IMF World Bank And Chinas Role Global Governance Politics Essay

IMF World Bank And Chinas Role Global Governance Politics Essay This study will explain how these international organizations are changing and why there are differences in how the two organizations (IMF World Bank) are developing. Constructivist approach to the study of international organizations as actors, it is argued that an understanding of international organizations as bureaucracies with varying degrees of autonomy will contribute to a deeper understanding of their behavior. There are three central International Organizations (IOs) involved in regulating and coordinating the global economy; the International Monetary Fund (IMF or the Fund), the World Bank, and the World Trade Organization (WTO). But I am only going to discuss the role of IMF, World Bank and Chinas role in Global Governance. Since the end of the Second World War, when most of todays more important IOs were created the environment in which these organizations operate has undergone some significant changes impacting on the roles they are to fulfill and the expectations place d on them. The larger process of globalization has generally meant more work for IOs, more states joining, and expansion into new areas previously considered domestic issues. So, the idea is that in new era organizations like IMF and World Bank have become more important in governing the global economy. So, the IOs can be seen as part of an international system where such organizations act as intervening variables in international affairs but also influence the interests of states, in a mutually constituting environment.  [1]   In creating an IO, states also necessarily grant some level of autonomy in order for the organization to work effectively.  [2]  Naturally some states will have more influence in an organization than others but an IO needs to find a balance between the interests of its members and the organizations interests in promoting its mission and continued existence. The roles of the IMF and the World Bank have changed since their creation and the dismantling of the Bretton Woods system in the 1970s. The increased importance of these organizations has meant different things for the organizations and they have developed their own unique way, yet they are still involved in the larger task of regulating the global economy. In some ways these organizations now also have a greater involvement in the domestic policies of the states. Those for example need to lend money or want to be part of the global trade regime. Importantly their membership numbers have also increased greatly since the end of the Cold War. However, if these organizations are perceive as being in the business of performing tasks that impinge on the sovereignty of states, in some ways fulfilling a governance function at the international level then we arguably need to look closer on how they are accountable to member states (shareholders) and people affected by their policies (Stakeholders). This becomes even more important since it is clear that often the states mostly affected by their policies. Developing countries, are the states with little input in these IOs, to an extent by design, have a degree of autonomy in developing solutions for problems and agenda setting  [3]  . The study of IOs in international relations takes place against a background of theoretical disagreement between rationalists and constructivists. From mainstream international relations perspectives, which are rationalist in character, IOs traditionally have not been seen as relevant actors in the international arena. IOs are primarily seen as tools for states with no independent interests and no relevant autonomy. At best from a neo-liberal perspective you could say that the existence of IOs can have a pacifying impact on state behavior increasing the likelihood of international cooperation. Rationalist theories are focused primarily on states and why states create IOs in the first place. State interest in rationalist theories is largely seen as predetermined while in a constructivist view more emphasis is placed on the importance of changing norms and ideas. Constructivists argue those ideas, principles and an actors perceived identity influence behavior  [4]  . International Organizations as Agents of Change IOs are designed to facilitate state cooperation but often also to uphold a given set of rules, norms and practices. These norms and rules are of course designed by states and are subject to change if states wish it. One state alone however will have a hard time bringing about significant changes. Cooperation and reciprocal treatment is usually necessary to reach some form of consensus on what norms should prevail. IOs can here also be seen as important facilitators of change as they develop new solutions and policies, within general borders of what is acceptable to their principals. In this view state interests can be seen as derived from both the domestic level and the international level where numerous actors more or less important and involved in shaping and reshaping internationally held norms and rules. IOs are sites of interaction where such norms are shaped, but not exclusively by the states as experts and staff are also highly involved. When an organization has become more e stablished it can be seen as an actor in itself, working to promote tasks delegated to it. In the process of doing this the organization needs to solve problems and develop solutions that can be acceptable to member-states and other clients. So, IOs are generally treated as something positive and are seen to promote peace and international cooperation. The fact that IOs often have a liberal orientation, promoting issues like human rights and free trade adds to the positive view of IOs. A view of IOs as bureaucracies however provides insight into how IOs can sometimes fail due to internal dysfunction  [5]  . In addition IOs have traditionally