Essay Sample on Differences Between the ADB, WB and IMF

Introduction

Coburn, Restivo & Shandra (2015) begin by giving a brief overview of the discussion. The International Monetary Fund (IMF), World Bank (WB) and the African Development Bank (ADB) have resulted to structural adjustment and investment lending as a potential solution to the stalemate caused by the inability of many poor nations to finance and pay back their loans. Structural adjustment lending first became popular in the 1970s and 1980s, and involves conditional lending which required the recipient of the loan to restructure their internal operations. The required restructuring is aimed at spurring economic growth, increasing production to increase the government revenues and minimize spending. The positive effect achieved on the balance of payment is thus expected to facilitate the repayment of the debt.

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The dependence theory is a theory that argues that the inherently capitalistic nature of the world economy favors the wealthy first-world nations at the expense of the middle and low income nations. The high income nations' main source of wealth has been the exploitation of labor and natural resources of the middle and low income nations Coburn, Restivo & Shandra (2015). Some of the practices and factors that have been known to have an inherent contribution to this effect include debt repayment, commodity concentration, multinational corporate investment and export partner concentration.

The impact of structural adjustment and investment lending on health is two-fold. The dependence theory suggests that the requirements that accompany the loan provided have a detrimental effect on health. For instance, privatization of government health facilities leads to the gradual increase in the cost of obtaining healthcare since the government no longer needs to subsidize the cost of services in such organizations. Government spending is also generally reduced, which inevitably leads to health budget cuts. Consequently, some of the health facilities are likely to be understaffed and under-resourced leading to closure. Some of the positive impacts of this lending include improved training of medical personnel, funding of campaigns that encourage the uptake of essential services such as immunization, drug provision and distribution and building of health facilities, among others.

Infant mortality was the dependent variable in Coburn et al.'s research. Independent variables include the ADB health loan, and the ADB structural adjustment loan, which are the dummy variables. Another independent variable is the WB or IMF structural adjustment loan, so that the impacts of lending from the two can be differentiated from those of lending from the ADB. Other independent variable include Debt service ratio, multinational corporate investment, gross domestic product (PPP), domestic investment, female secondary school enrollment, among numerous others. The size of sample used was constrained by availability of the relevant data thereby ending up with 31 countries under analysis. Based on the risk of heterogeneity bias, a two-way fixed effect regression model was used as part of the research methodology.

Theoretical Framework Concern

There is a major concern regarding the significance of some of the factors that are expected to influence the infant mortality rates, and their relation to the effect of structural adjustment loans. This is further evidenced by the subsequent results indicated after the statistical analysis. Some of the factors are based on far-fetched assumptions and expectations, such as democracy and multinational corporate investment.

Multinational corporate investment, for instance, is likely to have an insignificant effect on infant mortality rates, if any. In the inclusion of this factor as one that affects infant mortality rates, this study focuses heavily on its negative effects. The study assumes that multinational corporate investment has a negative effect on the economy, which is not entirely true. Numerous positive effects have been observed from the same especially in developing nations on which this study focuses.

Multinational corporate investment has been observed to spur economic growth in developing countries. This is affected through the increase in financing which would otherwise have been impossible to achieve through foreign aid and local savings. Export capacity could also be significantly built or boosted through the same. This necessitates elaborate frameworks designed to enable the multinational companies complement local producers. Moreover, multinational corporate investment injects significant amounts of otherwise unavailable capital in developing countries because they have access to international financial markets. Their access to resources also enables them to have higher efficiency in operations, better sustainability and offer good benefits to the local employees. In addition, these organizations often bring in new technology which the developing countries would otherwise be unable to access thereby facilitating the crucial flow of technology from the developed to the developing worlds. With the necessary visionary leadership and strategic regulatory policy, the absence of which this study blatantly assumes, multinational corporate investment is beneficial to economies, thereby cancelling out the mentioned disadvantages. This would make it of little consequence to the study objective.

Methodological Concerns

Concern 1: Research Model Significance

In any research, it is necessary to evaluate whether the methodology achieved the intended objective. This research was designed to determine the effect of AfDB health loans and ADB structural adjustment loans on health. While the researchers went to great lengths to formulate a statistical presentation of an evaluation of different factors which could affect infant mortality, the data presented does not carry enough weight to render the research relevant.

Upon evaluation of the results, for instance, most of the outcomes are expected. It is seemingly logical that an ADB health loan, would have a stronger effect on infant mortality than an ADB structural adjustment loan. Moreover, it is likely that an increase in the debt service ratio will lead to a higher infant mortality rates. In essence, the research does not offer any information that can be considered new. All the findings that are arrived at upon application of the two way fixed effects regression model could easily be argued out in theory.

In this respect, one of the ways in which the material significance could be improved would be in the addition of other variables which introduce new dynamics into the regression analysis. It is imperative, however, that these variables have sufficient relation to infant mortality. In the results presented, variables such as multinational corporate investment and democracy seem to have an insignificant effect on the state of health. One of the proposed factors that is missing would be the corruption percentage index as will be discussed forthwith.

Concern 2: Missing Relevant Variable (Measure of Corruption)

One of the variables which would be paramount would be the corruption index. The corruption index would significantly affect the utility of any given loans and subsequently the infant mortality rates. Corruption indices of middle and low economies are often among the highest in the world. These economies suffer from such problems as misuse of resources, unaccountability, nepotism, among numerous other negative effects of corruption. Corrupt societies also tend to have little value for honest work and industry, leading to generally poor work cultures. Moreover, the work force is often poorly motivated because, in many circumstances, honest effort is not appreciated.

African countries, of which this research was about, are often heavily affected by corruption. Corruption is the main hindrance to development as it prevents the building and establishment of strong and functional institutions. Hence, governance and resource use in such countries is often inefficient and poor. One of the main reasons why the balance of payments of such countries would be negative would be the fact that the resources that are obtained in the form of external debt were not used appropriately. In many cases, the leaders of these countries may direct the funds towards projects for which the funds were not intended, often because the leaders have an interest in those projects. Worse still, they may pilfer and embezzle the funds.

Conclusion

In conclusion, the research presents a number of deficiencies. First, there is a failure in sufficiently fulfill the objective using the data set and analysis as provided and presented. Secondly, the factors of corruption and poor leadership in the countries sampled must be included as Aside from the inadequacies the research fails to bring out significant differences between the structural adjustment lending from the ADB and that one from the World Bank and IMF. However, as rightly put by the researchers, more research needs to be undertaken on the same subject.

References

Coburn, Carolyn, Michael Restivo, and John M. Shandra. "The African Development Bank and infant mortality: a cross-national analysis of structural adjustment and investment lending from 1990 to 2006." International Journal of Comparative Sociology 56, no. 3-4 (2015): 275-296.