The Contemporary World

GED0035
 Module 7 Subtopic 1
International Financial Institutions
Objectives

1. Understand the basic functions IFIs and how

they are different from normal financial
institutions.
2. Identify IFIs based on their classification.
3. Identify the Big Three of IFIs and what led to
their formation, what purposes they serve,
their similarities and differences from each
other.
International Financial Institutions
What are IFIs?

• International financial institutions or

IFIs play a major role in the social and
economic development programs of
nations with developing or transitional
economies.
• This role includes advising on
development projects, funding them
and assisting in their implementation.
International Financial Institutions
Shared Goals
• International Financial Institutions
have these common goals:
1. Reduce global poverty and
improve people's living
conditions and standards;
2. Support sustainable economic,
social and institutional
development; and
3. Promote regional cooperation
and integration.
Globalization Defined
An Important Clarification
• IFIs are designed to be helpful.
However, it must be pointed out that
all funds borrowed from them must be
repaid, often with interest.
• This is the reason why a country cannot
blindly just borrow money from IFIs
without a plan on how to repay it.
• A country typically pays its debts
through the taxes it gets from its
citizens. The more it owes IFIs, the
more it will tax its citizens.
IFI Classifications
There are Five Types of IFIs
1. Commodity or industry-specific
organizations
Examples:
• Oil Producing and Exporting
Countries (OPEC)
• International Telecommunications
Union (ITU)
• International Sugar Organization
• International Lead and Zinc Study
Group
IFI Classifications
There are Five Types of IFIs

2. Commissions and agencies for

managing shared resources
Examples:
• International Boundary and Water
Commission (IWBC)
• Lake Chad Basin Commission
• Mekong River Commission
IFI Classifications
There are Five Types of IFIs

3. Development funds and banks

Examples:
• Inter-American Development Bank
(IDB)
• North American Development Bank
(NADBank)
• Asian Development Bank (ADB)
• Islamic Development Bank
IFI Classifications
There are Five Types of IFIs
4. International trade agreements
Examples:
• Association of Southeast Asian
Nations (ASEAN)
• North American Free Trade
Agreement (NAFTA)
• US-Israel Free Trade Agreement
• Mercado Comun del Sur (Mercosur)
• Asia-Pacific Economic Cooperation
(APEC)
• Enterprise for the Americas Initiative
(EAI)
IFI Classifications
There are Five Types of IFIs

5. Global organizations for

trade, development, and
macroeconomic stability
Examples:
• International Monetary
Fund (IMF)
• World Bank
• World Trade Organization
(WTO)
The Big Three
Overview
• The “Big Three” are all the
organizations mentioned in type
number 5 of the classifications of
IFIs from the previous section.
• These are the International
Monetary Fund, the World
Bank, and the World Trade
Organization.
• Together, they play major roles
in international economic
relations.
The Big Three
International Monetary Fund

• The IMF’s fundamental

mission is to ensure the
stability of the international
monetary system. It does so in
three ways: economic
surveillance, lending, and
capacity development.
The Big Three
International Monetary Fund
• Economic surveillance - the IMF
oversees the international
monetary system and monitors the
economic and financial policies of
its member countries. As part of
this process, which takes place
both at the global level and in
individual countries, the IMF
highlights possible risks to stability
and advises on needed policy
adjustments.
The Big Three
International Monetary Fund
• Lending - the IMF provides loans
to member countries
experiencing actual or potential
balance of payments problems to
help them rebuild their
international reserves, stabilize
their currencies, continue paying
for imports, and restore
conditions for strong economic
growth, while correcting
underlying problems.
The Big Three
International Monetary Fund
• Capacity development - the
IMF works with
governments around the
world to modernize their
economic policies and
institutions and train their
people. This helps countries
strengthen their economy,
improve growth, and create
jobs.
The Big Three
World Bank
• The World Bank has two main
goals:
1. End extreme poverty by
decreasing the percentage of
people living on less than
$1.90 a day to no more than
3%.
2. Promote shared prosperity by
fostering the income growth
of the bottom 40% for every
country.
The Big Three
World Bank

• The World Bank also has other functions:

1. The Bank also provides low-interest
loans, zero to low-interest credits, and
grants to developing countries.
2. The Bank offers support to developing
countries through policy advice,
research and analysis, and technical
assistance.
3. The Bank supports capacity
development in the countries it serves.
The Big Three
World Trade Organization

• The WTO is the only global

international organization dealing with
the rules of trade between nations.
• At its heart are the WTO agreements,
negotiated and signed by the bulk of
the world’s trading nations and ratified
in their parliaments.
• Its goal is to help producers of goods
and services, exporters, and importers
conduct their business.
Comprehension Check
If you can answer these without coaching, you are ready for the next lesson.

