Richer States Poorer States Essay, Research Paper Richer States Poorer States The Wealthy Economically Developed Countries (EDC’s) have established such systems as the International Monetary fund, to ensure economic stability among all countries. The United States led the way in the effort to create what we call today the Bretton Woods System.
Richer States Poorer States Essay, Research Paper
Richer States Poorer States The Wealthy Economically Developed Countries (EDC’s) have established such systems as the International Monetary fund, to ensure economic stability among all countries. The United States led the way in the effort to create what we call today the Bretton Woods System. Named Bretton Woods from the meeting that was held at Bretton Woods, New Hampshire in 1944. Which was attended by 44 countries. The purpose of this meeting was to come up with a system of rules and regulations to help avoid another international economic disaster like the one of the 1930’s. Between the meeting at Bretton Woods and Geneva, Switzerland (which was three years later) the Bretton Woods System was born. The goal was to manage the international money system, rebuild war-torn countries and to regulate international trade. According to the Northern states this was going to help them as well as the Less Developed Countries (LDC’s) of the south. The International Monetary Fund (IMF) was designed to help out countries in a monetary crisis. This was achieved by setting up a system based on the United States dollar backed by gold. The IMF determined that the price of gold was to be Thirty – Five dollars per ounce, and that was the standard to which all other currencies in the world where to be measured. This was the standard from 1947 thru 1971. This generated a confidence that contributed to the growth in trade and the economies of the first world states. The second of the three pillars was the World Bank. This organization was supposed to be designed to provide assistance for the rebuilding of those countries hit hardest by the 2nd world war. It was also suppose to help the lesser developed countries to develop. However, it was not until the mid 1950’s that the LDC’s actually started getting any assistance. This because the state of the north felt it was more important to rebuild their war torn states first and since the dominated the World Bank they got first renovations. In 1956 the World Bank established the International Finance Corporation (IFC). The purpose of the IFC was to encourage investment in the underdeveloped countries via private funding. The United States joined in its efforts during the 1960’s by developing the International development Association (IDA). Although the IDA was separate it was still closely integrated with the World Bank. The purpose of the IDA was to make loans available at lower interest rates to the LDC’s for development. Today the World Bank if focusing primarily on LDC’s, and has become a forum for discussions among the richer countries regarding the treatment of the LDC’s rather than its original development to assist richer countries rebuild after the war. Finally the third pillar of the Bretton Woods System. The general agreement on tariffs and trades (GATT). In the beginning only 23 nations agreed to the trading of GATT. GATT was suppose to be temporary until the formation of International Trade Organization (ITO). When the ITO did not materialize, GATT became the institutional framework for world trade.
The main purpose of GATT is to increase international trade while reducing barriers “1Weather in the form of Tarriffs, quotas, or other impediments such as regulations regarding labor standards or environmental protection.” An important function of GATT is to ensure all nations abide by the most-favored-nation principle. This principle states that nations will not discriminate. Basically, what this means is if one state were to give a break to say a poorer state it must give the same break to all states. The truth of the matter is GATT has allowed many exceptions to the most-favored-nation principle, and thus has not achieved a system where free-trade is recognized. GATT has reduced the barriers to international trade and has encouraged the growth of international trade for the richer countries at least. On January 1, 1995, the GATT became the World Trade Organization (WTO). The wealthy states may have felt they were economically integrating the south with the north states however,… over the years the LDC’s have discredited one theory after another on how to best speed up their development. During the 1970’s New International Economic Order (NIEO) was formed. NIEO was inspiring to bring unity among the group of countries known as third world. This can be traced back to the 1960’s at the first U.N. conference. Here the group of 77 was introduced. The group of 77 wanted to open foreign trade and multilateral aid from the world bank and the IMF instead of receiving country to country aid. Unfortunately by the end of the 1970’s the southern countries reached a dead end with NIEO. A contributing reason NIEO failed was due to the international debt among third world countries. These LDC’s became so focused on their debts that they did not focus on issues regarding reform of the international economic system. A key player in this was the action of OPEC in 1973, and then again during 1979. The raise in oil for the second time forced the economic slowdown for the richer countries, which led to worse conditions for the LDC’s. As richer countries found it hard to export the poorer countries suffered worse. So what went wrong other than the obvious… A lesser developed country cannot catch up with and compete with a richer developed countries. A renovated international monetary system cannot offer a solution for all economic falls. In particular, its contribution to solving the problem of world inflation, which is domestic in origin but not decisive. A renovated system must gain acceptance by all major players, and must contain a certain degree of resistance against major economic disturbances of all kinds including mistakes in economic policy which have proved to occur from time to time due to political pressures.
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