Case Study Analysis – “Aid, Debt Relief, and Trade: an Agenda for Fighting World Poverty”
Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs. The Bretton Woods Conference in 1944 spawned two IFIs, the International Monetary Fund (IMF) and the World Bank, in order to rebuild a world economy devastated by a war that took the lives of over 55 million people. The IMF was originally created to stabilize and regulate international monetary exchanges while the World Bank would facilitate postwar economic development through international lending. In the subsequent year, the United Nations was launched to play a direct role in poverty alleviation, public health and economic growth. In 1947, the United States launched a bold initiative, the Marshall Plan, which dispensed $13 billion in aid to Western Europe in order to restore economic security. The plan propitiously displayed the benefits of bold foreign assistance as evidenced by the “Long Boom.” Then the 1970s brought dramatic increases in oil prices shocking economic systems. During this time period, the IMF and the World Bank extended their respective mandates – the IMF offered short term loans to help countries cope with the increased costs and the World Bank announced a new “basic needs” approach to development that targeted poverty reduction rather than economic growth. Another oil shock occurred during 1979 and the Federal Reserve aggressively fought inflation which increased international borrowing costs. Consequently, the developing world