POG 100: Introduction to Politics and Governance, Section 1/2/3/4 Fall 2007

Lecture: November 20 2007

November 20 2007
• Review: Global Governance and World Order • International Politics and Relations • International Organizations • International Financial institutions • Globalization

• Should the Toronto District School Board establish Black focused schools?

Review: Global governance and world order
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1) 2) 3) 4)

Represents the level of governance about the state Through history, there have been three (and now increasingly four) recognized systems of global governance or world orders
Relating to imperial orders such as: Pax Romana; Pax Britannica and Pax Americana Relating to balance of power such as the Westphalian order which led to the emergence of sovereign nation states (Concert system) Relating to agreed upon arrangements of sharing of power as would be the case in regional arrangements such as the European Union or the creation of the United States of America (Federalism) Globalization - the post cold war integration of societies on a global scale through economic, political and cultural imperatives

Review: Approaches to international politics
There are competing approaches to international politics 1) The Realist Approach - Power politics and the struggle for power 2) The Liberal approach - Process, ethics and Cooperation among nations 3) The Marxist approach - Conflict arising from unequal world economy 4) International Political Economy - integrated political-economic focus • Human Security – safety from violent and non-violent threat • North South divide – global economic apartheid: 77% of global population live in the global South but have 15.5% of global gross national product • Environmental globalism – Ecological crisis occur at a global level. Conference on climate change in Montreal begins today

Review: International Politics
• International politics helps us study the political nature of relations on the international or global level. It is about the mutual relationships of two or more actors at the international level. • It is assumed that these relations occur within an international system, a system of states, but also non-state actors such as international non-governmental organizations, terrorist organizations, etc. • International relations represents the study of relations among states • In common usage, it is interchangeable with international politics • Foreign policy is a sub-set of international relations focusing on the formal relationships states have in their external environment. • Foreign policy is concern with the legalistic, structures of states’ relationships in the international system

International Relations
• In modern times, international relations has been about seeking ways to ensure security and keeping the peace. • The various regimes that emerge within the world order can only persist to the extent that they promise to address structural anarchy and deliver order and security • The world is often divided between East and West, North and South, while states are in conflict with each other and often go to war with each other to assert their interests • The State is the central institution and most important actor in international relations • It is the primary unit of analysis and state sovereignty and self-determination are crucial to maintaining international order and international law

International System
• Represents a system of states with regularized relations, covering all the nation-states of the world • The system is both a political and economic expression of the idea that at any time, the world is connected under a world order • The international system determines the ability of states to achieve their goals • The units of the international systems are both states based on their relative power in the system and non-state actors such as NGOs, TNCs. It also involves sub-systems or regional groupings of states. • Key structures include the United Nations (UNO), the European Union (EU), The Commonwealth, the Organization of American States (OAS), the Association of South East Asian Nations (ASEAN), the Organization of African Unity (OAU), North Atlantic Treaty Organizations (NATO), NAFTA, APEC, etc

International Institutions 
International organizations (IOs) have emerged as the  architecture of world orders. These include international  governmental organizations as well as international non­ governmental organizations • After world war I the League of Nations was created to  coordinate transnational security • After WWII, key structures emerged including:
 United Nations Organizations (UNO)  The Bretton Woods System (BWS)

– IDRB (World Bank) – IMF

 GATT and World Trade Organization

United Nations Organizations (UNO)
The United Nation emerged as an international  regime of governance to maintain world order in  the post war period and coordinate international  cooperation in the following areas: • • • • Security Economic Political Cultural

UNO System
• • • • • • General Assembly Security Council Economic and Social Council International Court of justice Trusteeship Council UNO System Agencies

Some UNO Agencies
• • • • • • • • • • UNCTAD - UN Conference on Trade and Development UNEP - UN Environmental Program UN-Habitat - UN Human Settlement program UNHCR - UN High Commission for Refugees UNDP - UN Development Program UNIFEM - UN Development Fund for Women UNICEF - UN Children’s Fund UNFPA - UN Population Fund WFP - World Food Program UNRWA - UN Relief and Works Agency for Palestinian

The Bretton Woods System (BWS)
• International Bank for Reconstruction and Development (World Bank) • International Monetary Fund (IMF) • General Agreement on Tariffs and Trade

The Bretton Woods System (BWS)  Objectives
•Α stable exchange rates  • A reserve asset (something like the gold  standard) • Control international capital flows • Availability of short­term loans to deal with  temporary balance of payments difficulties • Rules to open up trade.

