Sample Term Paper
This is an open truth that international organizations have a vital role when it comes to world economics. Among the various roles some of them are described below.
- Improving the efficiency of the global economy by tackling with market failure and imperfect competition.
- Promoting macroeconomic stability.
- Distribution of global income among countries.
Gunnar Myrdal a Swedish economist drew attention towards the large inequality that existed in the per capita income of the rich and poor countries (Cavanagh & Mander, 2004). According to Gunnar Myrdal the inequality is increasing mainly because of the weak relationship between the spread effect and the backwash effect. Ever since Gunnar Myrdal presented this theory, many of the economists agreed to the fact that, inequality among countries is rising with the passage of time.
The next step in this regard was to design a methodology which would be used in examining international inequality. Some of the famous measurement tools included;
- Per capita purchasing power
- Parity adjusted income or product
- Log variance
- Regression of growth rates
Unfortunately if we look around the world all these agendas of the World Bank and IMF seems invisible, as all these points were limited till the books and are never practically applied .The real picture which is going on is that Bretton woods twins IMF and The World Bank utilized the global debt crisis to fulfill their goals, which were to weaken the potential of the third world governments in dealing with the Northern dominated multilateral agencies. In doing so the World Bank’s structural adjustment lending approach has played a vital role, according to which a market liberalization program was applied across third world economies. The main elements of this program include the following points (Hazakis & Siousouras, 2008).
- Major reduction in governments spending on health, education and welfare
- Privatization and exemption of state projects
- Devalue the currency
- Liberalize imports and remove restrictions on foreign investment
- Limit the labor’s wages and weaken the system that protects the labor
After looking at these elements pick any third world country and you will be shocked to find all these elements present in that nation. By the end of 1980’s, 70 countries fell into the trap of IMF and World Bank programs and the reason why we have used the world trap is because this structural adjustment and free market policies were the primary factor which became the main cause of inequality in this region (Danaher, 2001).
In a UN conference on Trade and Development studied 124 countries around the world showed that the income share of the richest 20 percent of the world rose from 60 percent to 83 percent between the years 1965 to 1990. The campaign against poverty is still a dream with a statistics in 2000 showing 1.3 billion people are living with less than one U.S dollar a day (Danaher, 2001).
Moving forward research and extensive data shows that the globalization of market forces which is strongly supported by the World Bank and IMF creates greater inequality. Data shows that the on ground situation related with inequality is getting worse day by day. According to a report published by the United Nations Development Program (UNDP) the richest 20 percent of the world’s population consumes 86 percent of the world’s resources, while the remaining 80 percent poorest uses 14 percent of the resources (Danaher, 2001).
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