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IMF and World Bank: time to go

Éric Toussaint assesses the performance of the IMF and the World Bank and offers new ideas for global financial governance

In 2014, the World Bank and the IMF will turn 70. In October 2013, they held their usual annual meeting in Washington. Since their creation in 1944, the World Bank and the IMF have actively supported all dictatorships and corrupt U.S.-allied regimes.

In flagrant violation of the right of people to control their own destinies, they have trampled on the sovereignty of countless States, in particular through conditionalities they impose on them. These conditionalities impoverish people, increase inequalities, hand the country over to transnational corporations, and modify States' legislation (e.g. profoundly reforming the Labour, Mining, and Forestry Codes, and abrogating collective bargaining agreements) to cater to foreign creditors and ‘investors.'

In spite of having learned of massive misappropriations, the World Bank and the IMF have maintained or increased the amounts lent to corrupt and dictatorial regimes, allied with the Western powers (see the classic case of Congo-Zaire under Marshal Mobutu analysed in the 1982 Blumenthal report).

Through their financial support, they aided Habyarimana's dictatorship in Rwanda until 1992, which enabled a five-fold increase in his army. The economic reforms they imposed in 1990 destabilised the country, and exacerbated latent contradictions. The genocide that had been prepared for since the end of the 1980s by the Habyarimana regime was perpetrated beginning on the 6th April, 1994, resulting in the death of almost a million Tutsis (and moderate Hutus). Subsequently, the World Bank and the IMF demanded that the new Rwandan authorities reimburse the debt contracted by the genocidal regime.

They also supported dictatorial regimes in the other camp (Romania from 1973 to 1982, China from 1980) in order to weaken the USSR before its collapse in 1991.

They supported the worst dictatorships until they were overthrown: Suharto in Indonesia from 1965 to 1998; Marcos in the Philippines between 1972 and 1986; Ben Ali in Tunisia and Mubarak in Egypt until they were overthrown in 2011.

They have actively sabotaged progressive experiments in democracy (from Jacobo Arbenz in Guatemala and Mohammad Mossadegh in Iran in the first half of the 1950s and Joao Goulart in Brazil in the early 1960s to the Sandinistas in Nicaragua in the 1980s and of course including Salvador Allende in Chile from 1970 to 1973. The full list is much longer.

The very people who are the victims of the tyrants financed by the World Bank and the IMF are forced by these same institutions to reimburse the odious debts these authoritarian, corrupt regimes have contracted.

The World Bank and the IMF have also forced countries that became independent at the end of the 1950s and in the early 1960s to repay the odious debt contracted by former colonial powers when they colonised these countries. This is true, for example, of the colonial debt contracted by Belgium with the World Bank in order to fund its colonisation of the Congo in the 1950s. We must remember that this type of transfer of colonial debt is prohibited by international law.

In the 1960's, the World Bank and the IMF provided financial support to countries like apartheid South Africa and Portugal, which was keeping colonies in Africa and the Pacific under its yoke.

On the environmental front, the Bank continues to pursue a productivist policy that is disastrous for people and detrimental to nature. It has also succeeded in being assigned the role of managing the emissions trading market.

The World Bank finances projects that flagrantly violate human rights. For instance, many components of the ‘transmigration' project in Indonesia, which was directly supported by the World Bank, may be considered to be crimes against humanity (destruction of the natural environment of native peoples, enforced displacement of populations).

The World Bank and the IMF contributed to the emergence of factors that caused the outbreak of the 1982 debt crisis. a) the World Bank and the IMF encouraged countries to contract debts under conditions that led to their over-indebtedness; b) they drove, and even forced, countries to remove capital-movement and exchange controls, thereby increasing the volatility of capital and significantly facilitating its flight; c) they drove countries to abandon import substitution industrialisation and replace it with a model based on export promotion. They have concealed dangers such as over-indebtedness, payment crises, and negative net transfers, which they themselves detected.

The liberalisation of capital flows, which they have systematically encouraged, has increased the incidence of tax evasion, flight of funds and corruption. The liberalisation of trade has strengthened the strong and weakened the weak. The majority of small and medium businesses in developing countries are unable to withstand competition from large corporations, both in the North and the South.

A new international, democratic financial system must be found as soon as possible to promote the redistribution of wealth and to support people's efforts to achieve development that is socially just and respectful of nature.

Paths must be chosen that radically redefine the foundations of the international financial system (its missions, operation, and so on.)

The organisation that could replace the World Bank should be highly regionalised (banks in the South could be brought together within it). Its role would be to supply loans with very low or no interest and grants, which could only be on condition that they be used in strict adherence to social and environmental standards, and more generally, respect of fundamental human rights. Unlike the current World Bank, this new bank which the world needs would not seek to defend the interests of creditors, while forcing debtors to submit to an all-powerful market. Its primary mission would be to defend the interests of the people who receive the loans and grants.

Meanwhile, the new IMF, should recover part of its original mandate to guarantee currency stability, fight speculation, keep watch over movements of capital, and act to prohibit tax havens and tax evasion. To attain this goal, it could assist in the collection of various international taxes by working with national authorities and regional monetary funds.

All these solutions require the development of a coherent international financial system that is hierarchical and has an internal division of powers. The UN could be its cornerstone, provided that its General Assembly becomes the actual decision-making body – which implies eliminating the status of permanent member of the Security Council (and the associated veto power).

In the meantime, institutions like the World Bank and the IMF must be held accountable for their actions before national jurisdictions. The debts they are trying to collect must be cancelled. Action must be taken to prevent the harmful policies they recommend or impose from being applied.