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Political Groups

Updated on December 10, 2012
Source

The International Monetary Fund

Formed: December 1945

Members: 188

Aims: Create a stable global economy

How:

  • Monitor financial policies of all members, this allows them to spot potential problems and avoid recessions.
  • Advise LEDC's on how to manage economies effectively, increasing the amount of trade these countries do as they are seen as safe for investment.
  • Provides loans through its lending scheme, it has a reserve of capital put aside for nations struggling to repay debt. The loan does two things: it proves the countries can repay investments and also avoids the risk of that country could threaten the global economy.

Does this increase Globalisation?:

The IMF increases globalisation by attempting to create a stable global economy. The IMF increases the trust between nations, as they are not seen as a 'high risk' investment. This increases trade between countries.

Figure 2

Source

The World Bank Group

The world bank was started in 1944 with the aim of eradicating poverty all over the world.
The group started with the International Bank for Reconstruction and Development, and grew from there.
It now has 188 members and is similar to a co-operative, any profit the company makes from world markets is either used as investment into the customer countries again or invested back into the company


The group is now made up of 5 companies: (Figure 2)

  1. The International Bank for Reconstruction and Development
    This targets middle income 'creditworthy' countries, through loans, guarantees and financial services.

  2. The International Development Association
    Established in 1960, this part of the World Bank (W.B) helps the world's 81 poorest countries. It provides loans called credits and grants that boost economic growth, the money is lent on concessional terms, little or no interest is charged and repayments are stretched over 25 to 40 years. The IDA also provide grants for countries in debt distress.

  3. The International Finance Corporation
    Focuses on the private sector in developing countries, and accounts for around a third of all funding into this. They provide both sort and long term investment and advice for the companies invested in, in order to promote sustainable but quick growth. There are three parts:
    Investment Services, Advisory Services and IFC Asset Management.

  4. The Multilateral Investment Guarantee Agency
    This part of the W.B promotes foreign direct investment into difficult markets: the world's 81 poorest countries and conflict affected areas. They also encourage south to south investment (investment from one developing county to another. They encourage investment by investing themselves and showing a profit, and increasing the amount of insurance available to investors.

  5. International Centre for Settlement of Investment Disputes
    This part of the group does what it says on the tin. It was started in 1966 and now has 140 member states. These states all sign an agreement to follow the ruling of the committee. The committee is a self-governed institution witch settles disagreements between international investors. This lowers the risk of cross country investment.

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