# from [[GHM101 Session 04 The Global Economy Actors]] There are considerable ties between the two institutions which are traceable to their foundation and are reflected in their common membership (since membership of each organisation is dependent on that of the other) and the joint annual meetings they hold. Similar to WB, the IMF was created at the Bretton Woods Conference in 1944 at which they were envisioned as playing complementary roles in the management and governance of the world economy. The headquarter is also in Washington, DC. For this reason, the WB and IMF have come to be known collectively as 'the Washington Institutions' and, as we shall see later, the shared policies, and the underlying ideology, they are seen to promote has been dubbed the [[Washington Consensus]]. ## Relations with the [[World Bank (WB)]] From the outset they were designed to play a complementary role in the management of the global economy and their membership is identical. There are also numerous parallels in their governance structures. At the Bretton Woods conference it was argued that an international institution such as the IMF was needed to provide stability to exchange rates between states and the international monetary system more generally and thus to avoid the types of policies which had fuelled inflation and political instability in the inter-war years. The watchword for the IMF’s work is stability. It creates stability in the global economy by preventing potential dislocations and responding to those shocks which do occur. ## The IMF's competencies The primary functions of the IMF are: 1. Surveillance and oversight 2. Financial assistance 3. Technical assistance IMF plays a crucial supervisory role through its surveillance function. This involves monitoring not only the effects of policies on a country's domestic economy but on other states and the global economy more generally. ## Institutional structure Similar with WB. IMF is accountable to the governments of its member countries, which are presented on the Fund's Board of Governors. Each member-state nominates one governor. The day-to-day management of the Fund is delegates to the Executive Board, which has 24 members. The USA, Japan, Germany, France and the UK have permanent representation on the Executive Board, with the remaining members being elected by clusters of countries, organised on a roughly geographical basis. ==Where the structure of the IMF differs from that of the WB is in the additional level of management which exists between the Board of Governors and the Executive Board==. A further 24 members of the Board of Governors are nominated to sit on the International Monetary and Finance Committee, which guides the work of the Executive Board. ## The role of the Managing Director MD is the most senior official and is the equivalent of the President of the WB. Politically, there is a close association between the two roles since – as we saw earlier – the appointment of the IMF Managing Director by the European members is the trade-off for the USA’s right to appoint the World Bank President. In addition, ==the USA also appoints the most senior of the three Deputy Managing Directors appointed to assist the Managing Director==. Like the President of the WB, the role of the Managing Director is to be a figurehead for the IMF externally and to coordinate its work internally. A crucial part of this role involves chairing meetings of the Executive Board. ## The quota system Of key importance to the governance of the IMF is the so-called quota system, which determines the voting weights and thus the political power of each member-state. ==Quotas are based roughly on the position of each state within the world economy and dictate both the financial contribution to the IMF and its voting power. Voting weights and the right to elect members to the Executive Board are skewed toward creditor nations which have the largest quotas, creating a direct link between economic power and political power within the institution.== IMF quotas dictate capital subscriptions rights, and thus voting power in the WB, meaning the power imbalances in the IMF are reflected also in its sister organisation. WHile it may be true that the power distribution reflects the economy six decades ago, but it doesn't reflect today - as China, India, Brazil are not afforded the influence which their economic power warrants. Following on from the reforms discussed in the IMF’s website, the IMF's Executive Board approved a further overhaul of the quota system in November 2010. The current quota formula is a weighted average of gross domestic product (GDP; weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent). For this purpose, GDP is measured through a blend of GDP – based on market exchange rates (weight of 60 percent) – and on purchasing power parity exchange rates (40 percent). The formula also includes a “compression factor” that reduces the dispersion in calculated quota shares across members. China has become the third largest member country in the IMF; Brazil, India and Russia, as well as China, are among the 10 largest shareholders in the Fund. ## The [[Washington Consensus]] It is argued that the WB and IMF follow a broadly [[neoliberalism|neoliberal]] agenda which focuses on fiscal discipline, open markets, deregulation and privatisation. This ideological orientation and the associated policy programmes they favour has been dubbed the ‘Washington Consensus’ by commentators after the city in which the institutions have their home. It could also be argued that this title reflects also the predominant position of the USA within the organisations which, it is argued, promote the values of the USA and the other powerful, high-income states which control the organisations through the IMF quota system and their shareholding in the WB. ## Criticisms of the [[World Bank (WB)]]/IMF > Given the similarity of the policies advocated by the Washington institutions and the apparently shared ideology which underpins both, many of the criticisms levelled against the IMF appear also on the WB’s charge sheet. 