1. What is the difference between ordinary financial institutions and

international financial institutions?
2. Differentiate the five classifications of IFIs.
3. Differentiate the IMF, the World Bank, and the WTO in terms of main
functions.
 Module 7 Subtopic 2
Contemporary Global Governance
Objectives

1. Define the term “global governance”.

2. Understand what transnational issues are and how
they justify the existence of a global government.
3. Identify organizations currently “trying” to play the role
of global government.
4. Define the term “nation-state”.
5. Understand the different modes of international
cooperation.
Global Governance
Who is Running the World?
• The modern world faces complex issues like
climate change, COVID-19, wars, and terrorism,
which no single country can address alone.
• Solving these problems requires international
cooperation. However, deciding on leadership in
such collaborations poses challenges.
• A country may be rich or influential, but
sovereignty limits its authority over others.
• Therefore, managing international relationships
becomes complex. In a globalized world, most
countries must collaborate to tackle challenges,
raising the question: who leads this global effort?
Global Governance
The Nation-state
• To answer the question of who is
running the world, it is essential to
understand sovereignty.
• The concept of international relations
focuses on the dynamics between
nation-states, which possess three
key characteristics: (1) a unified
people, (2) attachment to territory,
and (3) desire for sovereignty.
• Sovereignty is the authority of a
nation-state to govern itself.
Global Governance
The Nation-state Every nation-state
• Nation-states are the main actors in the needs to cooperate
global interstate system, a political and coordinate with
network formed as countries establish
broader connections. other nation-states
• With complex issues demanding because of
international cooperation amidst each complicated global
nation's sovereignty, the question
remains: who leads in addressing these problems
global problems? Is there a single (transnational
entity tasked with running the world,
dictating terms to all countries?
issues).
Global Governance
Global Governance Defined
• The concept of global governance
Global governance is
arises from the challenges posed by a movement towards
globalization and transnational issues. political cooperation
• It involves political cooperation among among transnational
various actors to address problems
affecting multiple states or regions.
actors. It is aimed at
• Ultimately, it aims to establish a world negotiating responses
government or common political to problems that
authority overseeing the entire globe, affect more than one
akin to a single state with universal
authority. state or region.
Transnational Issue Categories
Overview

• Transnational issues are those

problems that no single country
can solve by itself. Their
existence is the prime
justification for why a global
government might be needed.
These issues come in many forms
and can be categorized into five.
Transnational Issue Categories
Environmental Governance and Managing the Planet
1. Environmental Governance and Managing the
Planet
• This category encompasses transnational
issues related to nature. Human activities are
causing significant harm to the environment,
leading to problems like climate change,
ocean pollution, extinction, biodiversity loss,
and nuclear risks.
• Addressing these issues requires a unified
approach because efforts by one country to
combat problems like air pollution can be
undermined if neighboring countries are not
doing their part.
Transnational Issue Categories
Governance of the Economy and Globalization
2. Governance of the Economy and
Globalization
• This category pertains to transnational
issues that threaten global economic
stability that arise from globalization.
• Examples include financial crises, laissez-
faire capitalism, and lack of access to
public goods.
• Managing the global economy is
immensely challenging, the existence of a
global government could potentially
prevent or mitigate such crises.
Transnational Issue Categories
Political and Institutional Governance
3. Political and Institutional Governance
• This category deals with territorial rights,
privileges, and powers. This includes issues like
resource pooling, sovereignty, and democratic
legitimacy at various levels.
• For instance, the unequal distribution of oil
resources highlights the need for global
governance. While some countries are major oil
producers, others rely on imports, creating
imbalance.
• A world government could potentially address
this by pooling and distributing resources fairly
to prevent unfair advantages.
Transnational Issue Categories
Governance of Peace, Security, and Conflict Resolution
4. Governance of Peace, Security and Conflict
Resolution
• This category focuses on maintaining peace and
security across borders. This includes addressing
armed conflicts, terrorism, human rights
violations, and international crime.
• Terrorism is highlighted as a cross-border issue
requiring cooperation and consistency in
apprehension efforts.
• With a world government, theoretically,
consistency and cooperation in combating
terrorism would be easier as there would be a
unified force dedicated to apprehending terrorists
regardless of borders.
Transnational Issue Categories
Governance of Science, Education, Information, and Communications
5. Governance of Science, Education, Information, and
Communications
• This category addresses ethical and progress-
related concerns in the fields of science, education,
information, and communications.
• Stem cell research serves as an example, with its
potential to cure genetic diseases. However,
ethical debates arise due to the extraction of
pluripotent stem cells from early-stage embryos,
leading to policy restrictions in some countries.
• If a global government supported stem cell
research, it could facilitate international scientific
collaboration. Conversely, if opposed, it could
hinder research worldwide.
Modes of International Cooperation
Forming a World Government
• The need for a single world
government arises from the inability of
nations to cooperate on transnational
issues like climate change and others
• There are two potential approaches to
forming a world government.
• A world government can be formed
through violent and compulsory world
domination.
• Alternatively, a world government can
be formed through peaceful and
voluntary supranational union.
Modes of International Cooperation
Two Modes of International Cooperation.

• At present, nation-states have

attempted to work together using
two main modes of international
cooperation. These two types
have something to do with a
nation-state’s sovereignty:
1. Intergovernmentalism
2. Supranationalism
Modes of International Cooperation
Two Modes of International Cooperation.

• Intergovernmentalism – refers to
arrangements whereby nation
states, in situations and conditions
they can control, cooperate with one
another on matters of common
interest.
• The most prominent example is the
United Nations.
• Members maintain their
sovereignty.
Modes of International Cooperation
Two Modes of International Cooperation.
• Supranationalism – refers to
governance arrangements where
states decide to delegate some
responsibility for decision-making
to a body or decision-making forum
that stands above the nation-state.
• The most prominent example is the
European Union.
• Members surrender their
sovereignty to the supranational
organization.
Comprehension Check
If you can answer these without coaching, you are ready for the next lesson.

1. What is the justification for global governance?

2. Pick 3 categories of transnational issues and differentiate them.
3. What is intergovernmentalism?
4. What is supranationalism?
5. What are the three characteristics of a nation-state?
This serves as a visual aid. For a more detailed discussion, you can watch the video courseware
prepared by the course designer.