POG 100: Introduction to Politics and

Governance, Section 1/2/3/4

Fall 2007

Lecture: November 20 2007

 November 20 2007
• Review: Global Governance and World
Order
• International Politics and Relations
• International Organizations
• International Financial institutions
• Globalization
 Question
• Should the Toronto District School Board
establish Black focused schools?
 Review: Global governance and
world order
• Represents the level of governance about the state
• Through history, there have been three (and now
increasingly four) recognized systems of global
governance or world orders
1) Relating to imperial orders such as: Pax Romana; Pax Britannica
and Pax Americana
2) Relating to balance of power such as the Westphalian order which
led to the emergence of sovereign nation states (Concert system)
3) Relating to agreed upon arrangements of sharing of power as would
be the case in regional arrangements such as the European Union or
the creation of the United States of America (Federalism)
4) Globalization - the post cold war integration of societies on a global
scale through economic, political and cultural imperatives
 Review: Approaches to
international politics
There are competing approaches to international politics
1) The Realist Approach - Power politics and the struggle for power
2) The Liberal approach - Process, ethics and Cooperation among nations
3) The Marxist approach - Conflict arising from unequal world economy
4) International Political Economy - integrated political-economic focus
• Human Security
– safety from violent and non-violent threat
• North South divide
– global economic apartheid: 77% of global population live in the
global South but have 15.5% of global gross national product
• Environmental globalism
– Ecological crisis occur at a global level. Conference on climate
change in Montreal begins today
 Review: International Politics
• International politics helps us study the political nature of relations
on the international or global level. It is about the mutual relationships
of two or more actors at the international level.
• It is assumed that these relations occur within an international
system, a system of states, but also non-state actors such as
international non-governmental organizations, terrorist organizations,
etc.
• International relations represents the study of relations among states
• In common usage, it is interchangeable with international politics
• Foreign policy is a sub-set of international relations focusing on the
formal relationships states have in their external environment.
• Foreign policy is concern with the legalistic, structures of states’
relationships in the international system
 International Relations
• In modern times, international relations has been about
seeking ways to ensure security and keeping the peace.
• The various regimes that emerge within the world order
can only persist to the extent that they promise to address
structural anarchy and deliver order and security
• The world is often divided between East and West, North
and South, while states are in conflict with each other and
often go to war with each other to assert their interests
• The State is the central institution and most important
actor in international relations
• It is the primary unit of analysis and state sovereignty
and self-determination are crucial to maintaining
international order and international law
 International System
• Represents a system of states with regularized relations, covering all
the nation-states of the world
• The system is both a political and economic expression of the idea that
at any time, the world is connected under a world order
• The international system determines the ability of states to achieve
their goals
• The units of the international systems are both states based on their
relative power in the system and non-state actors such as NGOs,
TNCs. It also involves sub-systems or regional groupings of states.
• Key structures include the United Nations (UNO), the European
Union (EU), The Commonwealth, the Organization of American
States (OAS), the Association of South East Asian Nations (ASEAN),
the Organization of African Unity (OAU), North Atlantic Treaty
Organizations (NATO), NAFTA, APEC, etc
 International Institutions 
International organizations (IOs) have emerged as the 
architecture of world orders. These include international 
governmental organizations as well as international non­
governmental organizations
• After world war I the League of Nations was created to 
coordinate transnational security
• After WWII, key structures emerged including:
 United Nations Organizations (UNO)
 The Bretton Woods System (BWS)
– IDRB (World Bank)
– IMF
 GATT and World Trade Organization
 United Nations Organizations (UNO)

The United Nation emerged as an international 
regime of governance to maintain world order in 
the post war period and coordinate international 
cooperation in the following areas:

• Security
• Economic
• Political
• Cultural
 UNO System
• General Assembly
• Security Council
• Economic and Social Council
• International Court of justice
• Trusteeship Council
• UNO System Agencies
 Some UNO Agencies
• UNCTAD - UN Conference on Trade and Development
• UNEP - UN Environmental Program
• UN-Habitat - UN Human Settlement program
• UNHCR - UN High Commission for Refugees
• UNDP - UN Development Program
• UNIFEM - UN Development Fund for Women
• UNICEF - UN Children’s Fund
• UNFPA - UN Population Fund
• WFP - World Food Program
• UNRWA - UN Relief and Works Agency for Palestinian
Refugees
The Bretton Woods System (BWS)