Mandate of the World Bank (IBRD)
The stated objectives of the World Bank  (International Bank for Reconstruction and  Development) were: –  to assist in the reconstruction of the global  infrastructure destroyed by the war,  –  to facilitate the development of the emerging, newly  independent, underdeveloped countries – (an objective  that at the time was secondary to the first one in  priority).

Mandate of the International Monetary Fund (IMF)
The stated objectives of the IMF were: •  to promote and maintain high  levels of  employment and income through the  expansion of international trade  •  the maintenance of exchange rate stability  and currency convertibility

Mandates of World Bank and IMF
• A key unstated mandate for both institutions was the integration of countries into the capitalist world economy.

• Over the past five decades of the existence of the World Bank and the IMF, this objective seems to have become the most dominant one.

World Bank
• The  most  relevant  of  the  World  Bank’s  two  branches  to  the  Third  world  was  therefore  the  IDA,  which,  like  the  IBRD  was  involved  in  providing  long  term  low  interest  rate  loans  for  development  and  reconstruction.  • Third  World  countries  had  originally  proposed  the  setting  up  of  a  Special  United  Nations  Fund  for  Development  (SUNFED)  in  the  1950s.  It would give them more control over the fund because of their  numerical clout within the UN • Industrialized countries insisted on the creation of the IDA under the  World Bank  which they had almost total control over.  The IDA is an  affiliate of the World Bank, not an agency of the UNO.  • They also established the Inter­American Development Bank, the  Asian Development Bank and the African Development Bank, all  governed on the basis of the contributions as opposed to membership.


World Bank
• The World Bank is structured along the lines of a  corporation, with member countries holding shares  as the basis for the Bank’s capitalization. They  make a nominal cash payment in line with the  shares they hold and are given promissory notes  for it.  • The capital is used as the base endowment for the  Bank to lever private capital from capital markets,  which it then uses to issue long­term  loans at rates  of interest below the market rates.

International Monetary Fund
• The IMF structure is organized more like a credit union, in  which members contribute funds (in gold or convertible  national currency) of amounts determined by the size of  their economy  • They can borrow from the accumulated amount to respond  to threats to their ability to maintain their rate of exchange.    • The original monetary system designated the US dollar,  backed by gold as the anchor currency against which all  other currencies’ values were determined.   • IMF loans were principally intended to provide borrowers  funds to deal with short term imbalances in their current  accounts.  

International Monetary Fund
• The loans generally have short term maturity and carry  conditions for the borrower to make some adjustments to  their economy to enable them to return to a stable position.     • If a member’s situation can not be fixed by those  measures, the IMF would agree to permanent currency  exchange rate changes – devaluation.   • In the early days, it was industrialized countries that were  the primary borrowers. That changed after the debt crisis  in the early 1980s. • The United States was the largest contributor and  subscriber  so it held the largest votes at both  organizations.  

International Monetary Fund
• The IMF now has 183 member states whose contributions  of members, each with a “quota” in proportion to the size  of its economy, finance its activities.  • The size of each national quota determines voting rights  and the 24­member Executive Board, whose members are  called Executive Directors. Each country’s vote is  proportional to its quota.  • 8 Executive Directors for the largest economies represent  only their own countries. The other 16 each represent all  other countries, including some Third World countries.  • A majority of 85% is required for most decisions, so the  vote of the U.S. at about 18%, is an effective veto power  over critical decisions.  However, even with loans that  require a simple majority, the US is able to exercize  inordinate influence

General Agreement on Tariffs and  Trade (GATT)
• As a forum for trade talks, the GATT was the site  of a series of rounds of multilateral trade  negotiations that aimed at the elimination of tariff  barriers, which enjoyed great, but intermittent,  success.  • The guiding principles of the GATT were to  facilitate multilateral trade bargaining, with most  favoured nation status, non­discriminatory access  to markets and other concessions granted to the  countries agreeing to play by the same rules and  procedures set. 