not been famous for their democratic organization and transparency. Treating them as bureaucracies could provide insights into their legitimacy and how they change to improve their legitimacy in the face of increasing criticism. Four characteristics of modern bureaucracies relevant to understanding IOs as actors are organizational hierarchy, continuity, impersonality and expertise  [6]  . The impersonal character of bureaucracies means that there is a focus on rules that contribute to the image of bureaucratic organizations as impartial and depoliticized. Ideally, as pointed out by rationalists, IOs could be seen as impartial organizations administrating and carrying out the will of their members. This is a view that IOs themselves are often happy to promote  [7]  . Bureaucratic culture is a concept that is useful in understanding why organizations choose one solution over another or why they develop in a certain way. Bureaucratic rules are an integral part of this. Rules and guiding principles will be specific to an organization depending on its area of expertise. Rules will reflect underlying norms and principles and define how the organization interprets problems. They can be both explicit, like operating procedures internal to the organization, and implicit rules and norms guiding staff as to how an issue should be approached. Barnett and Finnemore pointed out some effects of bureaucratic rules that can be of interest  [8]  . Internal rules prescribe how an organization interprets problems so that the organization can respond to issues in an effective manner. Rules, often produced by the organization, also define how other actors should behave. Such rules, as part of the bureaucratic culture of an IO, also influence how staff interprets the world around them and how new problems are dealt with. A further argument is that such rules also contributes to a classification of issues in a way that fits the organization that then influences how others understand those issues, thus having a constitutive effect. For example rules on trade are defined at the WTO which then serves as a standard for others. The World Bank develops solutions to problems of poverty and development which prescribe future action by themselves and others. Rules and principles at an organization are also constitutive of the organization s identity in that they define what the values of the organization are. In addition to this, a contribution to bureaucratic culture at IOs, are their different areas of expertise and what kind of people work there. The IEIs are economically oriented organizations working within the areas of international trade, development and poverty alleviation, and financial issues. Traditionally, although this is changing slowly, these organizations have been staffed primarily with individuals educated and experienced within these fields. While this is quite natural it also contributes to what can be called epistemic communities in these organizations. This can have both positive as well as negative effects. It is positive in that it contributes to effectiveness and expertise, but it also limits critical and alternative input. It may lead to dysfunctional behavior because of unwillingness to take in alternative ideas and information  [9]  . The bureaucratic culture thus informs how staff und erstands and interprets problems, as well as what problems they see. This also suggests that IOs may develop their interests over time as long as it is within the general frames of the original mission. Interpretation is necessary from the beginning as IOs are often given broad mission goals like promoting financial stability which the then has to be turned into a manageable set of goals  [10]  . Authority and Autonomy As bureaucracies IOs also have authority  [11]  . The fact that they have been delegated their responsibility by states is central but there are different dimensions to IOs authority as well. Their bureaucratic character as well as other characteristics of IOs contributes to their independent authority and also to autonomy. IOs autonomy is an issue that has been discussed in trying to account for what has been called mission creep in IOs. One way of explaining autonomous IO behavior and such mission creep that fits within the rationalist perspective, is by focusing on the distribution of information between an agent and its principals  [12]  . It can be argued that IOs have access to more information than their principals which they then use to further their own interest. Despite this IOs may have an informational advantage in certain issue areas that they may, but not necessarily will, use. But important point here is that; why would IOs have diverging interests from that of their members? As suggested above, seeing IOs as bureaucracies provide us with insights as to why IOs may develop their interests. IOs often have normative goals that they try to advance. Member-states would however in the rationalist view have a central role in defining the mission and underlying norms. For example the creation of conditionality on loans and the promotion of increased transparency in member-states by the IMF and the World Bank have produced both resistance from some states and support from other states. States of course have mechanisms to keep IOs in check, primarily by having representatives at the organization  [13]  . Evaluation mechanisms at IOs also serve the function of keeping states informed. While states may have an interest in limiting transparency at IOs in some cases, increased transparency could also be seen as a positive development to improve state control of the organization and accountability of the organization towards member-states. In being bureaucracies, IOs have a rational-legal character, they are authorities because they have been delegated this authority but also because of their bureaucratic organization and expertise. The IMF is seen as the guarantor for international