Global Loan Sharks

The World Bank and International Monetary Fund (IMF) were created in 1944, towards the end of the Second World War. After the economic chaos of the 1930s, the world's leading countries proclaimed that they wanted a stable framework for international trade, and to aid in the rebuilding of shattered European economies. Over time, the initial reason behind their creation has faded away. In order to survive, these two institutions have actively sought out new roles.

The World Bank has been in the business of making loans to "developing" countries for them to build up their infrastructure. Millions of dollars are made available for the construction of airports, dams, and projects designed to increase the export of cash crops. Many of these projects are environmental and social catastrophes that do not succeed even using their own limited definition of success. However, they provide the Bank with something to boast about and also provide nice fat contracts to (often Western) construction companies.

If the World Bank is the carrot of the international financial system, then the IMF is the stick. It is impossible to get World Bank loans without agreeing to IMF orders. These orders mostly focus around "balanced budgets", the removal of any protection for local industry, the reduction of "inefficient" spending on health and education, and the privatisation of publicly owned institutions.

Together, the IMF and World Bank hold out the promise of long-term economic growth and, ultimately, industrialisation. But they have been promising this for a very long time, and it never seems to happen. All "developed" countries, like the United Kingdom, the United States and Japan did not follow the path the IMF and World Bank are setting out. In fact, the ideas of the IMF and World Bank have been subjected to damning and scathing intellectual critique for almost 30 years. They have not worked in country after country.

The consequences of these institutions' activities are appalling. The World Bank has funded the construction of huge hydro-electric dams, which have displaced millions of people, without delivering the promised economic benefits. The IMF's Structural Adjustment Packages have meant governments in Third World countries have cut their budgets for health and education. In Zambia, for example, cuts in the health budget led to one hospital combining its obstetrics and tuberculosis wards. School teachers are not paid, and basic supplies like chalk, exercise books and pens become too expensive for many. At the same time, governments continue to equip their police forces and armies with Western-manufactured riot shields and tear gas, in order to suppress public anger when the price of food rises beyond the means of those on tiny wages. The IMF refers to this level of cuts in government spending as the "riot threshold".

The IMF exists to make sure that "debt" is repaid. But these countries have often repaid far more than they originally borrowed - they are caught in the classic trap of endlessly paying interest. In many cases, money was borrowed by dictators like Suharto of Indonesia with much of it ending up in their own bank accounts.

The consequences of the IMF and World Bank's policies are not just felt in the Third World. Causes of many wars, refugee crises & environmental disasters can be traced directly back to them. Everybody suffers from such activities; but these institutions will do whatever they can to survive. This means that they will seem to take on board all the criticisms, and claim to be genuinely concerned about the social havoc they've caused. They have been saying this for years, but haven't changed their behaviour. Ultimately these institutions are engaged in loan sharking and are beyond reform. They need to be abolished.

People Taking Action

People from all over the world are mobilising to take action against the World Bank and IMF when they hold their next AGM on Tuesday 26 Sept in Prague. Many see this as the next opportunity to oppose globalisation after the huge protests on June 18 in the City of London last year, in Seattle last November, and in Washington more recently.

On Wednesday 4 October there will be an open public meeting at the Friends Meeting House, Mount Street, at 7.30pm, with report backs from Prague, and how to continue campaigns against the World Bank.

For further information about protests in Prague, look at http://inpeg.ecn.cz


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© Networking Newsletter (Sept 2000)