What Are the IMF and the World Bank?

Seven Reasons Why We Should Care

On Saturday, September 28th, hundreds of protestors put themselves in harm's way to quarantine corporate executives from leaving the IMF/World Bank Meeting.

Most Americans become confused when they hear about the International Monetary Fund and the World Bank. These are not ordinarily high on the radar screen in corporate media coverage. But from September 27th through 29th, these two economic groups were thrust into the spotlight by anti-corporate globalization protestors in Washington D.C. The two groups met in D.C. last weekend to discuss future plans for furthering their "neo-liberal," "free market" agenda and reforms, and were challenged by grassroots protests and direct action attempting to shut down their annual meetings.

Most people are perplexed when they finally hear about these groups from protestors and activists. What exactly is the role of these groups, what are the effects of their policies, how long have they existed, and more importantly, should they even be allowed to exist?

All of these are perfectly valid questions that will never accurately be addressed in the media for one reason. The corporate media are owned by the same interests (elite, business interests) that make massive profits from "structural adjustment" policies enacted by the IMF and World Bank. But we first need to understand some of the history of the IMF and World Bank and their exact role in the global economy before we can criticize them.

Both organizations were created after World War II, during the period of rapid American economic expansion and dominance of the world economy. They retain major power in deciding which path the world's economy will follow. These organizations were created to promote easier flows of global capital (lowering restrictions on foreign investment in the national market), and promote the economic philosophy professed by the Western Democracies commonly known within the last fifty years as "Economic Neo-Liberalism." Neo-Liberalism basically refers to Western Nations attempts (led by the U.S.) to open up the economies of foreign nations, usually in the Third World to foreign investment. "Economic Neo-Liberalism" is closely related to the concept of "free-markets," meaning that all countries (at least according to rhetoric) should promote "liberal" economic policies designed to open up all economies to foreign influence and investment.

There is much contradiction between the public goals claimed by these two groups and the reality of the effects of their policies. The IMF and World Bank are responsible for providing massive bailouts and loans to Third World countries that are suffering from substantial economic problems (often on the verge of bankruptcy) and a high level of poverty.

But why are these countries poor or bankrupt? Much of this has to do with corrupt dictators and autocrats in these countries looting the nation's economies with programs designed to promote only the interests of the super rich. These leaders redirect the country's resources to the very rich, but more importantly, to the corporations based in the United States and their shareholders (who are disproportionately the very rich in the U.S.).

These corrupt rulers in the Third World (almost always supported by the U.S.) fulfill an extremely important role for the world's rich. They rape their countries and the majority of its citizens, and split up all the resources between the elites.

In order for a country in economic crisis to receive loans from these groups, their leaders must first agree to a plethora of requirements. These requirements are intended to supervise the growth/transformation of developing countries. These requirements are also designed to increase poverty, slowing economic growth, reduce the size of national governments, and in general lower the national standard of living. The loan conditions require that the recipient country "radically reduce government spending on health, education, and welfare" (Kevin Danaher, Ten Reasons to Abolish the IMF and World Bank). These programs treat the workers/majority of these countries like commodities to be exploited rather than people. There are many major requirements that the IMF and World Bank demand of poor countries receiving loans. Countries must conform to "austerity programs," designed to promote "structural adjustment."

1) Mandatory requirements in civil-service downsizing. The size of the federal government must be reduced, as well as the number of services the government can afford to provide for its citizens. In order to pay back loans, governments must cut as many public programs as possible.

2) Mandatory privatization of public services goes right along with the first requirement. This amounts to privatizing a whole number of services that have no right to be controlled by the private sector. Some areas of proposed privatization include: privatization of the Postal Service, water service facilities, sewage treatment centers, parks, roads, irrigation services, and agriculture. This includes privatizing water. The argument for privatization is that it is supposed to make services less expensive and make the services more efficient. We can see how true this is by looking at the reality of privatization in the First World and Third World. Efficiency in U.S. business can be seen in such successes as Tyco, World Com, and Enron (which actually ran into more problems when deregulated including problems with bankruptcy). The reality of water privatization in the Third World has been that where these programs were implemented, water services went down to a small number of individuals, and prices shot up two to three times original cost under public control (which should indicate how honest these business men are when they talk of privatization being less expensive and more efficient).

3) Requirements for programs promoting "labor flexibility." "Labor flexibility" basically means taking away all the benefits workers receive as a result of union and governmental protections (eliminating legal protections). This leads to reduced restrictions on governments and private businesses to firing employees (layoffs are required in advance of privatization). While the name "labor flexibility" sounds great, in reality it is a policy designed to cut labor costs and benefits, and radically increase the profits of corporations that do not to give workers benefits and rights.

4) "Wage decompression": the government is required to initiate radical cuts in the wages of all federal employees.

5) Required cuts in pension benefits. Pension reforms are yet another way to cut public services in order to pay back IMF loans.

6) A general devaluation of the national currency. This trend tends to develop along with the slowdown in economic growth in these countries due to all these "structural adjustment" policies.

7) Requirements for the deregulation of private industries, similar to those enacted in the U.S. in the communications and energy industries.

World Bank and IMF policies have led to some general trends in Third World countries. As a direct result of these "austerity programs," the majority of those living in Latin America where characterized by IMF/Bank studies to be roughly in the same position economically and as far as standards of living as they were 20 years ago. This is incredible when we consider the rate of economic growth of countries like the U.S. not affected by these programs.

A World Bank study even showed that "the absolute number of people living in poverty rose in the 1990s in Easter Europe, South Asia, Latin America, the Caribbean, and Sub-Saharan Africa, all areas that were affected by structural adjustment programs" (Danaher, 10 Reasons).

With the apparent imperialistic tendencies for most of these policies, many Americans and others around the world have joined together to fight these "Neo-Liberal" economic reforms imposed by the IMF and World Bank. The fight against these institutions is strongly centered on their anti-democratic tendencies. These groups meet, with no public accountability, behind closed doors, determining the fate of millions of the world's poor. Activists around the world have fought against this anti-democratic trend, demanding more public accountability and an increase in access to the meetings of the IMF and World Bank.

One solution proposed is to cancel "structural adjustment" policies completely. They are unfair to workers and actually hurt prospects for economic growth.

Another solution is to cancel the debt for countries who cannot meet their payments. These governments then, if properly coerced, could spend more of their resources on public development and infrastructure.

A final solution gaining support from many activists around the world is eliminating the IMF and World Bank altogether. Although the most radical solution, it may be possible to accomplish with extraordinary amounts of grassroots organizing and protests.

It will not be simple to eliminate these two groups, or at least radically change their outlook and policies for Third World countries and their people. It will take incredible amounts of grassroots organizing, and years of educating average citizens in the U.S. and other countries about the danger of these imperialist economic programs.

We can only win through demanding accountability from our so called leaders and taking the initiative into our own hands. The time to challenge these groups is now. If we cannot beat them in the richest country in the world, then no one can. Fortunately, the struggles and victories already pursued by grassroots movements shows that there is no limit to what we can accomplish when we work together.