• International Bank for Reconstruction and

Development (World Bank)
• International Monetary Fund (IMF)
• General Agreement on Tariffs and Trade
 The Bretton Woods System (BWS) 
Objectives

• Αstable exchange rates 
• A reserve asset (something like the gold 
standard)
• Control international capital flows
• Availability of short­term loans to deal with 
temporary balance of payments difficulties
• Rules to open up trade.
Mandate of the World Bank
(IBRD)
The stated objectives of the World Bank 
(International Bank for Reconstruction and 
Development) were:

–  to assist in the reconstruction of the global 
infrastructure destroyed by the war, 
–  to facilitate the development of the emerging, newly 
independent, underdeveloped countries – (an objective 
that at the time was secondary to the first one in 
priority).
 Mandate of the International
Monetary Fund (IMF)

The stated objectives of the IMF were:

•  to promote and maintain high  levels of 
employment and income through the 
expansion of international trade 
•  the maintenance of exchange rate stability 
and currency convertibility
 Mandates of World Bank and
IMF
• A key unstated mandate for both institutions
was the integration of countries into the
capitalist world economy.

• Over the past five decades of the

existence of the World Bank and the
IMF, this objective seems to have
become the most dominant one.
 World Bank
• The  most  relevant  of  the  World  Bank’s  two  branches  to  the  Third 
world  was  therefore  the  IDA,  which,  like  the  IBRD  was  involved  in 
providing  long  term  low  interest  rate  loans  for  development  and 
reconstruction. 
• Third  World  countries  had  originally  proposed  the  setting  up  of  a 
Special  United  Nations  Fund  for  Development  (SUNFED)  in  the 
1950s.  It would give them more control over the fund because of their 
numerical clout within the UN
• Industrialized countries insisted on the creation of the IDA under the 
World Bank  which they had almost total control over.  The IDA is an 
affiliate of the World Bank, not an agency of the UNO. 
• They also established the Inter­American Development Bank, the 
Asian Development Bank and the African Development Bank, all 
governed on the basis of the contributions as opposed to membership.  
 World Bank
• The World Bank is structured along the lines of a 
corporation, with member countries holding shares 
as the basis for the Bank’s capitalization. They 
make a nominal cash payment in line with the 
shares they hold and are given promissory notes 
for it. 
• The capital is used as the base endowment for the 
Bank to lever private capital from capital markets, 
which it then uses to issue long­term  loans at rates 
of interest below the market rates.
 International Monetary Fund
• The IMF structure is organized more like a credit union, in 
which members contribute funds (in gold or convertible 
national currency) of amounts determined by the size of 
their economy 
• They can borrow from the accumulated amount to respond 
to threats to their ability to maintain their rate of exchange. 
 
• The original monetary system designated the US dollar, 
backed by gold as the anchor currency against which all 
other currencies’ values were determined.  
• IMF loans were principally intended to provide borrowers 
funds to deal with short term imbalances in their current 
accounts.  
 International Monetary Fund
• The loans generally have short term maturity and carry 
conditions for the borrower to make some adjustments to 
their economy to enable them to return to a stable position. 
  
• If a member’s situation can not be fixed by those 
measures, the IMF would agree to permanent currency 
exchange rate changes – devaluation.  
• In the early days, it was industrialized countries that were 
the primary borrowers. That changed after the debt crisis 
in the early 1980s.
• The United States was the largest contributor and 
subscriber  so it held the largest votes at both 
organizations.  
 International Monetary Fund
• The IMF now has 183 member states whose contributions 
of members, each with a “quota” in proportion to the size 
of its economy, finance its activities. 
• The size of each national quota determines voting rights 
and the 24­member Executive Board, whose members are 
called Executive Directors. Each country’s vote is 
proportional to its quota. 
• 8 Executive Directors for the largest economies represent 
only their own countries. The other 16 each represent all 
other countries, including some Third World countries. 
• A majority of 85% is required for most decisions, so the 
vote of the U.S. at about 18%, is an effective veto power 
over critical decisions.  However, even with loans that 
require a simple majority, the US is able to exercize 
inordinate influence
General Agreement on Tariffs and 
Trade (GATT)
• As a forum for trade talks, the GATT was the site 
of a series of rounds of multilateral trade 
negotiations that aimed at the elimination of tariff 
barriers, which enjoyed great, but intermittent, 
success. 
• The guiding principles of the GATT were to 
facilitate multilateral trade bargaining, with most 
favoured nation status, non­discriminatory access 
to markets and other concessions granted to the 
countries agreeing to play by the same rules and 
procedures set. 
 The GATT
• It also served as an agency for resolving disputes 
and upholding trade rules, but was slow and 
impotent because it lacked of real powers to 
enforce its rulings, depending on the nations’ self 
interest.
• Initially, the plan was to establish the ITO to 
negotiate commodity agreements. But the failure 
to get the US Congress to approve it led to the 
establishment of the GATT in 1948 to organize 
rounds of negotiations aimed at liberalization of 
trade such as the Tokyo and the Uruguay rounds.
 From GATT to WTO
1) Following the last (so­called Uruguay) round 
(1986­94), GATT was replaced by the WTO 
at the beginning of January 1995. 

