The World Bank and the IMF are irredeemable – they must be closed down.
By George Monbiot. Published in the Guardian 21st September 2000
A few months ago I used this column to argue that the World Bank was destroying health and education in the developing world. In Zambia, for example, the conditions the bank had attached to its loans – cuts in state spending and the privatisation of services – had contributed to a 25 per cent increase in infant mortality since 1980 and, as parents now have to pay to have their children educated, a disastrous decline in school enrolment.
The bank, oddly enough, didn’t seem to be too happy about my analysis. “It is simply false,” Mats Karlsson, one of its vice-presidents wrote, “to claim that the World Bank is further impoverishing people”. It was, he insisted, lending developing countries more money for health, education and poverty reduction than ever before.
This is perfectly true. This year, for example, the World Bank will be handing out some $1.9 billion for schools in poor countries. It will also be destroying schooling worth many times this amount, by continuing to insist that countries put debt repayments ahead of public spending. It has yet to explain why on earth it is making dollar loans for schools in the first place, when nearly all their costs are incurred in local currencies. Only if local provision is to be replaced by foreign contractors, or if children are to be given computers before they are taught to read or write, does lending hard currency for basic education make sense. First they break your legs, then, by way of compensation, they offer you a pedicure.
At their grand summit in Prague at the end of this week, the World Bank and the International Monetary Fund will insist, as the IMF’s former managing director has claimed, that they are now “the best friends of the poor”. The bad old days of “structural adjustment” (forcing all the countries they deal with to accept precisely the same neoliberal prescriptions) are over. Instead of being obliged to accept policies imposed by the First World, debtor nations will now be allowed to devise their own “poverty reduction strategies”.
This sounds fine, until you discover that, as the World Development Movement has documented, the recipient countries can request whatever they want as long as it’s neoliberalism. As one senior bank official pointed out, the new scheme is a “compulsory program, so that those with the money can tell those without the money what they need in order to get the money.”
To me, the abiding mystery surrounding the World Bank and the IMF is why anyone still believes that they are capable of reform. The New Economics Foundation concludes its devastating critique of the two bodies by suggesting only that they should “undergo democratic overhauls”. Even the Guardian’s usually far-sighted economics editor Larry Elliott has argued that those who believe the World Bank and IMF are inherently corrupt “are not only wrong, but are giving succour to extremists on the right who oppose all but minimalist government and despise internationalism”. There is, most commentators agree, no alternative to the existing global financial system.
This is not a consensus that John Maynard Keynes would have joined. In 1944, he warned that a financial system which imposed penalties and strictures on debtor nations but not creditor nations would ensure that the rich became richer and the poor became poorer. He proposed a global financial institution which would charge interest on both debt and credit. Creditor nations would thus be encouraged to spend their surpluses in debtor nations, automatically correcting imbalances in trade.
The United States proposed an alternative system. Help for debtor nations would be confined to a fund and a bank which lent them money when they got into trouble. These would both be based in Washington and effectively controlled by the creditors. As Keynes foresaw, the US proposal would ensure both that debtor nations fell further into debt and that creditors – the United States in particular – could exercise ever greater economic and political power over them. But the US told Britain that if we didn’t accept its proposal, we wouldn’t get our war loan.
The World Bank and the IMF, in other words, were conceived as the policemen for a coercive and grossly unbalanced world order. The idea that they could deliver anything but disaster for the world’s poor is laughable. If, as they will claim in Prague, they want to help build a fairer world, then they must start by closing themselves down.
George Monbiot’s new book, Captive State: the corporate takeover of Britain, is published today by Macmillan.