The Issue

Brief history

In 1944, as World War II was nearing its end, leaders of the industrialized nations gathered at Bretton Woods in New Hampshire to create structures for managing the world economy in the wake of the destruction caused by the rise of fascism in Europe. Two institutions born out of the Bretton Woods Conference that have become central to international economic relations are the World Bank and the International Monetary Fund (IMF).

During the war, the business classes of Europe were either supporting the Nazis, getting their banks and factories bombed into oblivion, or fleeing Europe with all the money they could carry. On the other hand, socialists, communists and anarchists had high credibility because they were the leaders of the Resistance to Nazi occupation. So in order to prevent leftists from coming to power in western Europe, it was crucial to U.S. and British elites to get the business classes back into power. This required international institutions that would promote capitalist policies and strengthen the power of the corporate sector.

The World Bank focused on making loans to governments in order to rebuild railroads, highways, bridges, ports and other infrastructure. After Western European economies bounced back, the World Bank shifted its lending toward the Third World. It generally promoted large-scale projects inappropriate to the needs and capabilities of those countries’ peoples, but profitable to the corporations involved and to the governing elites.

The IMF was established to smooth world commerce by reducing foreign exchange restrictions and using its reserve of funds to lend to countries experiencing temporary balance of payments problems so they could continue trading without interruption.

The unwritten goal of both the IMF and World Bank was to integrate the elites of all countries into the capitalist world system of rewards and punishments. This program got a huge boost during the 1970s, when the oil-producing nations had enormous sums of surplus capital to invest through private lenders and the World Bank. In the short term, the projects funded by "petro-dollars" benefited corrupt dictators and First World corporations doing business with them. But many of them were ill-conceived and/or poorly managed. First World governments were not about to let the private banks and the investors in the World Bank lose their loans, so they forced the debtor nations to borrow from the IMF to fund the interest on the loans (which keep growing, so the principal can never be paid off).

Structural Readjustment: What it really means

With IMF loans come so many strings in the form of policy prescriptions that the economies of the debtor nations are no longer under their domestic control. These policy prescriptions are usually referred to as "structural adjustment programs" (SAPs). They require that debtor governments open their economies up to penetration by foreign corporations, allowing them access to the workers and natural resources of the country at bargain basement prices. Other policies imposed under structural adjustment include currency devaluation, cuts in social programs, increased interest rates, business deregulation, privatization of government holdings (even health care systems), the suppression of wages, and an emphasis on agriculture for export rather than for feeding the people.

Rather than alleviating the serious economic crisis in the South that came to the fore during the 1970s, SAPs have made the situation worse, as the GNP per capita either stagnated or decreased during the 1980s in countries where SAPs were instituted. As a result of SAPs, there is now a net outflow of wealth from the South to the North as Southern countries struggle with debt repayments far exceeding the amounts originally loaned to them by the IMF, World Bank or other Northern financial institutions.

The Victims: The Poor, Women, Children and the Environment

While SAPs may benefit the elites in many of the countries of the South where they have been imposed, the effects of these policies have mostly been felt by the poor, particularly poor women and their children. As SAPs have wrought increased unemployment and deep cuts in social services that provide education and health care, it is the women in these societies who are burdened with caring for sick family members and working harder to feed their families. As a result, rates of malnutrition and infant and maternal mortality in the South have increased since the imposition of structural adjustment programs. SAPs have also had a negative effect on the environment, as the SAP prescription of increased exports in order to increase foreign exchange earnings has accelerated the exploitation of these countries' natural resource base.

The Boomerang Effect

Although the effects of World Bank/IMF policies are most apparent in the South, those of us living in the North would be mistaken if we believed that these policies do not affect us here as well. Taxpayers in the North have paid for billions of dollars in tax relief for unpaid Southern debt given to Northern banks. The unsustainable exploitation of Southern countries' natural resources has contributed to increases in global warming and the greenhouse effect. Poverty and unemployment in the South are major factors behind the illegal drug trade and immigration from South to North. Finally, loans to Southern governments have often been used to purchase weapons from Northern countries, with increased global conflict the common result.

For specific examples of how the IMF allows the largest conglomerations of economic power to exploit and damage peoples in poor nations, read, "The All Too Visible Hand: A Five-Country Look at the Long and Destructive Reach of the IMF" on the web at http://www.developmentgap.org/imftitle_and_overview.html. The report was published April 1999 by the Development Group for Alternative Policies (www.developmentgap.org) and Friends of the Earth (www.foe.org). It includes five cases of IMF economic intervention and control: Mexico, Senegal, Tanzania, Hungary, and Nicaragua.

Current Activity:

More than 200 U.S. organizations and 170 nongovernmental organizations (NGOs) from 50 countries have formed the Fifty Years is Enough Network to curtail the power of these institutions, and to either reform or replace them with more democratic ones. Network participants are committed to the belief that the type of development promoted by the World Bank and IMF cannot be allowed to continue. They call for the full participation of affected women and men in all aspects of World Bank and IMF projects, policies and programs. This requires far-reaching changes in the lending policies, internal processes and structure of the World Bank and the IMF. Only when these reforms are implemented will these institutions be able to play a positive role in support of equitable and sustainable development.

Every World Bank and IMF meeting now attracts mass protest. The "A-16" protest in Washington on April 16 drew about 25,000 people. There is sure to be another outpouring of resistance in Prague on September 26 when the IMF and World Bank open their 55th annual summit in Prague.

View: The platform of the Fifty Years Is Enough Network

Campaigns:

Local: Local grassroots groups concerned with global economic justice and environmental protection include: Alliance for Democracy. Contact Charles Mauch, 4848 Pin Oak Park, #1501, Houston, TX 77081; 713.218.0344, chasmauch@aol.com. The Green Party. Contact David Cobb, 713.880.3219 (work phone); 713.880.9949 (fax); 281.496.3140 (home phone); cobbweb@onramp.net. The AFL-CIO focuses on protecting working people. Contact Richard Shaw, secretary, Harris County AFL-CIO, 2506 Sutherland, Houston 77023; 713.923.9473 (phone); 713.923.5010 (fax); shawtrek@aol.com.

National: Because of the scope and power of these two organizations and the closely related WTO, many groups are trying to reform or abolish them. Most of them are part of the 50 Years Is Enough Network (see above under Current Activity). Contact information: 1025 Vermont Ave. NW, Suite 300, Washington, DC 20005. Phone: 202.463.2265; Fax: 202.879.3186; Email: wb50years@igc.apc.org; website: http://www.50years.org. Global Exchange maintains an excellent website for IMF/World Bank reform at www.globalexchange.org/wbimf. It includes updates on grassroots actions worldwide and links to related sites.