Exam 12: Globalization, Trade, and Corruption

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The primary mission of the International Monetary Fund (IMF)has always been to promote international economic stability.Member nations pay "capital subscriptions" into a pooled fund based on the size of their economy.The money in this fund is then lent to countries with balance of payment problems.In the 1980s,the IMF amplified its mission by using its power as a lender to promote the spread of free market ideas.The IMF has always been dominated by the United States and the West.It is headquartered in Washington,D.C.Its governance mechanisms allocate votes based on financial contributions,which are in turn based on the output of national economies.IMF loans usually go to poor,indebted countries.Many loans are conditional.If the country accepts financial aid,it must agree to take actions that strengthen its economy.In the 1980s and 1990s,the organization often required structural adjustment programs.Because these policies were based on a philosophy of liberalization,deregulation,privatization,fiscal austerity,and tax reforms,it was criticized by global progressives as promoting a form of free market fundamentalism.The conditions in IMF loans were often said to be based on a Washington Consensus.British economist John Williamson set forth 10 policies that economists in the World Bank,IMF,and the U.S.Department of the Treasury prescribed as economic reforms for heavily indebted Latin American countries.He believed there was a consensus among them that these policies would promote growth.

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The Foreign Corrupt Practices Act (FCPA)makes it both a civil and a criminal offense to bribe an official of a foreign government or ministry,or a member of a foreign political party or candidate for office.For violations of the law's bribery provisions,companies can be fined up to $2 million and up to twice the pecuniary gain they derived.They can also be prohibited from bidding on government contracts.Individuals can receive up to a $100,000 fine and five years in prison,although application of federal sentencing guidelines has resulted in higher penalties.Bribes paid by managers of one corporation to managers of another are legal under the FCPA,although they violate fraud statutes in almost every nation.In addition,the FCPA requires companies and subsidiaries they control to keep accurate records of transactions and to use accounting controls for detecting corrupt entries.Corporations that violate these accounting provisions can be fined up to $25 million.Individuals can be fined up to $5 million and imprisoned up to 20 years.The FCPA contains an exception for facilitating payments intended only to expedite "routine governmental action."