Globalization, Development, and International Institutions: Normative and Positive Perspectives

Introduction A t the conclusion of World War II, several international institutions were created to manage the world economy and prevent another Great Depression. These institutions include the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (now called the World Bank), and the General Agreement on Tariffs and Trade (GATT), which was expanded and institutionalized into the World Trade Organization (WTO) in 1995. These institutions have not only persisted for over five decades, but they have also expanded their mandates, changed their missions, and increased their membership. They have, however, become highly contested. As Stiglitz notes, “International bureaucrats—the faceless symbols of the world economic order—are under attack everywhere. . . . Virtually every major meeting of the International Monetary Fund, the World Bank and the World Trade Organization is now the scene of conflict and turmoil.” Their critics come from both the left and right wings of the political spectrum. Anti-globalization forces from the left see them as instruments for the domination of the developing countries by both the rich countries or the forces of international capitalism. Critics from the right view these institutions as usurping the role of the market and easing pressures on developing states to adopt efficient, market-promoting policies. These debates often occur in a highly ideological and polemical fashion; they would benefit from being more informed by social science. By reviewing some of the recent social science literature, this essay addresses three questions: what has been the impact of these institutions on the developing countries, why have they had this impact, and what should be their role in the development process. Conventional wisdom in international and comparative political economy has held that international institutions, Helen V. Milner is the B. C. Forbes Professor of Politics and International Affairs at Princeton University and the director of the Center for Globalization and Governance at Princeton’s Woodrow Wilson School (hmilner@Princeton. edu). She has written extensively on issues related to international trade, the connections between domestic politics and foreign policy, globalization and regionalism, and the relationship between democracy and trade policy. Her writings include Interests, Institutions, and Information: Domestic Politics and International Relations (1997), Internationalization and Domestic Politics (co-edited with Robert O. Keohane, 1996), “Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries” ( International Organization 2005), “The Optimal Design of International Trade Institutions: Uncertainty and Escape” (coauthored with B. Peter Rosendorff, International Organization, 2001). The author thanks David Baldwin, Chuck Beitz, Robert O. Keohane, Erica Gould, Steve Macedo, Lisa Martin, Thomas Pogge, Tom Romer, and Jim Vreeland for invaluable comments. She also received much useful advice from seminars at Princeton University and the Rockefeller Foundation’s Bellagio Study and Conference Center. Review Essay