financial stability, the World Bank as a central IO working for development. IOs are often perceived as promoting the general welfare of their members, which they have to balance against particular interests of member-states. These sources of authority contribute to IOs being authorities in themselves and also consequently contribute to their autonomy. IOs are not of course autonomous or nor can they likely be entirely autonomous. Analysis of the Discussion There are various perspectives on IOs, and how we should understand them as actors? The arguments reflect that IOs are relevant actors, and although they are set up by states and states as their principals can have a degree of autonomy in them. This does not mean that IOs should be considered independent actors or they are making up their own interests as they go. IOs will likely have different degrees of autonomy depending on the original design by states for their functioning, but autonomy can also come from other sources. Like organizations expertise and informational advantage can contribute to autonomy in some cases. The expansion of the IEIs in the light of globalization has lead some to argue that these organizations constitute an elitist system of governance unaccountable to both member-states and people affected by their policies. This simplified picture is not really helpful in understanding the roles that the IEIs play in the international political economy or the environm ent in which they operate. In many ways the IEIs have been successful in pursuing their missions of trade and financial liberalization  [14]  . They have been able to adapt to a changing environment and find new issues to deal with as others have become less important. They have also persisted through various crises and have been central in solving problems. This reflects a concern over how these organizations are accountable to both shareholders and stakeholders and the character of the developing system of global economic governance. Legitimacy of this system should base on output oriented logic. In this way its effectiveness will matter the most. Furthermore, the inclusion of stakeholders in decision-making could play a prominent role. The International Monetary Fund The IMF as an organization has developed significantly from its creation reflecting the changing needs of member-states and developments in the world economy. The IMF has expanded over the years and has become increasingly engaged in prescribing economic policy for states in a way that was not originally intended  [15]  . The IMF since the 1980s increasingly deals with the domestic economies of states that want to draw from the Funds resources and prescribe economic policy through conditionality requirements on loans to developing countries. The IMF is an expert bureaucratic organization and an authority on international financial issues. To be perceived as an impartial and expert organization is important for the IMF to retain its legitimacy and importance. From the beginning the IMF has had a liberal ideological orientation to promote free movement of capital and contribute to economic growth. That the organization has been primarily staffed with economists in turn also affect how problems are interpreted and what kind of solutions are developed  [16]  . The staff of IMF need to interpret the mission given, identifies problems, and develops solutions that are likely to be successful while being sensitive to the interests of member states. The World Bank The World Bank of today has changed significantly from its origin both in its organization and in the policies it promotes. The Bank, like the IMF, has conditions attached to most of its loans and has moved further into previously domestic issues in order to pursue its mission of poverty alleviation and development. Originally the World Bank consisted of only one institution, the International Bank for Reconstruction and Development (IBRD). With time a number of auxiliary organizations were created; the International Financial Corporation (IFC) in 1956; the International Development Association (IDA) in 1960; the International Centre for the Settlement of Investment Disputes (ICSID) in 1966; and the Multilateral Investment Guarantee Agency (MIGA) in 1988. These together form the World Bank Group, while the IBRD and IDA are usually referred to as just the World Bank or simply the Bank. Unlike the IMF the Bank (IBRD) provides project specific long-term loans, but also development polic y loans to support institutional and policy change in borrowing countries. Although now strongly influenced by similar economic ideals as the IMF, the Bank has previously promoted and supported various development models  [17]  . In the 1980-90s the Bank became more engaged in issues of institutional and policy change in borrowing countries  [18]  . The organization has continuously been a target for criticism by NGOs and various other critics. But the World Bank has however changed more quickly and in slightly different ways than the IMF in response to legitimacy critique. How to Share Responsibility Before going further in the discussion of global governance, we need to understand the concept of power first. Following could be the important factors to determine a states power: geographical extension, population and military capacity etc. Considering this, and in order to achieve a democratic sharing of responsibilities on the principle of one person one vote. Now is the time when US and EU should really recognize the shift of economic power, energy power and of GDP power to Asia and other emerging economies. After the rise of China, US and EU should think about the other powers in developing countries. The world is progressing day by day and world powers should realize this change. As world is shifting very quickly and many countries are approaching them for forcing them to play their neutral role for the betterment of the world. The US and EU need to think