• It also served as an agency for resolving disputes  and upholding trade rules, but was slow and  impotent because it lacked of real powers to  enforce its rulings, depending on the nations’ self  interest. • Initially, the plan was to establish the ITO to  negotiate commodity agreements. But the failure  to get the US Congress to approve it led to the  establishment of the GATT in 1948 to organize  rounds of negotiations aimed at liberalization of  trade such as the Tokyo and the Uruguay rounds.

From GATT to WTO
1) Following the last (so­called Uruguay) round  (1986­94), GATT was replaced by the WTO  at the beginning of January 1995.  3) In addition to doing what GATT did, provide  a forum for negotiations and handling trade  disputes, the WTO is new in many ways.  

World Trade Organization
• The WTO is the most important regulator of trade at  international level today and also sets the terms within  which regional trade agreements can be signed. • The impact of the World Trade Organization (WTO),  established in 1995, had gone largely unnoticed until  Seattle 1999.  • Trade is an important aspect of the current wave of  globalization and its influence is felt from the global level  to  peoples' daily lives.  • According to the proponents of the WTO, globalization  needs to be managed at world level from a trade  perspective.

World Trade Organization
• The WTO covers all areas of trade, not just manufactured  goods, but services and intellectual property as well. • Whereas the GATT was virtually toothless when it came to  enforcement powers, a first objective of the WTO is  administering WTO trade agreements and monitoring  national trade policies.  • What this means is that an organization like the WTO  which is not internally democratic, is able to override or  change democratically approved national trading laws

World Trade Organization
• The result of trade negotiations in services (General Agreement on  Trades in Services (GATS) has been to put pressure on governments  to privatize what have historically been public services such as the  delivery of water.  In many countries in the Third World, the World  Bank has made the privatization of water delivery a condition of its  continued financial support for the government. • The result of trade negotiations on intellectual property (Trade­Related  Aspects of Intellectual Property (TRIPs) have led to billions of dollars  of monopoly profits being transferred worldwide from poor countries  to rich countries under the guise of protecting the property rights of  inventors and developers. E.G. HIV/AIDS Drugs

World Trade Organization
• In 1997, the WTO reported that world trade in goods reached $ 5.3  trillion, and trade in services an additional $ 1.3 trillion.  The United Nations Conference on Trade and Development (UNCTAD)  figures indicate that: • more than two thirds of world trade involves at least one multinational,  much of it within the same multinational around  the world (intra­firm  exports)  • with an estimated $7 trillion in global sales in 1995 ­ the value of  goods and services produced by some 280,000 affiliates of the world's  44,508 TNCs ­ international production outweighs exports as the  dominant mode of servicing foreign markets • TNCs were responsible for the $ 350 billion in foreign direct  investment in 1995.


The problem with the distribution  of trade benefits 
• The WTO's basic assumption is that its rules  contribute to trade and  investment liberalization  which leads to more competition, better allocation  of resources, economic growth, more employment  and better living standards, including  environmental conservation.  • Although the WTO, and GATT in the past, have  incorporated special measures for weaker  economies, there are many pitfalls in the current  system

Unequal distribution of the  benefits of trade 
• Inequalities between skilled and unskilled workers are  growing in the North as well as in the South;  • Corporate restructuring, labour shedding and wage  repression are on the rise; • Profit shares and the return on capital has risen much more  (from 12.5% in the early 1980s to 16% in the mid 1990s in  G7 countries ) than wages; • The concentration of revenues and higher company profits  have not been invested so as to create more jobs; • The benefits of liberalization have been mainly reaped by  traders rather than by farmers who have not received

Life and Debt
• According to the film Life and Debt, in what way has the intervention of the World Bank and the IMF facilitated the process of globalization? • Prepare not more than a one page response to the above question.

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