Evaluation of Bretton Woods Institution’s Influence on the Sovereign Decision Making Essay

Truly our global economy works in complexity as various collaborations and interrelationships happens between countries around the globe. Because of the interaction of different economies, Bretton Woods Institutions were established to guide those developing countries towards the attainment of impressive economic growth through the assistance of developed countries. Two of the major organizations under the Bretton Wood Institutions would be the World Bank and International Monetary Fund which provides research and financial services to developing countries to boost the economic activity of developing countries. Despite of the said gains that World Bank and International Monetary Fund offers to developing countries, a lot of debates concerning the real effects of such â€Å"intermediation† of WB and IMF happening on various parts of the globe. In this regard, the main question that this paper will about to answer would be: what are the effects of Bretton Woods Institutions programs on the sovereignty of developing countries and would there be really benefits that can be derived by developing countries on such existence of international institutions in the long run? These are some of the questions that we will uncover by the end of this paper. One of the main programs of World Bank and IMF for the developing countries would be to lend funds that can be used for economic development such as building of various infrastructures like roads and bridge that are essential to attract more foreign investors (Fischer et al 2003: 4). Aside from this, both of the identified international institutions provides research assistance as to how to deal with various economic problems such as poverty, high inflation and unemployment rate as well as stabilizing financial sector of the economy. But the only problem with IMF and WB would be their policy-conditional lending wherein they demand reforms on various economic policies of developing countries like lower tariff rate for United States or higher tax discount on foreign investors from developed countries in exchange for funds. Therefore, to some extent, IMF and WB, influences the economic policies of developing countries by requiring the latter to comply first on IMF and WB’s policy reforms before granting those financial aids. Since it is the government that makes economic policies, sovereignty is now at stake every time developing countries borrow money to MF and WB since the government becomes powerless from the demands of IMF and WB, and just let these international institutions to change whatever economic policies that is currently being implemented. For the past two decades, IMF and WB have been able to influence every developing country around the globe. Lending money serves as the powerful tool of IMF and WB in successfully penetrating the sovereignty of a given developing country in exchange for funding. In the short run perspective, every one would agree that IMF and WB are of great help for developing countries. But in the long run, due to their interventions on economic policies of developing countries, there is a tendency that the policy-conditional lending of IMF and WB would not fit to the nature of economic activities a certain country has thereby will only cause instability in the next coming years. In this regard, it is already clear that the policy-condition lending of IMF and WB would only provide short lived benefits for the economy of developing countries since negative effects of the said intervention would offset all those benefits. It would be better if IMF and WB would minimize its interventions on economic policies of developing countries to give room for the latter to have sustainable economic development.