of making IMF and World Bank more open and give representation to the developing countries of the world. If they are not going to act wisely, then there is possibility that other growing countries get frustrated soon and try to create their own multilateral institutions like IMF and World Bank. They could change the situation by giving up from their longstanding monopolies for appointing heads for the IMF and World Bank. (Traditionally Europe names IMF Director General and the US the h ead of the WB). EU and US should adopt the global changing economic reality and give up the leadership of World Bank and IMF for their own good  [19]  . Chinas Role in Global Governance China is rapidly integrating into the international system, but still a new player in global governance while the EU and its member states have rich experience in global governance. General literature on Chinas growing international importance is abundant; but there is still only a limited understanding of the motivations, targets and limitations driving Chinas participation in global governance. According to the literature there are four global governance arenas as key research areas, namely climate change, energy, trade, and development because they are global issues of particular concern for both Europe and China. It is most important to consider that mutual understanding and dialogue are indispensable tools for constructing global governance structures for the world. Since the onset of the financial crisis there have been suggestions to form a Group of Two (G-2) consisting of the United States and China. This proposal is based on the facts that China is the largest creditor of the US, the US is Chinas biggest export destination, and the strong interdependence of their two economies provides a foundation for joint action that can shape the global economy. This thinking is tempting when the Group of Eight is seen as reflecting an outdated balance of power and the Group of 20 is considered too diluted to respond to global challenges. Yet a G-2 would give a false assumption about stronger global governance and China would probably not deliver in such a format. We can say it like this [The] steady and fast growth of Chinas economy is in itself an important contribution to global financial stability. Or look at the closing statement of the National Peoples Congress: We have prepared enough backup firepower to deal with potential greater difficulties, a nd new stimulus packages, if necessary, will be launched.  [20]   Some Chinese are flattered by the suggestion of a G-2. It suggests China is a global power. But on the other hand Chinese realize that they are not yet ready for this. It could have another dimension and that it could be a potential trap for China that could expose it on the world stage. China is active in international reform with focus on internal growth and active foreign policy in financial and monetary matters. China is on the center court of international decision-making to protect a system of economic globalization that has provided China with many benefits. That is reflected in diplomatic efforts undertaken with regard to financial reform and the International Monetary Fund, as well as floating suggestions regarding a new reserve currency. Chinas foreign policy is still deeply rooted in non-interference and at its best conflict-avoidance. The US-China relationship is one of the most important bilateral relationships. There is need for tight coordination between the US and Chi na. Yet, to turn that into a G-2 will create an illusion of global governance that will not deliver on its promise. Is China Prepared for Global Leadership? Few years ago, some in the West warned of Chinas coming collapse but now, almost all hopes for global economic recovery are pinned on China, the only major economy still enjoying growth during the current global financial crisis. China has long sought to make others believe that it is one of the greatest countries on the planet. But China is not yet ready to take the leaders role, as it is a revisionist rather than revolutionary state. Chinas effective response enhances its image as the savior of a struggling global economy. Therefore, its proposals for the international economic order have attracted attention. President Hu Jintao became the star of the London Summit. Zhou Xiaochuan, governor of Chinas central bank, also won world wide fame for his suggested new international reserve currency, managed by the International Monetary Fund (IMF), to replace the US dollar. Chinas new offer of a loan to the IMF was also considered a step toward raising its voice in the international financ ial institutions (IFIs)  [21]  . Although China undoubtedly wields significant economic and political influence, its society contains the fundamental weaknesses of an underdeveloped country. It still has far to go to be a global leader in quantity and quality. With its domestic focus, Chinas government does not think it is time to take primary responsibility for global prosperity and stability. But China can still be more active in global governance and the G20 is an appropriate forum for China to exert its influence on global issues. Chinas rising power enhances the effectiveness of the G20 because a stronger China will improve the power balance in the group, as well as its legitimacy. Here there is no need to deny the differences between the advanced and emerging economies. The developed world is always willing to forget how countries became developed. For instance, developed countries claim that developing countries are stealing their intellectual property and that all countr ies need the strictest regulations to protect their intellectual property, overlooking the fact that they have control of most of it and that they were also imitating and copying during their development process. These differences, as well as Chinas power, help to ensure that the G20 will be a democratic and balanced