Book Report on Unholy Trinity: The IMF, World Bank and WTO - Peer Review

Jacqueline Jordan

4/9/19

Book Report

Unholy Trinity The IMF, World Bank and WTO by Richard Peet explores how these international organizations have negatively impacted developing countries in their mission to grow the global economy. The beginning chapters dive into the development of the United States economic development. In the post war period, there was a shift away from liberalism economics, which favors “…competition, specialization and trade” (Peet, 4). Liberalism, focuses on capitalism and ideas that the economy, if left free from government intervention, will correct itself. However, post war economics saw a shift towards Keynesian economics which favors government intervention in public works and interest rates, in order to decrease fluctuations in the economy (Peet, 8). More recently, however in developing countries such as the United States, Neoliberalism economics has taken over. Neoliberalism favors “…ideas about individual freedom, political democracy, self-regulating markets and entrepreneurship” (Peet, 9). This shift is crucial to the message in the rest of book. Peet throughout the novel explains how these Neoliberalism ideals, put in place by countries such as the United States, have shaped the policies implemented by organizations such as The IMF, World Bank and WTO. This turn has negatively impacted the developing countries that these organizations where created to help develop.

Originally, the International Monetary Fund (IMF) was created to “regulate the rates at which currencies were exchanged among member countries, it would help ensure international stability by making loans at times of crisis in member countries’ balances of payments” (Peet, 66). However, the IMF in actuality has been used exclusively by third world countries for loans under programs designed to stabilize the balance of payments. The only stipulation being that these countries engaged in “financial programming” with the IMF. These financial programs usually require a reduction in public sector spending, reduction to trade barriers and openness to foreign direct investment. These requirements were put in place to help ensure that the borrowing countries could repay their debts. However, what these stipulations actually did was expose these countries to crippling debt by forcing their economies, before they were ready into globalization. This in turn left them unable to pay their debts. Similarly, the World Bank offer loans under in its attempt to reduce poverty and increase infrastructure in developing nations. However, they stipulate much of the same requirements and force nations that are not yet ready to compete in the global economy to reduce protection of domestic industries. The World Bank has also faced backlash for its funding of projects such as the loan granted to the Brazilian government for the funding of a highway through the Amazon region. This project affected 1,600,000 people in six years and exposed thousands of people to deadly malaria.

When examining the World Bank and IMF it is important to evaluate the leaders and organizers behind these organizations. Chapter one of Unholy Trinity lists a slew of men who not only had worked for or had ties to the United States government, various banks and investment firms on Wall Street but also held prominent positions within the World Bank and IMF. These men were instrumental in creating neoliberalism policies, especially in the case of the IMF where the United States holds a majority of voting power. This allowed the United States to use these international organizations to implement policies that benefitted themselves. Many studies listed in Unholy Trinity outline how globalization policies have actually harmed these developing nations. However, the reduction in trade barriers benefitted the United States and other developing nations. Thus, there has been a constant reoccurring stream of Neoliberalism economic policies forced upon developing nations in return for loans.

Peet’s criticism of the capitalistic policies implemented by United States leaders within the IMF and World Bank, I think this is a very different view point than is traditionally introduced at a business school. While we do learn about these organizations and some of the issues, it is never at this in-depth of a layer. Peet offers in depth insight into the downsides of globalization and paints a stark picture of how organizations that are supposed to help the world economy, have actually only benefitted a few, developed nations. Often times, we focus only on the benefits that these organizations produce for a global business economy. With the focus being on how international trade is beneficial economically and developmentally. However, we do not necessarily see the direct, negative impact these organizations have had on developing nations.

The last organization discussed in Unholy Trinity is the World Trade Organization (WTO). The WTO was developed to regulate international trade using rules laid out in articles of agreements among member governments. These rules reduced barriers to trade, laid out rules against preferential treatment and the principal of reciprocity. What was most interesting about Peet’s discussion of the WTO was again, the United States’ role in its creation and hypocrisies demonstrated by the United States. During the creation of the WTO, the United States did not want to grant authority over the WTO to a United Nations organization, which it could not control. The United States believed that if the WTO was created under the control United Nations, US national interests could be threatened. Thus, the WTO was created as a separate entity. The ability of the United States to influence how an international organization could be created, in order to fit their own interests is concerning. Both for the sake of global cohesive and fair development opportunities.

Additionally, in United States during the 1930s, the common economic logic was that imports ruined domestic industry and increased unemployment. These sentiments came during the midst of the Great Depression. Thus in order to protect its economy, the United States passed the Smoot-Hawley Tariff Act, which increased tariffs on imports up to 52%. This tactic makes sense and in times of crisis many other nations have implemented tariffs as a way of protecting their domestic economy. Other reasons would be to protect the health of citizens and developing or key domestic industries. However, later, when the United States was part of the WTO, it negated the right of other developing nations to do the same, in the name of free trade. This is yet another example of the United States using is place of prominence to creates rules that benefit themselves and do not necessarily take into account the stable development of other nations. As a result, these countries have become weakened and are susceptible to human rights violations, labor laws and environmental concerns. All in the name of attempting to stay globally competitive. A perfect example of issues that arise from this is the investigation done by Jim Keady on Nike. The capitalistic policies of the WTO have diminished the possibility of developing nations implementing protectionist policies. In many cases, their main competitiveness is the ability to produce cheap labor. In doing so, human rights and child labor laws are suppressed in order to keep these industries competitive. This attracts companies such as Nike to take advantage of cheap labor. When considering these negative impacts, it is difficult to see how the WTO has the best interest of overall global development in mind when implanting such uneven trade policies.

Overall, I thought that Unholy Trinity presented information and details that I was not aware of. The book opened my eyes to a lot of social injustices and how they came about. However, the style of the novel I found difficult to digest. Often times, the style of writing was wordy. I found it difficult comprehend the overall point of the author at some points, since there was an exceptional amount of detail. Continuous reference to economists and economic theories throughout the book often also distracted from the main point in many sections. I also felt as though the book was a collection of separate writers at times, since there were so many in text references. The book was originally written by a collection of undergraduate and graduates students at Clark University, and I felt as though I was reading a conglomerate of student essays.

Another aspect of the book that I thought distracted from the power of the message it was trying to convey was, very opinionated wording. There was often sarcasm and blunt remarks that ignored the benefits of the international organizations, which they had spent so much time also explaining. I felt as though this distracted from the scholarly argument being made. This could be a personal preference however. I like to be presented cases, facts, or even options, if presented logically, but left up to my own devices to make up my opinion. I did not feel as though this book did a very great job at doing this.

Overall, there were many benefits to the book. There is a lot of information and examples to back up claims, which also allows for the reader to better relate to the information. I also liked that it gave me in-depth knowledge about these organizations and economics from a stand point that is not often presented in business school. So while I did not prefer the style in which the book was written, I did appreciate being exposed to a different view point in economics, as well as to the great injustices that these organizations have caused.