IMF/World Bank Model
IMF/World Bank Model
Outline
Introduction
This paper debates on whether IMF/World Bank model of economic development versus Marxist or structuralist approach is appropriate.
Part I: Financial programming
This section clarifies the policy implications and the basic tenets of IMF/World bank model. The chosen model for IMF literature is financial programming. It requires seven points in order to capture the basic thrust of the model.
Financial programming and growth oriented adjustment
IMF claims to collaborate with World Bank in the promotion of sustained economic growth.
The Washington consensus
This is a model that addresses the shortcoming of the financial programming model.
Part II: Alternative approaches
The UNICEF perspective
The UNICEF perspective calls for attention in human dimensions of adjustment. The budget cut on social services as customary in IMF/World bank policy are in the UNICEF perspective.
Marxist Oriented Vignettes
Marx believes that the introduction of capitalism in modes of production that are pre capitalist may infuse dynamism in stagnant social formation.
Frank and dependency school
Frank uses dependency concept which is the relationship between developing, and developed nations causes underdevelopment.
The Modes of production school
MOP focuses on modes of production and does not challenge the concept of underdevelopment and dependency.
Samir Amin
The theory of Samir combines, theory of unequal exchange, elements of the world capitalist system, articulation of MOP, and internationalization of production.
Structuralist approach
An approach that uses structuralist and neo structuralists approaches. The two groups believe in activist government in bringing appropriate policies for development. The approach normally divided into two; the first is early structuralist and neo structuralists. Structuralists view inflation as something caused by non monetary factors.
Part III: A fusion of horizons
It is an interpretation where it combines elements of relevant approaches considering some institutional elements of developing countries. Most developing countries have no enough non inflammatory instruments that can finance the government deficit. UNICEF program is sensitive in the promotion of economic and social justice.
Part IV: Conclusion
The paper has analyzed the policy issues and contrasted the IMF/World Bank model to alternative approaches.
Introduction
This paper debates on whether IMF/World Bank model of economic development versus Marxist or structuralist approach is appropriate. Familiarity with the IMF/World bank framework and alternative approaches will help in facilitating the understanding of the issues that face people in the developing world and their lived experience. Part 1 illuminates the policy implications and the basic tenets of IMF/World bank model. Part II contrasts the IMF model with other approaches. Part III is an interpretation with combining elements of relevant approaches considering some institutional elements of developing countries. Part IV is the conclusion of the entire discussion
Part I: Financial programming
Financial programming is the chosen model in IMF literature. There are seven points that needed in order to capture the basic thrust of the model.
The first point is balance of payment is in surplus, in the extent that, change in total money stock exceed change in domestic credit. The second point is that the current account equals the difference between absorption and income. The deficit in the current account needs to be financed by surplus in capital account. The third point is the change in the foreign borrowing of a country is the sum of change of the foreign borrowing of private sector and that of public sector. The forth point states that there are 2 key IMF policy targets including, inflation and the desired level of international reserves. The policy instructions used here are devaluation and domestic credit restraint.
The fifth point is that the preferred theory for inflation is the quantity theory of money, whereby the price levels equal to money supply multiplied by velocity then divided by output. The sixth point is that according to IMF, the wage bill should fall in order to meet an inflation target if the output fixed, domestic currency cost of import increase because of devaluation, and profit maintained to assure growth. The seventh point states that real output determined by the factors that are exogenous to the financial program.
Financial programming and growth oriented adjustment
The model of financial programming does not accommodate any other objective apart from the above mentioned objectives. However, in reply to the above statement, IMF claims to collaborate with World Bank in the promotion of sustained economic growth.
The Washington consensus
This is a model that addresses the shortcoming of the financial programming model. The recommendation that put forward on the policy framework paper include privatization of state owned enterprise, trade liberalization, price reforms, balancing of the fiscal budget, deregulation of markets, agreement on policy sequencing, and need for sound macroeconomic policy.
Part II: Alternative approaches
The UNICEF perspective
The UNICEF perspective calls for attention in human dimensions of adjustment. The budget cut on social services as customary in IMF/World bank policy are in the UNICEF perspective. The summary of UNICEF package is as follows the policies need to be more selective, and targets, macroeconomic policies should be less restrictive, social expenditures need to be restructured towards primary health care, education, and any other basic services, compensatory programs that are temporary need to be provided to the poor people.
Marxist Oriented Vignettes
This section provides a sketch of Marxist oriented approach for development. Marx believes that the introduction of capitalism in modes of production that are pre capitalist may infuse dynamism in stagnant social formation. Vladimir Lenin is pessimistic to Marx’s position by emphasizing on the monopoly capitalism as conflicting to competitive capitalism.
Frank and dependency school
Dependency is the concept of franks analysis, whereby a dependency relationship between developing and developed nations causes underdevelopment. Frank sees capitalism as relation to market exchange where the profit normally realized in the benefit of someone rather than the direct producer. Therefore, he refers to capitalism as a system of power exercised through relation of market exchange.
The Modes of production school
It is a continuation and reaction to the dependency school. MOP focuses on modes of production and does not challenge the concept of underdevelopment and dependency. There are three strands that can be identified in MOP that include articulation of MOP, peripheral or colonial MOP, and internalization of capital.
Samir Amin
Samir devices a development theory that combines, theory of unequal exchange, elements of the world capitalist system, articulation of MOP, and internationalization of production. According to Amir, periphery normally shaped in order to meet the needs of metropolis. The development of the latter needs the underdevelopment of the former.
Structuralist approach
This approach divided into two; the first is early structuralist and neo structuralists. The two groups believe in activist government in bringing appropriate policies for development. Early structuralist pays lip services in short running macroeconomic management and balances, and it also tends to focus on the supply side of the economy. Neo structuralists claim that integration of the monetary and real aspects is indispensable to working in the economy. Structuralists normally view inflation as something caused by non monetary factors because of the flaws in the economy and the social organizations of the country. It assumes that the rate of inflation usually increase without an increase in aggregate demand. The rate of inflation usually caused by structural factors. When the prices increase, it tends to trigger a fall in real income and decline in consumption and investment that result in higher rates of unemployment.
Part III: A fusion of horizons
The emphasis of IMF/World Bank can only make sense if, in some rare circumstances, it can force profligate governments in living within their budget constraints. Most developing countries have no enough non inflammatory instruments that can finance the government deficit. When the government implements stabilization programs sponsored by IMF in order to reduce budget deficits, it is likely to result to deepening of the already unstable economy condition; thus accentuating its fragility. The UNICEF program is sensitive in the promotion of economic and social justice, but it does not give a suggestion to formulating non inflammatory financing of the program as well as foreign aid
Part IV: Conclusion
The paper has attempted to critically appraise and review some relevant models. It has analyzed the policy issues and contrasted the IMF/World Bank model to alternative approaches. According to the essay, both IMF/World bank and its contenders approach are incomplete and at best partial.
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