Embed Size (px)
Citation preview
THE IMF and WORLD BANK
These 2 institutions exert enormous influence over world economy, particularly development efforts in Third World
IMF and World Bank founded 1945 as part of 1944 Bretton Woods conference
I. The International Monetary Fund
IMF governance
IMF member states
IMF funds come from quotas on member states
IMF only deals with governmentsHowever, IMF approval is important signal to private banks.
Purpose: promote global financial security, trade, and macroeconomic performance-smooth short term business cycles rather than long-term development
1945-1971 IMF fixed exchange rates and gold standard ($35/ounce)
1971 U.S. left gold standard
Since collapse of Bretton Woods 1973, IMF’s role switched to debt relief:from exchange rate stability among First World to control over Third World developmentIMF prospered by lending funds to overcome 1970s oil crisis, and degree of conditionality rose greatly
-move into long term issues blurred boundaries with World Bank
IMF actions include:
a. Country surveillance: advice on policies
b. Correct balance-of-payments problems
c. Debt restructuring: many countries are unable to repay interest or principal
-under Baker plan, terms of new loans are designed to promote “Washington Consensus,” i.e., “free markets”
IMF Structural Adjustment Policies (SAPs)-currency devaluation to make exports cheaper, imports more expensive
-cutbacks in government spending to free funds for debt repayment
-privatize government assets, deregulate-trade liberalization: end tariffs & quotas, open markets to foreign firms
-increase interest rates to battle inflation(note U.S. could not abide by these policies)
-> reductions in subsidies for food and transportation
Criticisms of IMF:a. structural adjustment is thinly disguised program to advance U.S. interests
b. its policies favor capital over labor, bankers and elites at the expense of the poor
-> promotes undemocratic top-down policies and a “race to the bottom”
-reducing public goods increases inequality
“Trickle down” economic policies never really trickle down
c. austerity problems make problems worse in countries already in crisis-when IMF forces interest rates to rise, it wreaks economic havoc-reduced gov’t services in the absence of a safety net can cause mass misery
1968-1995 Nicaragua received $185 million from IMF, but average incomes dropped 55%
1972-1995 Zaire received $1.8 billion from IMF, but average incomes dropped 54%
IMF argues its policies reduce, not increase, poverty:
d. short-term IMF loans perpetuate long-term debt & fail to generate development
IMF and 1997 Asian financial crisis-raids by currency speculators caused crisis in Thai baht-IMF insisted on capital market liberalization & higher interest rates, which weakened their economies-massive currency devaluations
-increased unemployment, poverty
IMF blamed internal weaknesses (e.g. accounting) not external speculatorsIMF needs to view economy as embedded in social institutions, not force “one size fits all” policies
Russia 1998: IMF’s demands for rapid privatization led to economic collapse
IMF-mandated “shock therapy” was simplistic, ignored absence of adequate legal & regulatory framework
-selling off government assets made billionaires of insiders, impoverished everyone else
-Russia dismantled its safety net without alternatives in place
Argentina 2001: An IMF nightmareDespite years of following IMF advice, the economy collapsed, provoking huge political crisis.
Anti-IMF austerity program riots
Indonesia
Colombia
Argentina
Czech Republic
Argentina‘The only thing lacking is for us to pull down the Argentine flag and replace it with the IMF’s.’– Alfredo Avelin, Governor of San Juan
Zambia‘Now let somebody out there tell us, having privatized 80 per cent of our economy, why is it that we have become one of the poorest countries in Africa and the whole world?’– Joyce Nonde, President, Zambia Federation of Free Trade Unions
Turkey‘This is a game they are playing. The game is called privatization. IMF wants to privatize social security. The Government thinks we don’t even deserve retirement.’– Sevil Erol, Secretary-General, Confederation of Public Sector Unions
World Bank Board of Directors meeting
Paul Wolfowitz
World Bank is a non-profit corporation owned by shareholders, who are member countries.
International Bank for Reconstruction and Development: to reduce poverty
International Development Association:zero-interest loans to poorest countries
International Finance Corporation: promotes private sector development
Multilateral Investment Guarantee Agency: promotes FDI
International Center for the Settlement of Investment Disputes: arbitrates between gov’ts and investors
World Bank’s initial purpose was to coordinate funding of recovery of Europe and Asia
-1960s-70s focus shifted to developing world
Robert MacNamara
World Bank is world’s largest external funder of development assistance ($16 billion/year).
Sponsors research, conferences, offers technical assistance, development advice.
Some successful World Bank projects:
Chad oil pipeline
Micro-loans in India
Promote early childhood development in Uganda
Road construction in India
Drinking water systems in Tajikistan
Rural water systems in Brazil
Russia: combat tuberculosis & AIDS, improve health care and education
Transportation development in Vietnam
Promoting cotton development in Benin
Disease control in Eritrea
Institutional reform of land administration in Ghana
Raise small farmer productivity in Malawi
Irrigation improvement in Guangdong, China
Encourage participatory forest management in Chhattisgarh, India
Pastoral risk management in Mongolia
Water resources infrastructure in Mekong delta, Vietnam
Encouraging rural access to markets in Brazil
STATE OF BAHIA. PEELING MANIOC ROOT.
TO BE PROCESSED AT THE FLOUR MILL,
THEN ON TO THE MARKET.
Creating rural financing agency in Mexico
Micro-credit to rural farmers in Albania
Cooperative rural finance program in Bosnia
Improving public management of Russian forests
Privatizing farming in Uzbekistan
Agricultural credit and private rural banking in Egypt
Irrigation in Morocco
Groundwater and soil conservation in Yemen
Karnataka Watershed Development
Water management and irrigation in Indonesia
Commercialize agriculture in Nepal
Improve rural health care access in Madagascar
Improve agricultural productivity in Honduras
Opposition to World Banklargely from grassroots environmental & labor movements opposed to globalization
1. Undemocratic, secretive, bloated and inefficient, doesn’t listen to community groups
2. Promotes corporate interests, not those of the poor, by over-relying on mythical unregulated markets
“Their [IMF & World Bank] policies have not only failed to bridge the gap between rich and poor and achieve greater equality, but have rather contributed to a widening gap, the virtual exclusion of an increasing number of the poor and widespread social disintegration.”
-Rev. Dr. Konrad Raiser, World Council of Churches, June 2000
World Bank encourages shift from sustainable agriculture to corporatized export-oriented farming.
3. Advances agenda of U.S. ruling class, i.e., neoliberalism
4. Its projects cause environmental harm
Example: supported corrupt government of Papua New Guinea as owner of forests, rather than local villagers, making them available to multinational timber companies
World Bank opposes agricultural subsidies and supports Green Revolution type projects:capital-intensive, use fertilizer, pesticides
Greening of the World Bank?
-more work with environmental NGOs, focus on sustainable development
Some failed World Bank programs:
Indonesian transmigration, 1960s
Polonoroeste highway, Brazil
Sardar Sarovar dam, Narmada valley, Gujarat, India, 1985+
Flooding displaced thousands of families;reservoir became breeding ground for diseaseWorld Bank withdrew funding, Indian gov’t will complete it
Have World Bank and IMF outlived their purpose?Conditions have changed dramatically since 1944, i.e., regarding Depression, floating exchange rates, FDI, reduced protectionism
