BETWEEN THE LINES: Enough IMF/World Bank Policies
The International Monetary Fund and the World Bank, targets of demonstrations in Washington D.C. this week, were founded by the U.S. and Britain in the wake of World War II. These institutions were created to shore up the devastated economies of post-war Europe and at the same time promote market economics.The World Bank focused on financing infrastructure projects such as railroads and ports, while the IMF lent its reserves to governments facing financial shortfalls. After their initial work in Europe these institutions turned their attention to the worldâs poorest countries in Asia, Africa and Latin America. However, the billions of dollars lent to these developing nations have come with strings attached in the form of Structural Adjustment Programs, or SAPs. SAPs mandate debtor governments to open their economies to foreign corporations, focus agriculture production on export crops, balance budgets through cuts in social programs and privatize publicly held enterprises.Between The Lines' Scott Harris spoke with Soren Ambrose, policy analyst with the 50 Years Is Enough Network, who considers the track record of the IMF and World Bank as they stand accused of presiding over an economic order that devastates the environment and makes the rich richer and the poor poorer.Soren Ambrose: The World Bank is best known for its large scale development projects, infrastructure projects such as large dams which are notorious for having displaced lots of people, often without consulting them beforehand. Some of the biggest battles on this front have been fought in India, where a series of development projects have displaced literally millions of people. There have been some very visible battles where people have refused to leave their homes and have had waters come flooding in as they stood their ground. Also, the notorious road projects that were built into Brazil's Amazon basin destroyed much of that largest tropical rain forest in the world.But in the last ten years or so the World Bank had been following the lead of the International Monetary Fund. In fact, the World Bank has been doing less and less of the lending for these large infrastructure projects and more of loans that are policy based, not linked to any specific project, but more of a bribe for countries to change their economic policies. This is the forte of the International Monetary Fund. And the name that they have for these -- although they have been trying to get away from it because of the bad reputation that's attached to it -- is Structural Adjustment Program, or SAP. Starting in about 1980, these programs have been imposed on country after country. Nearly 90 nations around the world now have gotten into debt problems, balance of trade problems and can't get loans or credit from anywhere else and have had to turn to these multilateral institutions and submit to structural adjustment programs in exchange for these loans.Structural adjustment programs require that countries hike interest rates, which have the effect of reducing credit available to small business people and farmers, opening up their economy to multinational corporations, cutting subsidies, cutting any kind of regulation that would protect industries within their own countries. They require the setting up of free trade zones -- the areas where sweatshops flourish -- and massive cuts in government spending, creating lay offs of government employees, which in most southern countries is the largest sector of formal employment. And, a sharp and painful reduction for most impoverished countries around the world in health and education programs.Between The Lines: Former and current officials of both the World Bank and the International Monetary Fund in recent times have been self critical, taking to heart some of the criticism groups like your own have made, pointing out the real detriment which their policies have caused. I'm wondering, do you think the World Bank and the International Monetary fund can be fixed or should they be scrapped? I guess it's the old fix it or nix it question.Soren Ambrose: Ah, well I'm going to give a kind of simple answer to that, but one that is different for the two institutions. I think that the International Monetary Fund, the IMF, can't be fixed, at least in terms of the kind of work that it does in the southern countries. The original role of the IMF was to monitor currency values, a role which became obsolete when the dollar gold standard was eliminated in the early 70s so that currency value simply floated on the open market. They really devised this role for themselves. They were never designed to be working with developing economies. I think that they've proven quite substantially that they are completely unsuited for this task. Perhaps the IMF would still have a role in doing economic analysis. But even in that, even if their power to oppose policies in other countries was reduced, it would still be an institution that I think would probably still do a disservice in the world even without power just because the orthodoxy that it follows is one that is so rigid and an extreme neoliberal Reaganite philosophy that their analyses which are in themselves pretty noxious, I should say.The World Bank, can it be reformed? The word that we use at the 50 Years is Enough Network when faced with this conundrum is always 'transform.' What would have to change fundamentally and first -- although it would not be sufficient -- is that the institution would have to be democratized so that the decisions are being made not by the finance ministers and treasury secretaries of the wealthiest countries in the world, but rather, a democratic process by the people of the countries that are affected by those policies. That would be a tremendous undertaking. But if that were to be accomplished, that would be a tremendous first step. Perhaps the World Bank or some institution under a different name could be a valuable institution. The next step then would be to try to weed out the neoliberal economic orthodoxy that is still pretty heavily represented within the World Bank.