Defining Development and its Relationship with the Bretton Woods System: a Critical Analysis
INTRODUCTION: WHAT IS DEVELOPMENT?
The concept of “development” refers to the sustained growth of a country or institution’s economy, which is often measured by improvements in the overall living standards of its population. The ultimate goal of economic development is to promote peace, security, and international cooperation. According to various developmental theorists, economic development can play a critical role in eradicating poverty and fostering prosperity within societies.
POVERTY: GLOBAL SOUTH AND GLOBAL NORTH COMPARISON
In the present day, the majority of the world’s impoverished nations are concentrated in the Global South, where several areas are marked by a significant incidence of extreme poverty. To address this issue, various international governance agencies and financial institutions have been established to promote development initiatives. These organizations collaborate closely with the United Nations system to advance poverty reduction efforts and facilitate the establishment of mechanisms for global financial growth. The eradication of poverty has become a paramount objective within the United Nations system, as evidenced by the adoption of the Sustainable Development Goals (SDGs) by all member states in 2015.
While poverty is more prevalent in the Global South, it is important to note the ongoing debate between the Global North and South when it comes to poverty identification. For instance, in the United States, the state of Mississippi is associated with the Global North but is also among the poorest states in the country, along with West Virginia and Arkansas. These Southern states have extreme socioeconomic disparities in income distribution, educational attainment, and high unemployment rates that are comparable to poverty indicators in less developed economies.
Similarly, there are a significant number of people in the Global South who enjoy lifestyles similar to those in major developed economies and do not live in poverty.
The Bretton Woods System and the United Nations
The United States, in partnership with the United Nations, led the Bretton Woods conference in 1944, which was held in New Hampshire. The conference established the World Bank (WB) and the International Monetary Fund (IMF) to address instability, establish monetary exchange rates, and promote international monetary cooperation for global development. The Bretton Woods System refers to these institutions collectively.
Although the Bretton Woods System became a part of the United Nations system in 1945, it has always maintained complete independence in decision-making, and is separate from the UN General Assembly or ECOSOC (Economic and Social Council of the UN). The System’s ability to set the agenda, generate revenue for its operations, and the specialized knowledge of its experts have contributed significantly to its approach, which critics argue has contributed to intellectual disparities between the Global South and the Global North.
Globalization and the Bretton Woods System
Prof. Richard Peet, provides a critique of neoliberal development theory and argues that globalization has created power for a few prodigious institutions that operate under undemocratic principles which in turn drastically affect the livelihoods of many peoples.
Since the collapse of the fixed exchange rate system in the 1970s, the IMF’s role has shifted from providing financial assistance to requiring states to make structural changes in their economies. These changes include implementing market-oriented reforms, privatizing government-owned industries, and imposing conditions on loans.
Critics argue that these structural loans do not alleviate poverty but rather increase it, and that they “diminish the ability of individuals and societies to determine their own destinies.” Additionally, they contend that the Bretton Woods institutions have become involved in member states’ economies in ways that their founders explicitly rejected and have interfered with their members’ income, labor, industrial, and environmental policies.
Globalization and Development Systems
Various schools of thought in international development have proposed different solutions to address various issues. However, many of these theories, institutions, and policies have originated from the Global North, particularly through the Bretton Woods system. Critics from the Global South have pointed out that these approaches often exhibit neo-colonialist tendencies. Besides the Bretton Woods system the main systems which have largely defined global economies are:
- Mercantilism: is subordinate to state power and state management protectionist policies are given priority over protecting the economy. It restricts imports and subsidies and gives preference towards earning more from exports. Mercantilism also prevents international institutes from gaining power over the national economy.
- Liberalism: the ideology is based on notions of the free movement of goods, free trade, capital and labor. Individuals and households are given priority instead of the state. Liberalism also advocates the least amount of regulation in treaties involving free trade. This system does not lay emphasis on social issues that can rise due to the results of deregulation and free trade policies.
- Marxism: emphasizes redistribution and concentrates on class struggles and the rights of the proletariat and their roles in production. Marxism also focuses on revolutions to achieve equality amongst the classes which are produced due to acute economic gaps within the labor markets.
- Western Capitalism: in this form class, markets and states and the role of culture is recognized.
The North-South Gap and the Concept of Sustainable Development
The disparity in economic development between the North and the South refers to the highly industrialized nations in the Global North and the less developed and technologically deficient countries in the Global South. While the Global South has a larger area and population, it suffers from inequality and poverty, which it attributes to centuries of colonialism perpetuated by the Global North.
Governments in the Global South have shown reluctance towards the concept of “developmentalism,” which has become evident through their support for the United Nations’ sustainable development goals. The notion of sustainable development acknowledges that economic growth has had negative impacts on the environment. In 1972, the UN Conference on Human Environment (UNCHE) was held, which was considered a significant milestone. According to Maurice Strong, the Secretary General of the conference, it was the most comprehensive review ever conducted on the current state and future prospects of mankind.
Following the UN Conference on Human Environment (UNCHE) in 1972, developed countries established the United Nations Environment Program to focus on environmental issues. However, this strategy was met with backlash from developing countries who saw it as hindering their path to progress. Leaders from countries like China and India opposed the initiative, arguing that the developed world had already caused significant environmental damage through their industrialization and colonization. They expressed a desire to not be subject to the principles of neoliberalism dictated by global governance institutions like the World Bank and International Monetary Fund.
Conclusion
Critics argue that the development ideology has failed to reduce extreme income inequalities and has widened the gap between rich and poor. Meanwhile, Chinese banks have been investing heavily in Africa, challenging the World Bank’s monopoly as the preferred financier of development. India and Brazil are also entering the race which means that the World Bank is under pressure to share power and influence, particularly in Africa. Western media narratives often portray Africa as a junior partner to the responsible, caring West, which is disingenuous and reeks of paternalism (with shades of coloniality). Instead, a mentality shift is needed, emphasizing responsible consumption and production, and monitoring progress which empowers people through partnerships. Structural changes in policies, laws, and financial systems should prioritize people over development strategies that create contention.
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