Foreign direct investment, Business Economics

The Basic assumption which underlay the government of international economy has been that the economies of the world would converge around a capitalist model. The details of such a capitalist model might differ but the essentials would remain the same: market allocation of resources, Privatization of state owned assets, preference for private investment over state direction of the economy. This model was sufficiently flexible that it could encompass different style if capitalism: the free market of the U.S., the social market of Europe, state directed capitalism of Japan and South Korea, the hybrid economy of China.

Beginning with secretary of the Treasury Baker's speech in Seoul Korea in October 1985 to joint annual meeting of the World Bank and IMF, the United States determined the use of the IFIs to impose a single model of capitalism on their borrowing member countries: the United States model. The principles outlined in Baker speech were then codified in Washington Consensus and became the basis of the "conditionality" which attached to the financing of the World Bank and IMF.

What were the Factors that led to undermining this strategy? Can the tolerance for different strategies of development be reconciled with desire for a rule based system of international trade? Does a tolerance for different strategies of development undermine the conditions which have accompanied IFI financing of the 80s and 90s? Do you see a role for the IFIs in the future? If so, what is it?

Posted Date: 5/8/2013 2:44:32 AM | Location : United States







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