Global Finance and Free Trade Limits and Possibilities

GLOBAL AND FINANCE TRADE – LIMITS AND POSSIBILITIES
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Global and Finance Trade – Limits and Possibilities
Introduction
International Monetary Fund (IMF) and World Bank (WB) have been essential cogs of the global economy. They play essential roles in assisting various nations across the globe from financial crises while also funding the important projects in developing countries. Despite the perceived significance of their work, these two institutions face major criticisms, which hinge upon their legitimacy and authority. The economic policies they place on countries have proved unsuccessful in multiple cases. Moreover, unequal representation in the process of voting and moreover, making decisions is also a concern for these two international financial institutions (IFI). These two bodies are also great advocates for free trade. Free trade refers to the economic model where multinationals are prohibited to conduct business without quotas, tariffs, or any other constraint. Through free trade, customers are guaranteed higher-quality and cheaper products. The subsequent discussion offers in-depth analysis on legitimacy and authority-related issues surrounding IFI (IMF and WB) as well as the merits and demerits of free trade.
Legitimacy and Authority of the IMF and World Bank
Legitimacy has been a historical and political though but gained greater attention with the advancement of international relations. International organizations (IO) and in this case, the IMF and World Bank act as independent and neutral actors when they come to the global stage. This independence is vital in the creation of transformational relationships among states and even better, enhances the efficiency and legitimacy of their individual or collective decisions. Besides, it enables the IO to initiate a short or long-term balanced actions which are dependent on the profound interest of both parties. This sentiment implies that powerful states are reluctant to conduct any business with organizations they are aware they cannot influence. On the other hand, the less powerful or smaller states will fail to enter into deals where their sovereignty is undermined.[Gabriela, Sterian Maria. "The Role of International Organizations in the Global Economic Governance-An Assessment." Romanian Economic and Business Review (2013): 308-316.]
The two funding institutions have been central in increasing integration among global states. Consequently, the old age challenges of poverty and ways of improving human development are becoming solvable and hope towards their success is higher. Despite the constant setbacks in regards to their governance, the IMF and World Bank have been two crucial institutions in the elimination of global poverty particularly in developing counties. The spotlight that the poorest countries has gained as a consequence of the actions thereof has compelled the institutions into thinking of involving them in various aspects such as higher representation. Representation in this regard comes in terms of voting power because they are the primary borrowers while the industrialized nations do not borrow as much. It is undeniable that these firms have altered the progress of the developing countries which has seen these nations adopt better equality terms and above all, eliminate poverty at a more progressive and visible rate.[Birdsall, Nancy. "Why it matters who runs the IMF and the World Bank." Center for Global Development Working Paper, no. 22 (2003).]
Religion has always been an ever-present dynamic even before the colonialization days and even then, missionaries were sent as the first category of individuals who were responsible for ‘aligning’ the subjects to the will of the colonials. Besides, religious traditions among many denominations among them Christianity, advocate for actions that appear to favor the less privileged in society. The works of the IMF and World Bank align with these objectives. Religion since old age never disappears or completely diminishes in significance, instead it continues to exist alongside modernization and globalization processes. Surprisingly, it often adapts and in some circumstances, intensifies with response to changes in the political, economic, and social environments.[Tomalin, Emma. "Religions, poverty reduction and global development institutions." Palgrave Communications 4, no. 1 (2018): 1-12.]
Criticisms Facing International Organizations
The primary criticism that IOs factors convolutes around the legitimacy and effectiveness of its decisions. Consensual decision-making is the major controversial point, which elicits heated debates in the sense that the profound decisions are justifications of power relations among countries. In decisions of major interests, the weighted power of voting is apparent. The voting system is marred and it is unfortunate that in this case, the voting share of the poorer countries is less important than that of the wealthier countries. The principle of consensus advocates for equality on the issue on the table but this is not reminiscent when it comes to the voting system. The developing countries are at the mercy of the rich and powerful countries. This stance is also evident in free trade where developing countries are confronted with safeguards, dumping, voluntary export restrictions, quotas, or other forms of limitations.
Another factor that discredits these monetary institutions is their policy homogeneity. In this case, these institutions have the ‘one-size-fits-all’ approach in establishing the economic policy reforms. For instance, despite the fact that the Asian financial crisis hit many countries in the region, same policies could never be the solution to the each countries challenges each one of them has differing needs and capabilities. The IMF justification in initiating similar policies for different economies is that it aims to establish “world’s best practice” when it comes to economic policy. In such a situation, the fund disregards the political variations in the affected countries besides their capability to implement their loan conditions. Such a situation is likely to create a conflict of interest between the two parties that is evident in the responses offered by Malaysia and Indonesia. Indonesia accepted the IMF conditions and loans while Malaysia opted not to take the offer.[Seabrooke, Leonard. Resolving the International Monetary Fund's Legitimacy Crisis. Working Paper, International Center for Business and Politics, Copenhagen Business School, 2006.] [Seabrooke (2006, p.2)]
Conditionality are the fundamental instruments that the two IOs use to affect national policies. Conditionality implies that the borrower has to meet preset provisions and criteria if they are to qualify for the loans. Thus, the debtor country has to offer guarantees that is going to implement those policies before being offered the loan. On the other hand, the presence of the conditionality is a protective mechanism by the international finance...