The IMF and Poland’s Economy
The international monetary fund has had pivotal roles in the 1970s, 1980s and the 1990s. The role the fund was play in the development of nations across the globe gave the institution much attention and much was written on the institution. The beginning of the 21st century has seen much being written on the need for the restructuring of the institution and much criticism on its performance. Poland on its part, however, attracted much attention due to its prospects as one of the fastest growing economies in Europe.
After breaking from the communist Russia the country did away with communist policies and developed capitalists policies that so the economy transform very fast. This chapter seeks to review any literature that would be incidental in establishing the role is any that the International Monetary Fund has played in the world economies and narrows to look at the polish economy. The literature reviewed also looks at the conditional ties that the institution puts on its funds before giving the funds to beneficiaries.
Formative, it is hypothesized that the funding by the International Monetary Fund has mixed effects on any economy. The great depression that ravaged the world in 1930s saw country seek to develop stringent barriers to international trade and subsequent devaluation of their currencies (Best, J. , p 688). Citizens were curtailed fro holding any foreign exchange. The policies were self-defeating and could not alleviate the challenges that were seemingly becoming insurmountable by the day.
During the period world trade plummeted considerably, coupled by increase in the levels of unemployment. Subsequently living standards in most states went low. The devastated international monetary system necessitated the development of an institution that would oversee the international payment and transactions alike (Beeson, M. , Broome, A. , p 396). The developed outfit was to ensure that the there was stability in the exchange rate of the countries that were members. Besides, the outfit was to facilitate the purchase of goods and services from amongst citizens.
This breakdown in international monetary cooperation led the IMF’s founders to plan an institution charged with overseeing the international monetary system—the system of exchange rates and international payments that enables countries and their citizens to buy goods and services from each other. The new global entity would ensure exchange rate stability and encourage its member countries to eliminate exchange restrictions that hindered trade (Best, J. , p 649). The IMF has over the years been termed as the lender of last resort for countries that have had financial difficulties (Woods, N.
, p 380). The institution has over the years used its powers in the imposition of strict conditions that would make the countries access loans from the institution. The policies have been commonly referred to as structural adjustment programmes (SAPs). The institution has been very instrumental in the stabilization of countries that have had financial constraints, particularly in Latin America, Africa and Asia. The World Bank did not prior to peg its lending on the structural adjustment programmes. However, the International Monetary Fund did set precedence.
Today, most of the lending institutions require that country seeking for the loan put in place strategic structural adjustment programmes to access any loans. All loans have to be attached to some conditional ties. The structural programmes require that labour laws are made less stringent. More often the policies for the adjustment of the structures tend to make the workers less unionisable. Besides, while the policies will see the country come back to the requisite track, the policies tend to do away with labour laws. In most cases countries that are loaned by the IMF have massive layoffs in the short run.
When Mexico (Elekdag, S. , p 631) was bailed out in 1995 by the International Monetary Fund, it had to lay off most of its workers. An estimated 2million Mexicans lost their jobs in the wake of the bailout and the structural adjustment programmes. This layoff appeared to be in utter tandem with the policies of free trade that would liberalise the market and make possible the ease of access of labour (Archer, D. , p 17). Subsequently, the loaned states have to embrace international trade policies that would allow for the free flow of resources across its borders.
Overall, the International Monetary Fund policies are those that seem to be anti-workers. It is perhaps for this reason that most of the unions across the globe will be against funding by the International Monetary Fund. The inception of the Bretton woods institutions was meant to not only revive capitalism but to also encourage international cooperation. This move was prompted by the currency competition that was prevalent in the 1930’s (Woods, N. , p 390). The move was to tame the Soviet wave and shift to the market based alternative of economic development.
By the time the IMF was coming into full force, the United States was developing into the sole major economy. The International Monetary Fund found itself functioning in a new economic order by the 1970’s with the sudden collapse of the Bretton woods institutions at the time (Dieter, H. , p 346). The International Monetary Fund had t reinvent itself and become an institution that would provide economic surveillance and provision of policies that would assist nations that were tending to the doldrums to regain economic strength.
The challenge the IMF was facing in the 1990’s was resultant from the relationship the institution was having with the United States of America. It can to be argued that the IMF was in fact a tool for the US to pursue its foreign economic policy. In deed, the policies of the IMF seemed to simply perpetuate the policies of the US in the countries that were beneficiaries to the IMF funding (Seonjou K. , p 705). However, many scholars are in agreement that the United States has played a major role in the activities and the policy development and implementation prospects of the International Monetary Fund.
One of the major examples cited is the use of the US dollar as the major transacting currency for the IMF. The IMF also relies so much on the US as the major shareholder. This has on many occasions made the US to overlook the board and go ahead in lobbying for the adoption of the policies that the US favours. Most scholars argue that the US treasury has some sort of special relationship with the International Monetary Fund. This intimated relationship was evident particularly with the handling of the crisis in Asia. Besides, the US treasury played a pivotal role in the negotiations for the loan packages for both Thailand and Korea.