3) In addition to doing what GATT did, provide 
a forum for negotiations and handling trade 
disputes, the WTO is new in many ways.
 
 World Trade Organization
• The WTO is the most important regulator of trade at 
international level today and also sets the terms within 
which regional trade agreements can be signed.
• The impact of the World Trade Organization (WTO), 
established in 1995, had gone largely unnoticed until 
Seattle 1999. 
• Trade is an important aspect of the current wave of 
globalization and its influence is felt from the global level 
to  peoples' daily lives. 
• According to the proponents of the WTO, globalization 
needs to be managed at world level from a trade 
perspective.
 World Trade Organization
• The WTO covers all areas of trade, not just manufactured 
goods, but services and intellectual property as well.
• Whereas the GATT was virtually toothless when it came to 
enforcement powers, a first objective of the WTO is 
administering WTO trade agreements and monitoring 
national trade policies. 
• What this means is that an organization like the WTO 
which is not internally democratic, is able to override or 
change democratically approved national trading laws
 World Trade Organization
• The result of trade negotiations in services (General Agreement on 
Trades in Services (GATS) has been to put pressure on governments 
to privatize what have historically been public services such as the 
delivery of water.  In many countries in the Third World, the World 
Bank has made the privatization of water delivery a condition of its 
continued financial support for the government.
• The result of trade negotiations on intellectual property (Trade­Related 
Aspects of Intellectual Property (TRIPs) have led to billions of dollars 
of monopoly profits being transferred worldwide from poor countries 
to rich countries under the guise of protecting the property rights of 
inventors and developers. E.G. HIV/AIDS Drugs
 World Trade Organization
• In 1997, the WTO reported that world trade in goods reached $ 5.3 
trillion, and trade in services an additional $ 1.3 trillion. 

The United Nations Conference on Trade and Development (UNCTAD) 
figures indicate that:
• more than two thirds of world trade involves at least one multinational, 
much of it within the same multinational around  the world (intra­firm 
exports) 
• with an estimated $7 trillion in global sales in 1995 ­ the value of 
goods and services produced by some 280,000 affiliates of the world's 
44,508 TNCs ­ international production outweighs exports as the 
dominant mode of servicing foreign markets
• TNCs were responsible for the $ 350 billion in foreign direct 
investment in 1995.  
The problem with the distribution 
of trade benefits 
• The WTO's basic assumption is that its rules 
contribute to trade and  investment liberalization 
which leads to more competition, better allocation 
of resources, economic growth, more employment 
and better living standards, including 
environmental conservation. 
• Although the WTO, and GATT in the past, have 
incorporated special measures for weaker 
economies, there are many pitfalls in the current 
system
 Unequal distribution of the 
benefits of trade 
• Inequalities between skilled and unskilled workers are 
growing in the North as well as in the South; 
• Corporate restructuring, labour shedding and wage 
repression are on the rise;
• Profit shares and the return on capital has risen much more 
(from 12.5% in the early 1980s to 16% in the mid 1990s in 
G7 countries ) than wages;
• The concentration of revenues and higher company profits 
have not been invested so as to create more jobs;
• The benefits of liberalization have been mainly reaped by 
traders rather than by farmers who have not received
 Life and Debt
• According to the film Life and Debt, in
what way has the intervention of the World
Bank and the IMF facilitated the process of
globalization?
• Prepare not more than a one page response
to the above question.