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In an era of globalization, are global economic institutions indispensable instruments of global governance?

In an era of globalization, liberalism posters that global economic institutions are indispensable in global governance, as these institutions coordinate and facilitate communication between states. Moreover, economic forums hold states accountable and incentivize member states to keep their word by creating punishments in the form of legal or economic sanctions if they fail to do so. Realism, however, argues that these institutions are just a front for already existing power structures and have absolutely no power in themselves.

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Scholars converge on whether global economic institutions matter in our era of globalization. Liberalism believes that in the absence of economic global institutions, economic growth and human development objectives fail because institutions aren't there to enforce the rule of law, keep governments transparent and accountable, and maintain low levels of corruption. For these reasons, global economic institutions are instrumental in creating norms of trust which then lead to strong alliances. Finally, institutions foster economic growth by promoting free trade, i.e. reducing economic barriers and increasing imports and exports.

Three major global economic institutions frame world economic governance: the World Trade Organization (WTO), the International Monetary Fund (IMF), and the United Nations Conference on Trade and Development (UNCTAD).

Liberals argue that the WTO promotes peace within nations by leading to fewer trade wars, providing a framework for handling trade disputes constructively, and discouraging unwise policies that lead to corruption. The IMF's main goals are to increase employment and real income, maintain stability in international exchange rates, and assist developing countries in implementing sound financial and economic policies. Similarly, UNCTAD eliminates trade barriers for developing countries, promotes international trade, and negotiates multinational trade agreements. Similar efforts are made by regional trade associations such as MERCOSUR, USMCA, and ASEAN.

Realists, however, downplay these benefits and argue against the power of global economic institutions. Realist scholars believe such organizations to simply allow economically developed countries to maintain their hold on developing nations. Liberalism posits that global economic growth can be a non-zero-sum game and that all nations can grow together. Realists reject this as being idealistic and baseless.

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