Global Economic Developmental Council

Topics: Global financial system, International Monetary Fund, Developing country Pages: 8 (2620 words) Published: October 2, 2013
Policy Paper
Global Economic Developmental Council (GEDC)
Word count: 2,277

After the strikes of several financial crises, domestic economic problems in developing and developed countries are exacerbating. For developing countries, they are frustrated by the aftermath remedies prescribed by the International Monetary Fund (IMF), as they do not bring benefits as promised. To countries in earlier stage of development, launching massive national development projects are increasingly difficult due to the lack of friendly financial supports from global economic institutions. To avoid shocks on currency exchange rate, export-led developing countries are bounded to accumulate foreign reserves at high costs. For developed countries, they are offended by major developing countries who have kept their currency exchange rate low, which creates global imbalance. It is important to know that the above problems are not independent; they interlock with each other and cannot be considered separately. Therefore, an effective solution to these problems should call for joint efforts from client countries and related state actors. However, the IMF does not recognize this logic. Their subject-object approach deters effective communication between developing and developed countries, making them fail to recognize each other’s needs (Martin and Simmons, 2001). As such, major global economic institutions could not call for global collective actions, which are more effectual than unidirectional prescription suggested by dominant hegemonic countries in global economic institutions. (Stiglitz, 2003) In this paper, a new global organization called Global Economic Development Council (GEDC) would be proposed as a solution supplement the defects in the IMF. It is an independent advisory body consists of a panel of representatives from different countries and areas of expertise, providing consultation materials to other global institutions, including the IMF. A reserves system is also found under GEDC to finance developmental projects. Details of the structural and functional designs of GEDC will be discussed in later sections. Historical contextualization: how the IMF did not honor their promises Owing to its voting rights allocated according to the amount of financial contribution a country made, the IMF is currently reflecting the ideologies to its biggest stakeholders: central bank governors and trade ministers from hegemonic Western countries (Stiglitz, 2003). As such, policy recommendations of the IMF are driven mainly by financial and economic interests of these parties, with side-effects on social aspects being neglected, resulting in incompatibility between the IMF recommendations and pre-existing domestic policies. What is more, the economic-indicator-oriented doctrine is found to be infeasible and unrealistic. Cases in East Asian have proven that IMF’s remedies to its client countries were ineffective. In Thailand after the Asian Financial Crisis, IMF’s recommendation on stabilizing the Baht by raising interest rates was proven to worsen the situation: half of the bank loans became nonperforming with number of firms went bankrupt. Other examples in Botswana, Indonesia and South Korea also reflect failure of the IMF in providing down-to-earth remedies to tackle with after-crisis problems. Moreover, the IMF could not address the interests of both developing and developed countries. It could hardly draw for full support and trusts from its members, so there is seldom an inclusive forum for discussion. As a result, many of the annual meetings and conferences are called off without any satisfactory outcome (The Guardian, 2010). In short, there is an urgent need to address these defections in the IMF. Here, a new global economic institution called Global Economic Development Council (GEDC) would be proposed. With its special structural and functional designs, GEDC aims at establishing effective and clear...
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