While the IMF is supposed to focus on individual economies as the singular and basic unit of analysis, the institution appears inclined to some political bloc (Archer, D. , p 16). Through the IMF, the adoptions of international unified monetary policies have been largely advocated for. The move has been furthered through the sponsoring of the retraining of officials from the member economies. The United States has played a central role in the training of these officials. The interest by China in the IMF policies seemed to make the United States to develop some cold feet.
This was sufficient show that the United States had some hidden agenda for pursued through the IMF. The intervention of china through the use of exchange rate control witnessed high opposition from the United States (Elekdag, S. , p 629). The United States put much pressure in 2007 to review or clarify its surveillance of the exchange rates. This made the IMF to adopt external stability policies that would seek to have countries have their economy stabilised through external forces. Despite the restructuring by the IMF, critics argue that the IMF has not executed satisfactorily its mandate as an economic surveillance institution.
The fund has been struggling to redefine and reposition itself towards measuring to this responsibility. The invention of the Financial Stability Forum in 1999 by the G-7 seemed to further devastate the institution. The aftermath was characterised by the reduced popularity of the IMF amongst countries such as the United States of America (Microfinance Network). By any standards the usefulness of the institution seems to be dwindling by the day. Clearly the institution has over the years undergone a cycle since the exit of the Bretton Woods. The fund has been the central salvage institution during crisis for ravaged countries.
However, this popularity notwithstanding the fund has rare and unpopular reputation because of sovereignty costs which it was imposing on the various governments. This can be traced clearly in its actions during and after the Asian financial downturn of the 1997-98 (Dieter, H. , p 349). While the Asian economies were state-led the IMF policies were geared towards having the economies towards market led economies. The IMF termed the unprecedented development in the Asian economies as the real essence of globalisation. The director argued that the development was merely neoliberal (New African p 16).
However, when the crisis in Asia took toll, the IMF and the United States so it as a loophole for the introduction of market economy into the crisis-hit nations. The IMF roles appear to be divided into two models, one that embraces dialogue and the other that is interested in the auditing. However, if the fund is insulated from any political pressure its surveillance role would be adequately delivered to the member countries. According to Gordon Brown, the UK Chancellor in the exchequer, with sound management of the international monetary fund, the fund would live above partisan ideologies and become independent and credible in its mandate.
The IMF has had countries rejecting its advice on monetary issues outright. This rejection has made the institution lose its credibility. Malaysia for example rejected the IMF’s and chose to reintroduce control on the inflow of capital (Archer, D. , p 10). Ultimately, this move seemed to show that the IMF was not credible enough. Perhaps it is for this reason that the critics blame the IMF for the pre-crisis and post-crisis challenges that faced the ravaged states. Clearly, the politics of accepting the policies of the international monetary fund seems to put most states off their feet.
Within any earnest assertions, the autocracy of nations seems largely impeded by the intervention of the international monetary fund (Seonjou K. , p 700). When focus is put on the democratic ideals of IMF funded nations there is evidence that the countries make efforts to democratise, however the efforts seem to last for as long as the International Monetary Fund lasts. Though it is universally acceptable that the IMF intervention comes in handy when states have economic difficulties, the conditional ties attached to the fund cause much political upheaval.
Similarly, the fund is seen a cause of stagflation within nations that receive the fund. Unless structures within the recipient countries are restructured prior to the receipt of the funds, the corruption and inefficiency within the public services impedes the objective of the fund. Camdessus (Camdessus, M. , 363) argues that though the adjustment programmes mentioned earlier would be a good step towards the attainment of the objectives of the fund, the success of the implementation depends on the electoral cycle. In regimes where there are impending elections, the regimes tend to work very well.
However, in regimes undergoing a post election era, structural adjustment programmes of the International Monetary Fund are flawed in their implementation. Camdessus (Camdessus, M. , p 363) agrees with the argument by Kaufman and Haggard who assert that the implementations of the SAPs are a success particularly in countries that are in a state of democratic transition. In these countries, they argue, the political class are conscious of the need integrity and sobriety in the management of the affairs of the public offices which they have interest or the ones they are holding.
While it is regrettable that most of the authors on this topic tend to examine at length the polity type regarding the failure or success of the IMF programmes. A thorough examination of countries such as Mexico, Argentina and Brazil, tends to imply that only countries that have authoritarian rule would successfully implement the strategies and programmes of the International Monetary fund. Kaufman argues that the ideologies postulated and pursued by the IMF would not be implemented by technocrats. Overall, the impact under technocratic implementation would be less felt than would be the case in authoritarian states.
In her examination, Onis (Onis, Z. , p 251) finds a lot of fault in the implementation of the policies by the International Monetary Fund both in democracies and in autocracies. She does this with particular reference to Latin America. Her central concern was to ascertain whether the programmes by the IMF posed any risk to the autocratic governments and if autocracy was a sufficient condition for the successful implementation of the IMF programmes. According to her, democracies had an edge in the implementation process.Sample Essay of Paperial.com