The Imf and the World Bank

The World Bank and the International Monetary Fund (IMF) claim that their mission is to “concentrate on building the climate for investment, jobs and sustainable growth [in third world countries], so that economies will grow, and by investing in and empowering poor people to participate in development,” (World Bank Group 2005). Every year the directors of these two institutions meet for one week, enjoying elite social events and extravagant meals in order to validate this vision of fighting poverty and promoting growth in the “third world.” In a speech during one of these annual gatherings, former World Bank president Mr. Barber Conable 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.”

However, needing 10 million dollars worth of luxurious meals and elegant limousine rides to look through the eyes of the impoverished and to realize that they are in fact needy is a demonstration of something essentially flawed in this system of the extremely wealthy trying to help the severely poor, without any hidden agendas or intentions. The hypocrisy of these meetings represents the corrupt functioning of the organizations, and this paper shall further delve into this and expose aspects of their purely corporate agenda.

Initially, the World Bank and the IMF were created for the reconstruction of Europe after the Second World War. But as most of Europe was already under the Marshall Plan, which provided for the assistance it needed, the World Bank started to consider third world countries as potential customers. The oil crisis of 1970 and soaring interest rates resulted in third world countries to over extend their already existing debts. Needless to say, the World Bank and IMF both seized this opportunity and stepped in as mediators between international lenders and the virtually bankrupt countries (Korten 2001). The World Bank facilitated loans for these nations, and developed structural adjustment policies or SAPs that these countries had to follow in order to repay their debts. Privatization, removal of price and wage controls, and balanced fiscal budgets were integral to these policies. Consequently, by 1980 the debt of these low-income countries increased from $21 billion a decade before, to $110 billion, and by 1992, to $473 billion (Korten 2001). This indebtedness helped the World Bank and IMF to accumulate vast power over third world countries; the kind of power that put the underprivileged at a further disadvantage while only benefiting the elite.

For the World Bank and the IMF to dispatch money to these third world nations, they require that a neo-liberal economic ideology be applied. As mentioned earlier, there are many ways this is done, and diminishing the role of the government and making sure the fiscal budget is balanced, ranks fairly high on the list. There are two ways to balance a fiscal deficit: raising taxes or by cutting government spending. Because increasing taxes would redistribute income more fairly and thus empower the poor, the latter option is strongly recommended by the IMF and World Bank. This requires reduced spending on necessities like health, education, development and the removal of subsidies designed to control the price of basics such as food. The negative effects of these policies are apparent. In Chile, for example, “the percentage of poor households rose from 28.5% in 1969 to 41.2% in 1989,” where as unemployment rates went from “3.1% in 1972 to 41.2% in 1989,” and the financial support for “health care was cut from being 3% to 0.9%” causing corrosion of infant and maternal health (Comelo 1996).

Privatization, which is thought to increase efficiency, productivity and output, is encouraged as well. A good example of this is India, which has experienced widespread privatization in recent years due to the policies imposed by the World Bank and IMF. While many in India would like to see improvements in the country’s public sector, as well as technological advancement, privatization only benefits, and is aggressively endorsed by a very small percentage of India’s vast population. This percentage mainly consists of the English-speaking urban population that aren’t too concerned with the higher prices that would follow privatization and the effect that would have on the majority of India’s poor (Comelo 1996). Privatization results in basic services that were initially provided at low rates by government organizations to be offered by profit seeking firms at much higher rates, to the extent that the impecunious can no longer afford them (Lloyd & Weissman 2001). These companies may even refuse to provide services to poor or rural areas if it’s deemed to be financially unbeneficial, leading to suffering for the already poverty-stricken;