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Imf And World Bank Challenge Nation State

1439 words - 6 pages

To what extent do organizations like the IMF, WTO, and World Bank challenge the nation state’s ability to shape domestic economic and social policy?

The World Trade Organization welcomed with open arms Russia in 2012. This would open up trade possibilities for many countries in Asia, Europe and even the US. Some US companies, like Caterpillar, are already exporting a substantial amount to Russia. However, many in Congress do not want to grant Russia permanent normal trade status because of the way Russia has handled many political situations. As Andrew Kramer brought out in his NY Times article, “Congress has balked at the Obama administration’s request to grant Russia permanent normal ...view middle of the document...

That will hurt the bottom line of companies here in the US and thus hurt US workers and the economy. So there will be much discussion about what status to grant Russia which shows that the WTO policies on its members to treat all other members the same will shape the national policy of the United States government on this matter.
In a general way the United States is dependent on the IMF, and thus that organization will influence US economic policy. There are a few reasons why the International Monetary Fund makes it easier for the United States to do business globally, and I will look at one. Because of globalization, the US economy is tied up closely to the growth of the world economy. The IMF can lend to developing countries and thus stabilize their ability to engage in trade with the US. In fact, as brought out in the report by C. Randall Henning, US trade (exports plus imports) with countries that have borrowed from the IMF totals more than $400 billion per year. Keeping foreign trade open by lending to countries that struggle economically or that face a crisis which hurts their economy, limits the potential for a collapse of currencies and growth that could hurt the US economy. So by supporting the IMF and developing policies that make it easier to support the IMF, especially financially, the US government may feel it is doing what is necessary to help local job growth and strengthen the country financially.
There is also the argument that the United States would have to tailor its policies to please other member countries of the IMF, therefore compromising its ability to make independent decisions that would be beneficial for itself. The counter to that is by having more nations involved and making multilateral decisions, there are more resources to handle a crisis and more countries to shoulder the burden of responsibility. Also, the US has the major influence over the IMF and has veto power over decisions of the Fund, so the United States could keep the decisions of the IMF in line with its own economic policy preferences. Once again, it seems belonging to the IMF does have an effect on policy decisions of the US, but this could be a compromise which is the best decision for the health of the United States economy. So obviously it is in the best interest of the US to make sure the IMF can continue to support these smaller countries.
The IMF has also come under scrutiny because of the conditions under which it will provide assistance to countries, and allow countries to be a member. The organization uses this conditionality to impose economic policies that it thinks are best for the country. So in the United States, the Federal Reserve Bank not only has to fight inflation but also create policies that would stimulate job growth and the economy. This is usually based on what the team of economists used by the IMF thinks is best as an economic policy, not necessarily what is best for the country. It seems that the Fund’s economists...

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