forum for countries in various stages of development to revise the existing global economic system. Critical Analysis of Chinas Position for Global Governance China has brought forward ideas on the reform of the international institutions. But it is not trying to overturn the existing system and does not yet have its own blueprint for future global governance. It is trying only to reform some deficiencies that conflict with its own interests and values, as China is not yet in a position to take on the responsibility to lead. Moreover, China has enjoyed unprecedented growth under the current system. With regard to global economic governance, it will take into account the interests and requests of developing countries and reduce the control of industrialized countries. China also shares many common interests with the developed world. Cooperation rather than confrontation will help China achieve its goal of revising the international economic order. Because China has benefited much from its WTO membership, and the economic downturn has demonstrated that the Chinese economy still depends heavily on foreign demand, China needs to take a more ag gressive and accommodating stance in the coming negotiations, for instance, by offering more radical market-opening commitments in services and agriculture. On sustainable development, however, China is more defensive. The United States and the European Union have proposed a carbon tariff, which China strongly opposes. For China, this proposal ignores the differences between developed and developing countries for the historical responsibility of climate change, as well as regarding their present levels of development. Here, China again has a strong sense of identity as a developing country. Although it is excited by its acceptance as a major world power, China is not yet prepared to take a leading role in assuming responsibility for global prosperity. In terms of its economic and political development, it is still a developing country. China has therefore neither the capability nor the willingness to establish a new international system to replace the existing one. China, rather, us es the current system, while trying to change parts of it to sustain its own interests. This rising China is revisionist rather than revolutionary, and will help the recovery of the global economy and the reform of international economic order. Globally, I think China should actively participate in global governance constructive. From a longer-term perspective, China should participate in many global issues such as climate change and food security, and offer suggestions with vision. The world power shift has been happening in a peaceful way, without wars. But in reshaping international economic and financial territories, trade wars and protectionism are threats China and other countries must face. China is rapidly integrating into the international system, but still a new player in global governance while the EU and its member states have rich experience in global governance. While general literature on Chinas growing international importance is abundant, there is still only a limit ed understanding of the motivations, targets and limitations driving Chinas participation in global governance. The rise of China will undoubtedly be one of the great dramas of the twenty-first century. Chinas extraordinary economic growth and active diplomacy are already transforming East Asia, and future decades will see even greater increases in Chinese power and influence. But exactly how this drama will play out is an open question. Will China overthrow the existing order or become a part of it? And what, if anything, can the United States do to maintain its position as China rises? Conclusion The size and rapid growth of China, together with its increasing assertiveness, represent a challenge to the established global order. The dynamics and the future impacts of these power shifts for global governance and Chinas rise will create tensions varies according to the ways in which the basic interests of China and Western countries clash. Correspondingly, China has been playing a responsible, cooperative and constructive role in many areas. We can find contributions from China at nearly every big global or regional occasion. But meanwhile, Chinas domestic economic measures have helped create opportunities for other countries. In this way, the stimulus package has been designed and implemented in a balanced way. China is against trade protectionism and actively participating in redesigning international financial institutions. And the efforts are gradually delivering results. We can say China, as a growing power, is playing its role well. It is a suggestion that China should wo rk more aggressively to establish partnerships with international organizations such as the International Monetary Fund and World Bank. On the other hand some states will have more influence in an organization than others but an IO needs to find a balance between the interests of its members and the organizations interests in promoting its mission and continued existence. The US and EU need to think of making IMF and World Bank more open and give representation to the developing countries of the world. Chinas new activism should be encouraged as part of its transformation into a responsible stakeholder. A strengthened partnership and contribution from China can, in turn, boost its role and performance globally. At the same time, Chinas partnership with the United States is very important. The bilateral partnership is the key to the success of Chinas role on the global stage. The Western countries are losing power, and we have to admit the US has been severely affected by the financi al crisis. However, the US is still a robust society. Its high-tech industry is still leading its economy. Furthermore, economic cooperation between the US and China is much needed but world governance is still about more than economics.