Research Paper (Rough Draft)
Why The IMF Needs A Reset
An analysis on the division between today’s emerging and developed markets post 2008 financial crisis, and the role the IMF must play in developing an effective strategy for global economic governance.
Today the global economy slowly continues to recover from the events of the 2008 financial crisis, one of the most severe depressions in modern economic history. Due to the byproduct of thicker degrees of globalization, every player in today’s global economy was financially affected. As markets crashed, countries across the world wondered how this disaster could have occurred. Little did they know, financial institutions across the world, primarily the International Monetary Fund (IMF), warned the largest players within the global economy of the impending financial crisis. Years of irresponsible fiscal policies brought on by an onslaught of liberalization, lack of institutional transparency, and mass privatization led by the worlds most economically developed states had brought the global financial system to it’s knees. Why would the IMF allow this to go on despite the foreseeable outcomes? Here in lies the problem. Created in 1945, the IMF was designed to be the worlds premiere form of economic governance. Its role is to safeguard the global financial system and while working with its member countries, strive towards stable economic development in regions and countries that need it most. The financial institution is comprised of 188 member countries, with developed states such as the U.S. in power of the majority of institutional power. Despite being the owner of the world’s largest economy, other countries such as China, India, Brazil, Russia and many other emerging markets (EM) now rival or have surpassed developed economies in terms of economic size and growth. With increased economic power these emerging markets have begun to ask for more voting power and say over economic policies carried out by the IMF. This is a compromise that developed states within the IMF are reluctant to provide. This current scenario within the international community creates a rift dividing emerging markets and developed states from an economic and political standpoint with the IMF caught right in the middle. As the world’s premiere form of global economic governance, the IMF must regain institutional legitimacy amongst its member countries. With the increased economic power of emerging markets upon the global stage, will the IMF grant more power to these developing states within their institution? If reform such as this were to occur will we see a shift towards increased levels of multilateralism between developed states and emerging markets? If this were to occur will there be changes to international economic agenda that has been dictated by developed states for decades? In analyzing the contending ideas and priorities of IMF member nations prior to and following the events of the 2008 financial crisis, and by assessing the events that have taken place since from a regional and international scope amongst important economic states a more visible picture of the future of economic global governance will be presented.
In order to properly explain the current global economic landscape, an analysis of the IMF and the ideas upon which created the institution must be looked at. Upon its conception at the Bretton Woods Conference in 1944, the funds mandate was presented in its very first Article of Agreement. Although vague, the funds objectives were to promote international monetary cooperation, facilitate the growth of world trade, promote exchange rate stability, and to help to create a multilateral system of payments. 1In order to achieve these objectives, the IMF was supposed to provide short-term balance of payments support to countries in need of further...
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