Infraestructura turística

Looking into our recent history, membership of the IEIs has increased considerably and this could only have happened if these countries were convinced that being a member of these organisations they can reap more advantages than opting to staying out or not having any other options. If countries want to be part of globalization and want to reap the possible benefits of welfare gain, then they become part of the IEI network.

There could be many reasons for sovereign states becoming part of a global regime and compromising their independent decision-making. States join IEIs of their own free will. They

Financial

Development International Trade

Economic Growth

Economic Growth

Institutional Role of IEIs in the Economic Cycle in achieving stable and balance growth using predictably and certainty of law.

Stable and Balanced

92 only do it because they think that the overall advantages of staying in an organisation are more than those of staying out.231

Four of explanations are often theorised for the existence of these IEIs232: firstly, limiting the dominant powers. According to Ikenberry, they facilitate to control the behaviour of the most dominant countries.233 By making and then act in accordance with rules of the game laid by the IEIs, the dominant countries reassure weaker countries that they will not exploit of them.

Secondly, IEIs provide information and reduce transaction costs. International institutions promote agreements by increasing the expected costs of not following the agreements. IEIs are comparatively efficient institutions since their principles and rules form a connection between issues which gives states an incentive to reach mutually beneficial agreements.234Or, in other words, IEIs constrain economic behaviour in ways that rule out actions that, if widely practised, would be economically costly.235

Thirdly, institutions promote reciprocity amongst members. The concept of reciprocity and mutuality is of significant importance in an institution. In other words, the IEIs promote the concept of cooperation for collective gain which gives each (or the majority) of its constituents a sense of contribution towards the collective good.

231

As Gruber contends, if the most dominant country outline the options open to the developing countries and create multilateral institutions, all countries can relatively benefit by becoming part of these organisations, than in a situation in which no institution existed. Gruber, L., (2000) ‗Ruling the World: Power Politics and the Rise of Supranational Institutions‘, Princeton: Princeton University Press.

232

Milner mentioned four common reasons to join international institutions. Milner, Helen V. (2005). ‗Globalization, Development, and International Institutions: Normative and Positive Perspectives‘, Perspectives on Politics, Vol. 3 , p 833-854.

233

Ikenberry, G. J., (2001) ‗After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order After Major Wars‘, Princeton: Princeton University Press.

234 _{Keohane, Robert O. (1984) ‗After hegemony: Cooperation and discord in the world political economy‘, chapter}

6, Princeton, N.J.: Princeton University Press.

235

Nelson, Richard R. and Sampat, Bhaven N., (2001) ‗Making Sense of Institutions as a Factor Shaping Economic Performance‘, (Spanish Version), Revista de Economía Institucional, Vol. 3, No. 5, Second Semester, available at SSRN: http://ssrn.com/abstract=923637

93 Fourthly, it facilitates countries in reforming their domestic politics. By becoming a member of an IEI and overtly committing to follow its rules of the game has significant impact on the domestic politics. It can possibly assist local leaders to modify their rigid domestic policies which they otherwise would not be able to do and can support them lock in ―good‖ policies. Thus it reduces the possibility of any state changing their economic policies arbitrarily.

Having said all of the above, regarding the rationale and benefits for the existence of IEIs, there is always the other side of the coin. Currently, the IEIs may not be the most optimal entities for creating the rules of the game for the global economy. They have deficiencies and this fact needs to addressed by the IEIs or their constituents. For example, consensus rule-making in the WTO is good from some aspects, but practically it nearly standstills the rule-making process as the Contracting Parties fail to develop consensus (Doha Round is a clear example).

In the case of the IMF and the World Bank, developing countries have no say in their operation. These institutions lead the global monetary and financial regime. The voting system needs to be addressed in these institutions. Almost all the sovereign states approach these IEIs, even when they don‘t like them, simply because they have no other option.

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III.

Historical Background and Evolution of IELR

The IELR which represents and controls the rules of the game of the current global economy has evolved over a long period of time. As discussed in the preceding chapter, the IELR emerged as a result of cooperation between sovereign states with a view to tackling issues which could no longer be dealt with by domestic law. Moreover, it was not the first time the sovereign states had tried to cooperate for the collective interest, the most recent example in history being the League of Nations.

To understand the essence of the current IELR, it is important to understand the historical background of the current regime and the way in which it evolved to its current stage. The historical background and evolution allow us to analyse the current regime in the context of its evolving nature, which provides room for criticism and adaptability within the IELR. This chapter talks in depth about the historical background and evolution of the current regime that is the IELR. It starts from World War I and then looks at the creation of the Bretton Woods system which is now a major part of the IELR. The focus is on the formation of the WTO as part of an evolutionary process which started with the ITO, then to GATT and then the WTO. The IMF and World Bank are not addressed in particular detail in this chapter because they did not go through any major structural changes. However, the practices and the scope of these two IEIs has evolved (or rather, has expanded) since their creation. These changing roles are discussed in Section Two of this thesis (which talks in detail about the IMF).

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