MIM 513Pacific Rim Economies

Class Five – International Organizations & The Environment

Review of midterm exams

Consumption of foreign lending / borrowing

International Organizations & their impacts

Intro to Economics and the environment

Current events / country projects

Agenda

Consumption – Saving / Investment models-Increase in savings results from increase in I

-Increase in investment results from a decrease in I

-When the ROW I is above home country, then excess savings will lead to ROW lending

-When the ROW I is below home country, then excess investment will lead to ROW borrowing

Large Economic Institutions- IMF / WB created in Bretton Woods

conference in 1944. - IMF – To police the international monetary

system- WB – To promote economic development- UN – established to promote peace globally

World Bank - Role

- To reconstruct and promote economic growth

- Concentrated on public projects in underdeveloped nations

- Offers low I loans to unreliable economies- Offers 0 I loans for 50 yr horizon to

poorest nations

IMF - Role

- To control fiscal disasters such as trade wars, financial collapse, high unemployment

- To lend foreign currency to countries with high balance of payment problems

- Heavy borrowers must adhere to IMF policies

- Fundamental disequilibrium – countries that have suffered permanent decline in exports

WB & IMF – How do they differ?- WB lends 75% of money to large projects- IMF lends to governments for short term

lending- Focus on structural reform has blurred the

borders between the two- IMF lends at below market rates & oversees

the international monetary system- WB lends to developing countries through

long-term financing of development projects and programs

Jamaica Agreement - 1976- Allowed IMF to enter the currency exchange

markets to alter speculation- IMF was allowed to sell gold to support

loans- Member countries raised quotas for lending

IMF effects – Monetarist approach

IMF policies

- Members need 85% for decisions, U.S has 17% voting influence.

- Conditionalities – structural adjustment programs and economic performance targets- Austerity – raise taxes to increase governmental

revenues- Lower corp taxes- Argentina & Kenya

IMF policies

- Food – treats food as a comparative advantage trade commodity

- Public Health – Monetarist policies deteriorate long term investment in infrastructure

- Environment – promotes eco-system damaging projects (coal, oil, water)

IMF policies

- Millennium Challenge Account – March 2002 GWB created the MCA with $5B - Poverty reduction strategy – PRS IMF / WB to raise

conditional lending to PRS countries- Incomes of less than $1,400 – 29 countries have applied,

but 87 countries fall in this category- PSRP – Papers that describe “how” the country will

change to receive funds – rely on NGOs- IMF – identifies where the PSRP should concentrate

- Not tied to the MDGs at present

IMF in Crisis

Questions: - How did the IMF’s responsibilities evolve and

did it deter from its original mission?- Should the IMF be the LOLR? Why and How?- How does conditionality work? - What are expected of its members?- Does it fill a legitimate need? WB crossover?

Economics and the Environment

Does free trade hurt the environment?- Limiting Japan imports on fuel efficient autos- Subsidies of Agriculture extends use of pesticides- Shifts exports to less restrictive economies

Economic Impact-- Larger economies consume more- Higher incomes result in better environmental

restrictions (NIMBY)

Economics and the Environment

-Is the WTO anti environment?While promoting free trade and admonishing protectionism, there are two exceptions:

- necessary to protect human, plant, animal life or health

- relating to the conservation of exhaustible natural resources

Environmental challenges

- Extinction of species- Overfishing- CFCs & Ozone- Global warming

- Kyoto Protocol