The unholy trinity: World Bank, IMF and WTO

George W Bush (in)famously declared his enemies in the Muslim world to be an “Axis Of Evil”. Well here’s the real axis of evil, the neo-liberal high priests of corporate globalisation.

We start with the Bretton Woods institutions…

Two international institutions which wield a lot of power over the third world / global south are the World Bank and International Monetary Fund (IMF), otherwise known as the Bretton Woods institutions. They are funded mainly by governments of the rich industrialised nations, but they deal mainly with the developing world – in many cases virtually dictating government policy. 

The World Bank makes loans for “development projects” such as dams for hydro-electric power generation. A lot of these projects have been criticised. There are three reasons for this criticism. 1) Socially damaging projects. 2) Environmentally damaging projects. 3) Wasting money on white elephants and projects which turn out to be useless.

Then there’s the IMF, whose role is supposed to be to promote “macro-economic stability”. It lends money to countries which are very short on cash (eg because they are trying to repay unpayable debts to other creditors).

Both institutions are notorious for the controversial “conditionalities” attached to the loans which they make. These have been known as Structural Adjustment Programs (SAPs).

Structural Adjustment” has forced governments throughout the majority world to cut back on education and healthcare, whilst rolling back policies which had provided affordable access to drinking water and electricity. Welfare states have come under attack. Employment rights and environmental standards have come under attack. Public services and nationalised industries have been privatised – often in very badly designed ways, with the result that corporations reap huge profits while the customer is bled dry. All the “reforms” associated with the ideology of neo-liberalism / free market fundamentalism have been promoted heavily by both the IMF and World Bank.

When Structural Adjustment encountered criticism for the role it had played in increasing poverty in these countries, there was talk of a new emphasis on “poverty reduction”. So it was announced that from now on, instead of Structural Adjustment, the IMF and World Bank would design “Poverty Reduction Strategy Papers” (PRSPs). However, it soon became apparent that this was simply the old SAPs dressed up in new language. Seeing as they have the effect of increasing poverty and inequality, the name is somewhat Orwellian. This is what we can expect from the powerful of this world – hiding behind lies and euphemisms, acronyms and weasle words.

The IMF and World Bank are supposed to be impartial and objective and simply promote development and a healthy world economy. But the fact that they are controlled by the rich and powerful nations and exert most of their control on the poor and relatively powerless nations suggests that we should pay attention to the hidden power relations going on here. In fact one US politician is quoted as saying that the IMF should be used as a “battering ram to prise open third world markets” – in other words forcing sovereign nations against their will to adopt damaging policies which benefit the rich world.

A little more on rich world control over the IMF and World Bank. Both of these institutions are governed by a system of voting in which votes are distributed according to the wealth of the member states (or rather their wealth at the time of the institutions’ founding, at the Bretton Woods conference after the end of World War II). Moreover, there is a tradition that the World Bank is always run by an American and the IMF by a European. Thus power is skewed firmly in favour of the powerful states in the world, who use that power (through Structural Adjustment) to perpetuate a state of economic subordination, in which third world economies are maintained as a source of cheap labour and natural resources and a dumping ground for our exports.

There is little doubt that at least some of those working within these institutions believe they are helping the third world, and that their neo-liberal economic orthodoxies are some kind of “medicine” which is “tough to swallow” but will help in the long run. A look at the history of structural adjustment, however, strongly suggests that this extreme market ideology has caused nothing but harm wherever it has been tried, from Latin America to South East Asia to the former Soviet Union, sub-Saharan Africa and beyond, but that at the same time it has been quite beneficial for the vested interests of western banks, financial speculators, and the profits of multinational corporations. It is quite clear whose interests the IMF and World Bank serve, and where their loyalties lie. It may be convenient for them to believe they are helping the third world (from the point of view of soothing their own consciences at least) but as far as their behaviour is concerned, it is fair to say the role they play as institutions is as an extension of western capital, to promote the strategic interests of the moneyed elites of the industrialised nations. Neo-colonialism is not too strong a word. Where before Western powers used military force to exert direct control over the rest of the world in order to plunder its economic resources, now we apply more subtle means of domination, applying pressure through maintaining a position of vastly unequal bargaining power using such institutions as the IMF and World Bank. This isn’t some secret conspiracy, it’s simply the state of affairs which has evolved over time, in which countries with vastly differing power and wealth exert power over eachother – it’s called politics.

Now we move onto the World Trade Organisation (WTO).

This is a body which countries sign up to in order to agree upon rules to govern world trade. Member states must adhere to these rules or risk costly trade sanctions. The general flavour of the rules is the same kind of neo-liberal orthodoxy promoted by the IMF and World Bank. The stated aim is to promote “free trade” between the member states.

But the concept of free trade has over the years been widened and generalised quite considerably to encompass all manner of things which were previously off the radar.

The original concept was that countries should progressively remove their tarrifs (taxes levied on imported goods) so that goods could flow freely between nations – this would then benefit all the countries involved. However, we are now finding that all kinds of things are now being threatened by the WTO and in the name of “free trade”. Employment rights, environmental safeguards, and the right of developing nations to protect their infant industries are all being threatened. Subsidies for food which served important social functions (ie ensuring that people have access to affordable food) have been forcibly removed.

One problem is that (for example) the USA has insisted that developing countries remove their subsidies and tarrifs while the USA itself has kept its own. Apart from the hypocrisy of this, the effects are hugely damaging. Third world farmers are unable to compete with US imports of rice or wheat and therefore go out of business. There is no adequate safety net in the countries involved so these people become destitute. Then when the price war has been won , the prices of the US imports often increase, so that any benefit to the consumer is lost. Meanwhile, the country does not get to enjoy the benefit of access to the US market, as the US has not been forthcoming in opening up its own market to the country involved. This is a typical outcome of negotiations at the WTO.

Essentially, the WTO is another tool by which big business is gaining rights and shedding responsibilities, on a global scale. Indeed, many of the trade agreements agreed at the WTO have been virtually written by the corporations and their lobbyists.

The effects of WTO rules are mirrored in the unlevel playing field of WTO negotiations. Most of the WTO trade rules are hammered out in advance by the 4 main blocs of the rich nations – “The Quad”: USA, Canada, the EU and Japan. They are then presented as a fait accomplit, to the rest of the members, at the WTO summit. Various blackmailing techniques are employed. Third World trade negotiators are intimidated and bullied.

One problem is that the poorer countries are not adequately staffed, so that they cannot effectively prepare for the negotiations. They cannot afford the large teams of lawyers etc working full time on trade policy, which the rich nations take for granted.

The WTO managed to operate away from the public spotlight from its inception in 1994, when it took over from its predecesor the GATT (general agreement on trade and tarrifs), until the 1999 Seattle trade summit, when a rebellion of global south trade negotiators inside the meeting and an army of protestors outside brought the discussions to a standstill, and put the issues of trade and globalisation firmly on the international political agenda (among dissidents if not governing elites).

WTO agreements which are binding on nation states include:

The Agreement on Agriculture – threatens small farmers throughout the developing world by forcing them to compete with cheap subsidised imports from the rich West.

The General Agreement on Trade in Services (GATS), which may open the way to privatisation or privatisation-by-stealth of public services. GATS is still under negotiation.

Trade-Related aspects of International Property rights (TRIPs) – which enforce tough standards on patents and copyrights. Problems caused include the rendering inaccessible of vital medicines to people of the developing world.

And that’ll serve as a brief introduction IMF, World Bank and WTO, at least for now.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: