Global Political Economy

Global Political Economy
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Global Political Economy
The global political economy remains an important topic considering the impacts that policies, in that construct, can have on the operational stability of each nation. In the context of the global political economy, prospects such as international finance, international trade, economic development, and the impacts of such prospects on the socio-political stability of the world are assessed. Nations play individual and collective roles in ensuring the management of the global political economy. Besides the inputs of the nations, there are independent institutions that have played a significant role in steering global political and economic trends, especially in the period after the war. Primary among such institutions is the International Monetary Fund (IMF). The IMF stays at the center of global prospects such as reducing poverty around the world, promoting high employment and sustainable economic growth, facilitating international trade, securing financial stability, and fostering global monetary cooperation. Combined, the above roles of IMF steer global political trends. In this paper, emphasis is put on assessing how the roles of IMF in the global political economy have changed over the past four decades and the impacts of such changes on the primary mandates of the institution. Assessing the evolution of the IMF and its impacts in the global political economy triggers insight into understanding the direction the world is taking in key political and economic prospects such as trade, financial stability, efficient political integration, and economic developments.
The International Monetary Fund (IMF)
The IMF is an intergovernmental pillar founded to support the structure of the world’s financial and economic order. IMF was formed in 1944 and came into formal existence in 1945, with 29 countries becoming its key members. Since its formation, IMF has grown to have 190 members. Additionally, 150 nationalities are represented by staff at IMF (IMF, 2021). The organization has 24 executive directors who represent the 190 member states. As it is constituted presently, the IMF can lend its member countries up to $1 trillion (Krueger, 2006). There are 29 lending arrangements currently to execute that order. It is also worth remarking that low-income countries can borrow money from IMF at a 0% interest rate. The IMF keeps influencing economic and political activities with the mandate that it is accorded in the global platform.
There are specific roles of the IMF that have defined its evolution since the 1970s. Primary among such roles is surveillance. IMF is mandated to prevent crises and maintain stability in the international monetary system. To execute such a role, the institution is allowed to monitor the policies that member countries have implemented. The institution further monitors the regional and global economic and financial models through its surveillance systems (IMF, 2021). Within that capacity as an independent monitor of financial and economic policies and activities, IMF can promote policies aimed at enhancing the living standards of some people, reducing vulnerability to financial and economic crises, and fostering economic stability among member countries. IMF’s mandate extends beyond surveillance as the institution also offers financial assistance to member states (Yan & Zhongxue, 2019). Individual countries can be supported by various IMF funding schemes depending on their needs. Over the years, the roles of IMF have changed to accommodate prospects such as capacity development, management of special drawing rights (SDRs), and mobilization of resources among member states (IMF, 2021). The past four decades have been vital to the IMF’s impacts on the global political economy trends.
The 1970s
The 1970s became an important period for IMF in influencing the global political economy. Before this decade, the industrial countries were the largest borrowers at IMF. Such countries had struggled to maintain external payments balance and domestic growth as they wallowed in debts accumulated at the peak of the war. The onset of the 1970s marked the end of such challenges (Dreher, 2018). In effect, the decade steered the onset of the expansion of IMF activities to other nations, especially in the developing world. Partly, such changes would mean that IMF would bear more direct influence in global initiatives such as the need to eradicate poverty, sustain political stability, and steer efficient economic and financial policies in the developing nations to foster faster economic growth (Gaspar et al., 2017). The period that followed the war was also vital in the shaping of global political ideologies. There were those countries in support of the communist ideologies while another faction supported the capitalist economic models. Using the IMF influence in the global platform, most countries were influenced to adopt capitalist ideas (Yan & Zhongxue, 2019). Also, the advisory inputs of IMF implied that, against the backdrop of a stable international financial environment and multilateral trade liberalization, with accompanying growth of world markets, a few developing countries in Africa, Asia, and South America began to enact more effective pro-growth policies.
The 1970s also triggered some changes through IMF that would revitalize fiscal and economic policies globally. In 1971, US President Richard Nixon sanctioned the abandonment of the gold convertibility policy. The change halted the conversion of the dollar into gold, which was practiced by institutions such as the IMF and the World Bank. This change would mean that Bretton Woods’ institutions would abolish the limiting fixed exchange rates policies they had operated previously (Dreher, 2018). While the industrialized nations lost on the interest rates by experiencing increased inflation and high unemployment rates, the recoil effects on the targeted developing economies were positive. Moreover, 1971 also accommodated the OPEC oil embargo that occurred in the wake of the Arab-Israeli war. The embargo was announced against the US, Netherlands, Japan, the UK, and Canada, a move that triggered a surge in oil prices. In a reactionary move, IMF created new lending tools to support countries facing the energy emergency to show its policy to prevent harmful spill-overs (Clift, 2018). The move created stronger economic and political relations among the nations indulged in the embargo (Yan & Zhongxue, 2019). In 1978, the IMF adopted flexible exchange rate policies. The change allowed IMF to acknowledge members’ right to adopt exchange rate arrangements befitting their choices.
The 1980s
The 1980s showcased a continuation of some of the trends initiated in the 1970s while also marking the onset of other new policies at IMF. In the early 1980s, industrial countries triggered an increase in the interest rates with their efforts geared toward reducing inflation and the economic policies that weakened their economic developments to which they were exposed in the period following the war (Nwangwu et al., 2019). The changes in the industrialized nations implied economic stress in t...