1. The first set of criticisms levelled against them focuses on the distribution of political power in the organisation. 2. The second set of criticisms focus on the [[neoliberalism|neoliberal]] ideology which informs the WB and IMF policies. Evidence suggests that the policies advocated by the Washington institutions, and imposed as conditions for WB and IMF assistance, have caused great hardship in the countries in which they have been implemented. Furthermore, the costs of these policies have been borne disproportionately by the poorest members of society. [[Austerity measures]], for example, have meant c==uts to essential services including the provision of healthcare and the imposition of charges. Associated policies such as the privatisation of national utilities have led to the rising cost of basic public services including access to clean drinking water==. [[Neoliberal policies strikes hardest to the most vulnerable population while reversing the economic gain in the long term ]] The effect of this second set of criticisms has been to restrict access for the poorest people in society to some of the basic determinants of health. Without clean drinking water and access to medical treatment the effects on these individuals and the economy more broadly can be potentially devastating. Ironically then the very policies designed at making countries competitive economically may have the reverse effect in the longer term. It has been argued that while the WB and IMF policies make sense on the pages of an economics textbook they do not always translate into the real-world situations in which they are implemented. ==Too little attention, it is argued, was paid to the specificities of the countries in which the WB and IMF were active==, with sometimes devastating consequences for the individuals concerned. ## The [[World Bank (WB)]]/IMF and health More specifically with respect to health outcomes, ==evidence suggests that there have been negative impacts from neoliberal (market-led) strategies employed by the IMF and World Bank when providing loans to countries requiring financial assistance. The provision of these loans was conditional upon certain domestic policy reforms being implemented by the countries receiving loans==. Early reforms consisted of setting macroeconomic targets such as expenditure ceilings for public budgets. During the 1980s, the conditions related more to global economic and social policy, broadly structured around four neoliberal principles of economic stabilisation (limiting variations in exchange rates), liberalisation (tariff removal), deregulation (e.g. removal of labour regulations to enable easier adjustment of hours or wages), and privatisation (whereby state-owned enterprises are transferred to private ownership to allow greater competition and provoke greater efficiency). In response to extensive criticism of this model of development during the 1990s, the IMF and the WB later promoted pro-poor recommendations to, for example, increase social spending and protect the poor from the effects of price increases, although some studies question the extent of the change this has accomplished. Analysis of the effects of structural adjustment on health have been varied, with some suggestion of adverse effects on child health outcomes, particularly mortality and malnutrition. ==Some evidence suggests that in many poorer countries, healthcare expenditure was reduced by SAPs, which has affected quality and quantity of services (although there is also some evidence of increases in healthcare expenditure in sub-Saharan African countries)==. However, many other mechanisms related to SAPs have also been hypothesised as having adverse health consequences. [[IMF's recommendation in 2007 to put ceilings for public sector wage bills has led to brain drain of healthcare workers]] Until 2007, one of the IMF’s recommendations had included ceilings for public sector wage bills and this has been criticised for its potential effects on job security and “brain drain” (the migration of healthcare workers seeking higher wages - brain drain is covered in Session 9). Other criticisms related to SAPs include prescribed changes to the mix of public-private care, which may increase provision but creates financial barriers to access. ==The decentralisation of health systems from SAPs’ recommendations allows region-specific health demands to be addressed but, conversely, may lack coordination in the event of disease outbreaks.== Currency devaluation from SAPs may be beneficial to provoke economic competitiveness but may also increase the cost of importing pharmaceutical goods and health equipment. Privatisation of non-health enterprises, it has been suggested, may bring short-term economy-wide benefits but, ultimately, results in the loss to government of the profits from those businesses. The competitive nature of privatised business may mean that overall employment in those businesses is reduced, with adverse social impacts and consequences for incomes of poorer, less skilled workers. While changes have been made to address many of the earlier shortcomings of the conditionalities imposed by SAPs, and international financial institutions such as the WB and IMF, there remains much discussion and debate as to the overall impact of these programmes and their impact on equity within the countries to which they are applied.