Global Finance & Free Trade

Global Finance & Free Trade Student’s Name Institutional Affiliation Course Professor Date Global Finance & Free Trade Global economic governance is a significant aspect of realizing international development goals. Led by foundations such as the World Bank and the International Monetary Fund (IMF), economic governance through the recently agreed reforms at these two institutions has improved the voices and representation of evolving markets and developing nations in those institutions. The IMF and the World Bank were initially established with the goal of supporting economic collaboration, reducing poverty, and supporting sustainable development. However, their authority and legality, together with the effectiveness of the free trade regime they support, have been the subject of intense debate. Authority and Legitimacy of the IMF and World Bank Global Membership and Governance The IMF and the World Bank have a broad membership, comprising most of the world's nations. The World Bank has 189 members, and the IMF has 190 member nations. Such widespread membership ensures that their policies and actions have a universal insight and are impacted by a diverse range of nations, improving their legitimacy. Moreover, the IMF operates explicitly on a quota system where member nations' contributions are founded on their economic size, giving them voting power proportional to their financial stakes (Weaver et al., 2022). Such a system aims to balance the influence between larger and smaller economies, offering authority to the organization’s choices. The “World Bank and the IMF have a Board of Governors, with representatives from each member nation,” typically finance ministers or central bank governors, who supervise critical choices and regulations, ensuring that member states have a say in the governance (Weaver et al., 2022). The Board ensures close political oversight over management and staff, meeting at each institutional headquarters for at least three days a week at IMF. Mandate and Expertise The primary mandate of the IMF is to ensure global monetary cooperation and financial stability. Reports show that this institution promotes universal macroeconomic and financial constancy and offers policy recommendations and capacity growth support to help member nations build and uphold profound economies (Hillebrand, 2019). It offers short- and medium-term loans to help states that are facing problems and difficulties in their balance of payments to meet the universal payment responsibilities. The loans are often funded by quota contributions from its members. Such roles that uphold global economic stability give the IMF significant authority. The World Bank emphasizes long-term economic development and reducing the problems of poverty in member states. Reports show that such roles offer significant monetary and technical support to developing projects, which specifically serve to improve healthcare, education, governance, and infrastructure (Hillebrand, 2019). The expertise of the Bank in such areas and its dedication to sustainability fortify its legitimacy. Moreover, the research and data gathering on international economic development issues by the IMF and the World Bank are crucial in economic institutions. Such analyses and reports from these institutions are broadly recognized and used by different institutions, including governments, hence strengthening their authority. Financial Resources and Support Mechanisms The IMF has a massive financial resource, which mainly comes from the money paid by member nations as their capital subscriptions when they become members. Each member country is assigned a quota, founded mostly on its relevant position in the world economy. Reports show that multilateral and bilateral agreements can supplement quota funds. Such an initiative plays a crucial role at the IMF, raising its total resources to around SDR 695 billion by mid-December 2023 (Hillebrand, 2019). They also engage in borrowing arrangements with member countries, allowing the IMF to offer significant support to nations in crisis. The capacity of the IMF to act as a lender of last resort gives it considerable authority in international financial governance. For the World Bank, its ability to fund large-scale development projects through grants, loans, and guarantees makes it a significant player in universal development. The Bank's financial support often attracts more funding from sources, amplifying its impact and authority in global governance (Hillebrand, 2019). Such financial support from both institutions mostly comes with policy advice and conditions meant to support economic stability and development. Even though it might be controversial at times, the set conditions are meant to support sound economic guidelines and governance, advancing their power in shaping global economic practices. Generally, the combination of above factors; specialized expertise, global representation, and substantial financial resources establishes the World Bank and the IMF as authoritative institutions in the global economic governance. Criticisms of the IMF and World Bank The World Bank and the IM...