Text 5. Development Assistance

The Bretton Woods conference that created the IMF also led to the establishment of the International Bank for Reconstruction and Development, better known as the World Bank, a multilat­eral institution designed to promote world trade and economic development by making loans to nations that otherwise might be unable to raise the funds necessary for participation in the world market. The World Bank receives its capital from mem­ber countries, which subscribe in proportion to their econom­ic importance. The United States contributed approximately 35 percent of the World Bank’s capitaliza­tion. The members of the World Bank hope nations that receive loans will pay them back in full and that they eventually will become full trading partners.

In its early days, the World Bank often was associated with large projects, such as dam-building efforts. In the 1980s and 1990s, however, it took a broader approach to encouraging eco­nomic development, devoting a growing portion of its funds to education and training projects designed to build "human cap­ital" and to efforts by countries to develop institutions that would support market economies.

A new program of American foreign assistance designed to be a tool for creating new markets for American exporters, preventing crises and advancing democracy and prosperity was organized in 1961 and administered through the U.S. Agency for International Development (USAID). In the 1980s, USAID was providing assistance in varying amounts to 56 nations. Like the World Bank, USAID in recent years has moved away from grand devel­opment schemes such as building huge dams, highway systems, and basic industries. Increasingly, it emphasizes food and nutri­tion; population planning and health; education and human resources; specific economic development issues; famine and disaster relief assistance; and Food for Peace, a program that sells food and fiber on favorable credit terms to the poorest nations.

Exercise 29. Read the following information and answer the questions. Give your reasons.

Whatever the advantages of global economic interactions, there remain countries where poverty is the norm, economies do not grow, and living standards do not improve. Over decades, many hundreds of billions of foreign aid dollars have flowed into underdeveloped countries whose citizens have seen little if any improvement.

1. Is that then just a cynical way to channel money through destitute countries on the way to corporate coffers (treasury)?

2. Is development aid poorly conceived and doomed to fail?

3. Is it impossible to effectively help?

4. Does simply giving money to a poor country help?

5. May it unknowingly finance corrupt dealings?

Have people not done enough of what really works?

Exercise 30. Speak on:

a) the emergence offoreign exchange markets;

b) foreign currencies in international business;

c) foreign currency market structure;

d) the current monetary systems;

e) international financial institutions, their mission and activities.

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Module 6

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