Non-Sector Actors: A Necessary Evil

The role of non-state actors such as the World Bank, World Trade Organization, and the International Monetary Funds have been very prominent in today’s world. They have contributed to the growth and expansion of OECD and developing countries. They have also contributed to the corruption and inequality in developing and developed nations. These non-sector actors have an important role but an immaculate flaw as well. They hold an importance role in helping countries grow through lending powers, but their flaw is that it tends to benefit developed nations more than developing nations. Therefore, it creates a level of inequality. Developing nations find themselves more in debt and find these non-sector actors increasingly intervene within their political and economic policies and exploiting their national identity. Although non-sector actors such as the IMF hold an important role in the world, they are also main contributors to the Asian financial crisis.

The Asian financial crisis occurred throughout East Asia beginning in July 1997. Due to financial deregulation and encouragement of taking loans, nations silently grew into debt, which was initiated by the private sector. Initially, the economy was booming and expanding, which increased the level of investments, but as the economy overstretched exchange rates depreciated. In the late 1990’s, the US increased their interest rates in hopes to stabilize inflation pressures, but with an increase in interest rates, East Asia became less attractive to move money flows. As money flows dried up, currencies decreased, and exchange rates became harder to stabilize. Thailand was the first to be affected by this crisis and to float the Thai Bhat, which caused a ripple affect throughout East Asia and soon countries were forced to devalue as investors pulled out from the region. This crisis caused for an increase in deficit throughout the region, which initiated the IMF to intervene.

The IMF insisted on restraining fiscal decisions within the region. The idea was if spending decreases, taxes increase, and the economy increases to be privatized, exchange rates would stabilize. On the contrary, these fiscal policies caused an economic downturn to exacerbate and plow into a recession. Although many of these Asian countries were in need of money, IMF’s strict loan agreements and moral hazard was a strong contributor to the financial crisis. Even though the IMF imposed strict agreement rules on East Asian countries, which contributed to the crisis, it also helped these nations grow out of their debt and grow as an economy. It is important to note the positive and negative impact of non-sector actors.

These non-sector actors can be thought of as banks lending out individuals loans for colleges, houses, cars, etc. Once a bank starts lending out money, they start imposing strict rules to ensure that their money is paid back to them. The same idea is applied to nations in need of financial aid. When a country is in debt, it affects their deficit, exchange rates, flow of investments, and money flow. Many nations ask for aid from the IMF because although this gives power to these actors, it frees these nations from their debt and help the growth of a nation.

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.