Right Livelihood

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Legal and Financial Issues

Shifting the global economy towards sustainability
How the Global Economy Works Today	Why the Global Economy Behaves As It Does	Turning the Global Economy Towards Sustainability

Role of International Organisations

The three principal bodies responsible for regulating international economic affairs – the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO) – play a central role in defining and reinforcing how the global economy works.

The World Bank and the IMF were created at the Bretton Woods conference in 1944, where finance ministers from the countries emerging victorious from the Second World War met to design a new architecture for the modern international economy. The World Bank was set up to help rebuild war-torn Europe, but soon thereafter turned its focus to the so-called underdeveloped world to help integrate the poor countries into the international economy. The IMF was created to help stabilise currency exchange rates between nations and to come to the aid of countries with temporary liquidity needs. The WTO was set up in 1995 to determine and enforce the rules regulating international trade. It replaced the General Agreement on Tariffs and Trade (GATT), which evolved from the Bretton Woods conference.

After the ascendancy of neoliberal economists in the early 1980s in the USA, the IMF changed policy by introducing their so-called “structural adjustment” program, thereby imposing policies of economic liberalization on the poorer countries of the global South. These obliged the countries of the South to open their markets to imports from the industrialized world and to further entrench their already existing specialization in production and trade of primary commodities, such as cocoa, coffee, sugar and so on.

However, one (entirely predictable) result of the adoption of such policies throughout the global South was the over-production of many primary commodities, since the IMF and World Bank were providing the same advice to many countries simultaneously. In consequence, between 1980 and 1997, the price on the international market for most commodities dropped sharply: sugar by 73 per cent, coffee by 64 per cent, cocoa by 58 per cent, rubber by 52 per cent, rice by 52 per cent and so on. So, producer countries needed to significantly increase their output just to retain the same level of earnings.

Both the World Bank and the IMF provide support and finance for many industrial projects that displace human populations, increase fossil fuel dependence and erode natural eco-systems. The Bank, for example, is currently backing oil palm plantations in Indonesia, a major source of deforestation, as well as financing monocultural soya plantations in Amazonia, even though soya is destructive of Brazil's rich agricultural lands. (Robert Goodland, How to aid destruction: My former employers, the World Bank, are damaging the planet and punishing the poor, Guardian, Tuesday October 23 2007, http://www.guardian.co.uk/commentisfree/2007/oct/23/comment.globalisation)

The rationale for the creation of the WTO was to broaden the mandate previously followed by GATT and further promote global economic liberalization. So, while GATT focused on promoting world trade by pressuring countries to reduce tariffs (import taxes), the WTO was also mandated to target so-called ‘non-tariff barriers to trade’ – essentially any national legislation to protect social, labour or environmental interests that might be construed as impeding trade.

Any country whose legislation is seen as inhibiting trade can be taken to the WTO dispute arbitration panel by any other. These panels have the power to order such legislation to be overturned on pain of fines or other sanctions. The panels, which generally include a strong corporate representation, tend to lay greater weight on the interests of trade above those of labour or environmental protection.

By way of example, WTO panels have ruled illegal EU bans on the imports of genetically modified foods and hormone-injected beef, both from the US. It similarly ruled that the preferential access granted by the European Union to bananas grown on family farms in its partner ACP (African, Caribbean and Pacific) countries constituted an unfair impediment to trade with large-scale, monocultural, US corporate banana producers in Latin America.
Together, these bodies constitute a powerful force protecting and further reinforcing the corporate-dominated global economy.

Oxfam Critique of WTO
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Current members of the WTO (in green)
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