The Imf and the World Bank, a Social and Economical Perspective

Introduction

It is claimed that the mission of the World Bank and the International Monetary Fund (IMF) is to “fight poverty and improve the living standards of people of the developing world … promote growth to create jobs and to empower poor people to take advantage of these opportunities.” The annual gathering of the directors of the World Bank and IMF reconfirms the World Bank’s and IMF’s vision of fighting poverty and promoting growth in the “third world.” Every year the directors of those two Bretton Woods institutions meet for one week, enjoying $10 million worth of lavish meals and elite social events. During one of those annual gatherings, the ex-world Bank president Barber Conable gave a speech, in which he described the duty of the World Bank and the IMF to “look through the eyes of the most underprivileged, [to] share their hopes and their fears, [to] serve their needs and help them realize their strength, potential, and aspirations.”

There is something fundamentally wrong in an institution that needs $10 million worth of lavish meals and elegant limousine rides in order to look through the eyes of the most underprivileged and to realize that poor people are in fact needy. There is something essentially flawed in a system based on the extremely rich trying to help the severely poor, without any hidden agendas or intentions. The hypocrisy of the Bretton Woods meetings is a fitting metaphor of their corrupt functioning. This paper will delve into the hypocrisy of the World Bank and IMF and will expose aspects of their purely corporate dealings.

Demand for Debt

The World Bank and the IMF were originally created for the reconstruction of Europe after the Second World War. Of course, most of Europe by that time was under the Marshal Plan which provided the assistance that Europe needed, mainly balance of payment adjustments and imports to meet basic needs. The World Bank’s loan by that time was as low as 1.75 billion , so the World Bank started looking at third world countries as potential “customers”. The oil crises hit in the 1970’s and as interest rates soared, third world countries started over extending their already existing debts. The World Bank and IMF seized this opportunity and stepped in as mediators between international lenders and the virtually bankrupt countries. In light of this economic turmoil, the World Bank facilitated loans for the third world, and developed structural adjustment policies (SAP) that indebted countries must follow in order to concentrate their economic power on debt repayment. Privatization, removal of price and wage controls, and balanced fiscal budgets are all integral to these structural adjustment policies. “By 1980 the debt of the low-income countries increased from $21 billion a decade before, to $110 billion, by 1992 the indebtedness of low-income countries reached $473 billion.” It is only then that those Bretton Woods institutions started accumulating a vast power over Third World Countries; a kind of power that puts the poor at a disadvantage while benefiting the elite.

Privatization and the poor

Privatization ranks high on the IMF’s wish list. Capitalist economic theories preach that privatization increases efficiency,