Understanding International Relations, Third Edition

Partly this was because of continual currency crises; the system worked via
‘reserve currencies’ (the dollar and, to a much lesser extent the pound
sterling) which had somehow to be made widely available for use by third
parties without this undermining the issuing countries. Squaring this partic-
ular circle remains impossible, hence the current system of floating
exchange rates. The decline of Bretton Woods was also a function of the rise
of new economic actors, to be discussed in Chapters 8 and 9. Still, although
the Bretton Woods System went into abeyance, the Bretton Woods institu-
tions remain in existence, finding new roles.
The new roles of the IMF and World Bank are largely oriented towards
the developing world; instead of handling the short-term currency and
capital needs of the developed world, these two institutions have gradually
become responsible for promoting growth in the so-called ‘South’. Their
role in this respect has been deeply controversial. IMF ‘conditionality’ – the
terms under which assistance is given to borrowers – is widely regarded as
incorporating advice that is inappropriate and burdensome for developing
economies, and similar kinds of criticisms have been levelled at the World
Bank and the WTO. Whereas genuine free trade might be to the advantage
of the developing world, the unwillingness of the advanced industrial
countries to liberalize trade in agriculture in particular is a source of deep
resentment – even the recently completed preliminaries of the Doha Round
of trade negotiations (July 2004) place no timetable on the liberalization of
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Understanding International Relations

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trade in this area. In any event, the South has created its own global
economic institutions. A key date here is 1964, which saw the formation of
both the United Nations Conference on Trade and Development (UNCTAD)
and the Group of 77. UNCTAD was a body set up by the UN to hold regu-
lar conferences on trade issues as they affected the South. Unlike the IMF or
World Bank, UNCTAD works on a one-state, one-vote basis, thereby max-
imizing the key advantage held by the South in international fora – their
sheer weight of numbers. The same is true, incidentally, of the WTO, where
with good leadership, such as that provided by Rwanda for African states in
the July 2004 negotiations, the South can exercise a great deal of power, and
where major Third World countries such as Brazil and India have real clout.
The Group of 77 was the group of ‘less-developed countries’ that pressed
for UNCTAD in the UN – which, given the pace of decolonization, more or
less immediately had more than 77 members but still retained the name.
As well as all these formal institutions, economic decision-making also
takes place in other fora such as the G7 – annual meetings of the heads of
government of the leading industrial powers (G8 when Russia attends) – via
UN Conferences on particular big issues, smaller scale local trade agree-
ments, policy networks and informal meeting-places of the rich and influ-
ential such as Davos and Bilderberg. For this reason it makes sense to think
of the governance of international economic relations – and perhaps other,
social areas – in terms that go beyond the merely institutional; in terms, that
is, of regimes.