Category: Essentials of Economics: Ch 15
The World Bank and the IMF are no strangers to criticism. Both organisations have pursued controversial policies in their attempts to improve the lot of people in developing countries. Recent events at the World Bank have heightened criticism of the organisation and in the first article below Naomi Klein (author of No Logo – nologo.org) argues that the behaviour of Paul Wolfowitz is symptomatic of a wider hypocrisy in the behaviour of the World Bank around the world. In the second article George Monbiot writes a criticism of the behaviour of the IMF and its approach.
Questions
| 1. |
Use the web sites of the IMF and the World Bank to write a summary of their roles. |
| 2. |
Assess the validity of the arguments of (a) George Monbiot with respect to the IMF and (b) Naomi Klein with respect to the World Bank. |
| 3. |
Discuss possible changes in World Bank policies that would help address Naomi Klein’s criticisms. |
In March 2007, the pound reached a record high against the dollar. This made it an excellent time for UK tourists to visit the USA with prices appearing relatively low thanks to the exchange rate. These exchange rate values also affected the balance of payments of both the USA and the UK and the article below looks at the economic impact of the high exchange rate against the dollar.
Why everything’s almost free in America (and why it won’t last) Guardian
(23/4/07)
Questions
| 1. |
Explain the principal reasons for the change that has taken place in the exchange rate in recent years. |
| 2. |
“On a PPP basis, a pound should buy $1.60”. Explain what is meant by this statement. |
| 3. |
“My bet is that within a year the rate will be closer to $1.60 than $2. Maybe a lot closer.” Assess the impact of this possible outcome on economic growth and inflation in the UK. |
| 4. |
Examine the likely impact of the high exchange rate on the balance of payments situation of (a) the USA and (b) the UK. |
It was over 25 years ago that £1 was worth more than $2 on the foreign exchange markets, but that important psychological barrier was broken again this month as the value of sterling crept above $2 on foreign exchange markets. The continuing weakness of the dollar is making life difficult for UK exporters and also for firms in the Eurozone as the weakness in the dollar also affects the Euro and other major currencies.
Pound reaches 26-year dollar high BBC News Online (18/4/07)
UK pound goes through $2 barrier BBC News Online (17/4/07)
Yen hits record low against euro BBC News Online (16/4/07)
Pound hits 25-year dollar high Guardian (18/4/07)
British pound breaks through $2 International Herald Tribune (17/4/07)
Questions
| 1. |
Explain the impact of the weak value of the dollar on international markets on the price of UK imports and exports. |
| 2. |
Assess the likely impact of the high value of sterling on the major UK economic targets. |
| 3. |
Assess policies that the government could use to try to reduce the value of sterling against the dollar if they chose to. |
Many new regional trade agreements (RTAs) and bilateral trade agreements have been signed in recent years. In a report – Signing away the future – Oxfam has argued that these trade agreements may often significantly disadvantage the poorer developing countries. The links below give access to the briefing paper and some FAQs about these agreements.
Oxfam slams bilateral trade deals BBC News Online(20/3/07)
The state of world trade – Oxfam Oxfam website
Signing away the future – Oxfam Briefing Paper Oxfam website
Signing away the future – Q&A Oxfam website
Questions
| 1. |
Explain the difference between a regional trade agreement and a bilateral trade agreement. |
| 2. |
Discuss the advantages and disadvantages for developing countries of signing (a) bilateral trade agreements and (b) regional trade agreements. |
| 3. |
Choose a specific recent regional trade agreement and assess the impact it has had on the member countries. |
The United Nations has set a target for developed countries to donate 0.7% of their GDP to poor nations. However, the average figure is just 0.33% for the developed world and according to a recent OECD report many nations are set to miss this target if they fail to boost aid spending significantly. Indeed, only a few countries – Denmark, Norway, Sweden, Luxembourg and the Netherlands – are currently meeting this target.
West set to fail aid targets, OECD says Guardian(22/2/07)
Questions
| 1. |
Explain what is meant by ‘official development assistance’. |
| 2. |
Discuss the likely impact on the developing world of a failure to meet the aid targets set by the United Nations. |
| 3. |
Assess the extent to which developing countries are likely to gain from globalisation. |