towards alleviating suffering and maximizingimpact.
The World Bankfunctions through the coordinated efforts of five different bodies.For example, the IBRD offers loans to reduce poverty and buildeconomies. The International Development Association (IDA) usuallyextends interest-free loans to member states. The InternationalFinance Corporation (IFC) facilitates sustainable growth anddevelopment by enhancing the private sector. In this regard, itprovides structured finance and equity so as to promote investments.The International Center for Settlement of Investment Disputes(ICSID) solves disputes between private investors and governments.This helps to enhance the free flow of capital for development. TheMultilateral Investment Guarantee Agency (MIGA) encourages foreigndirect investments in developing nations (World Bank, 2016).
The World Bankfocuses its efforts on six fundamental themes. It strives to reducepoverty in the poorest African nations. It is also committed tocreating more opportunities for development in the Arab world. TheWorld Bank also aims to leverage knowledge and learning so as togenerate development. Middle-income countries also receive customizedfinancial services from the World Bank. Fragile states andpost-conflict nations face unique economic challenges that need theintervention of the World Bank. Some factors such as infectiousdiseases and climate change have global impact (World Bank, 2016).Therefore, the World Bank works to solve such factors for the sake ofglobal stability and development.
Roleof International Institutions
Internationalinstitutions are important since they ensure stability. In previousdecades, the US dominated in all sectors such as science, technology,innovation, economic prowess, and political stability. However,nations such as China, Japan, and India have slowly gained prominenceto the extent of overshadowing the US. Therefore, internationalinstitutions are needed to oversee the transition to a multi-polarsystem (Chen, 2003). Some proposals have been made so as to engenderglobal governance. For example, the composition of the UN SecurityCouncil needs to be enlarged. Also, NATO needs reform so as toinclude more powerful states. The IMF and the World Bank may alsorequire democratization to make them more global in their outlook(Chen, 2003). A world without international institutions wouldprovide a recipe for disaster.
Granted, analternative scenario may be presented in belittling the impact ofinternational institutions. War and peace occur due to imbalances inpower rather than lack of international institutions. Furthermore,countries form international institutions when they perceive makinggains that supersede those of their counterparts. Therefore,international institutions would crumble whenever constituent membersfelt shortchanged. However, a world without internationalinstitutions would face formidable challenges. Internationalorganizations form rules and establish standards to be followed byall members. Deviant behavior by any member state is punished byfines and sanctions. The long-term effects of economic and tradesanctions help to effect a change in behavior (Devin, 2011).Therefore, a world without international institutions would increaseinequality and poverty.
The IMF and theWorld Bank are crucial in helping to ensure economic stability anddevelopment across many nations. Their functions contribute toprosperity by promoting international trade and increasingemployment. In this regard, a world without internationalinstitutions would be chaotic, imbalanced, and inhabitable.
Chen, J. (2003). The role of international institutions inglobalization: The challenges of reform. Cheltenham, UK: EdwardElgar.
Devin, G. (2011). Making peace: The contribution of internationalinstitutions. New York, NY: Palgrave Macmillan.
International Monetary Fund. (2016). Retrieved fromhttp://www.imf.org/
Monschella, M. (2010). Governing risk: The IMF and globalfinancial crises. New York, NY: Palgrave Macmillan.
Reinhart, C. M. (2015). The International Monetary Fund: 70 yearsof reinvention. Cambridge, Mass.: National Bureau of EconomicResearch.
The World Bank. (2016). Retrieved from https://www.worldbank.org/